In Case You Missed This... 'My Faith-Based Retirement' - By Joe Nocera/NYT

[WillyT]

My Faith-Based Retirement
By JOE NOCERA - NYT
April 27, 2012

<snip>

...
...
...

When I related my tale recently to Teresa Ghilarducci, a behavioral economist at The New School who studies retirement and investor behavior, she let out the kind of sigh that made it clear that she had heard it all before. The sad truth, she told me, is that I’m the rule, not the exception. “People have income shock, like divorce or loss of a job or a health crisis,” and those crises tend to drain retirement accounts, she said.

But even putting income shocks aside, she said, most human beings lack the skill and emotional wherewithal to be good investors. Linking investing and retirement has turned out to be a recipe for disaster.

“People tend to be overconfident about their own abilities,” said Ghilarducci. “They tend to focus on the short term rather than thinking about long-term consequences. And they tend to think that whatever the current trend is will always be the trend. That is why people buy high and sell low.” Financial advisers — at least the good ones — are forever telling their clients to be disciplined, to create a diversified portfolio and to avoid trying to time the market. Sound as that advice is, it’s just not how most humans behave.

That data starkly backs up Ghilarducci’s contention. According to the Employee Benefit Research Institute, for instance, only 22 percent of workers 55 or older have more than $250,000 put away for retirement. Stunningly, 60 percent of workers in that same age bracket have less than $100,000 in a retirement account. Ghilarducci told me that the average savings for someone near retirement in America right now is $100,000. Even buttressed by Social Security, that’s not going to last very long.

What, then, will people do when they retire? I asked Ghilarducci. “Their retirement plan is faith based,” she replied. “They have faith that it will somehow work out.”

I laughed, but it’s not funny. “The 401(k),” she concluded, “is a failed experiment. It is time to rethink it.”

...
...
...

<snip>

More: http://www.nytimes.com/2012/04/28/opinion/nocera-my-faith-based-retirement.html?_r=3&src=me&ref=general&pagewanted=print

[josephslaton]

1. Hartmann talks about pension versus 401k a lot

Like everything else its designed to let wall street get their cut

[coalition_unwilling]

2. No offense, but there is a lengthy thread around this topic

already:

http://www.democraticunderground.com/1002621903

Not sure whether or how to combine threads.

[WillyT]

4. Damn... Did A Search... Apparently Missed It...

Sorry...

[coalition_unwilling]

5. No worries. Other thread has some good stuff in it, btw - n/t

[dkf]

3. He made some bad decisions...

"The bull market ended with the bursting of that bubble in 2000. My tech-laden portfolio was cut in half. A half-dozen years later, I got divorced, cutting my 401(k) in half again. A few years after that, I bought a house that needed some costly renovations. Since my retirement account was now hopelessly inadequate for actual retirement, I reasoned that I might as well get some use out of the money while I could. So I threw another chunk of my 401(k) at the renovation. That’s where I stand today."

How is he supposed to retire if he used it to fix his house and what did he expect? I bet he spent a chunk of change on that...have you seen the cost of renovating a kitchen? Crazy.

He is pretty brave to fess up on this seeing as how he is a financial columnist.

[Indykatie]

6. I Agree With DKF's Comment

This guy contributed to much of his own problems through bad decisions and circumstances he surely didn't plan on, the divorce. So this financial saavy investor thought it was good idea to load his portfolio up with tech stocks. His wife would also have been entitled to a share of his defined pension plan if he had one. I have been working since 1975 and one of the biggest changes I have seen is that people do not routinely go to work and stay with a company for 20+ years. The younger generation move around quite a bit during their careers and the mobility of the 401K fits that work style. Defined pension plans work only if you plan on sticking with a company long enough to earn the actual benefit. Many of the folks in my age group are not prepared for retirement because they didn't save, period not because their 401Ks have performed poorly over the years.