Sorry, that’s not quite right. Some (and more than a tiny minority) of the bottom half have negative return rates, which isn’t negligible.
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I have an automatic deduction from my paycheck that diverts a small amount into savings. Sadly, despite all the hype about savings, I rarely have more than enough to pay my car insurance in it, I keep having to dip into it for those unforeseen problems like a cat’s vet bill. I make more than minimum wage, so I have no idea what people who make only that can do to give themselves a cushion besides pick up change in the street.
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Oh no, not at all. It’s performed exactly as intended. It let businesses get rid of defined benefit plans, which are expensive.
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This is the takeaway of the article- that left to their own devices, this is what workers do. When employers impose a mandatory retirement investment program, the choice is taken away from them to pay off the debts before investing, and they are left financial worse off in the long run.
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At one point, I had about $70,000 in a 401k. What no one tells you is that a manager (at an investment firm, or even the 401k officer at your company) can make bad decisions and a fund can lose money. My company’s 401k officer invested heavily in Enron in the late 90s. Of course it all wiped out. Funny thing, as everyone’s accounts tanked, people kept telling us to keep our money in the accounts, that the fund would rebound. I pulled out my last 10K, with taxes fees and fines, and was just sorry I had not withdrawn more, earlier. Since then, I have only been employed off and on, and cannot afford to save like I used to. I simply try to maintain my house, which I will probably have to sell when I am older.
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Grow weed in your bedroom? I’ve, uhhh, heard that can help out some…
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Well, the choice isn’t taken away. They can still opt out of the 401k to pay down debt.
I wish I could read more details on this study, but its behind a paywall, and the linked article that might actually have some details is WSJ, also paywalled. Possible that if I had those I might find it just stupid.
The only detail I do have is that they followed people apparently for four years after hiring. Maybe that just isn’t long enough somehow. I’m guessing they compared people just before the 401k default changed and just after… but that’s just a guess.
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During the dotcom boom some startups would make sure the 401k portfolio was heavy with the employer’s own recently IPOed stock and that of affiliated companies (e.g. partners, board members’ companies, etc.). That scam was eventually addressed, but not before a lot of Enron-like investments wiped out a lot of retirement funds.
Yep. 1) Cover the essentials of life, 2) pay down high-interest consumer debt to a manageable level, 3) build at least a 3-month emergency fund and then you can think about investing for retirement.
The problem is that our late-stage capitalist system is rigged to keep at least half the population stuck trying to get past 2), which is why so many people can’t afford to cover an unexpected $400 expense unless they increase their consumer debt. The health insurance system makes it even worse.
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In fact, it’s a double success. Just look at the fees that it has generated for the financial management companies. It’s win-win for everyone.
Well, everyone important
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What they’re even less eager to tell you is that fund managers are under no obligation to do what’s best for you instead of what’s best for them, and the fiduciary rules that would have required them to start doing so last April were delayed by 
less than 30 days after he took office.
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The John Oliver piece on this is fantastic.
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I would say this is right. The flowchart @comedian posted has 2 and 3 the other way round. They go for emergency fund first then pay off the debt.
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You’re assuming that the people who saved for retirement, if they hadn’t, would have used that money to pay down current debt instead. I’m skeptical. I, for one, would probably not have.
To be fair, his chart does put minimum payments on debt before building the emergency fund. That counts as making a start on paying down CC debt and should be done simultaneously with building up the emergency fund.
It looks like the chart is a guide for a member of the precariat who isn’t yet overwhelmed by CC debt, so it may make sense for the person to delay the full push to pay off the CCs (e.g. paying 2x-3x the minimum ea. month) until the emergency fund is in place. But you’re correct that if the CC balance is crushing (say 10%+ of annual income) then that becomes the priority over the emergency fund.
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This is similar to my Facebook post criticizing recent efforts to increase minimum wage. My reasoning is that will merely cause businesses to look for ways to reduce the number of people they employ. I used the analogy of a dog chasing its tail, the dog thinks he is always behind, and the few times he ‘catches’ that tail, it is painful.
And we see evidence of that in that this week, the Red Robin Restaurant chain is getting rid of Busboys.
My son in law asked me what is the alternative? A good question! He is pretty smart, for a liberal. And after thinking about it, I have come to the conclusion that a reasonable alternative is taking steps to increase productivity to the extreme, and an in increase in the public dole. Naturally, this has problems as well.
There may be a point where productivity CAN’T be increased to the point where it produces more than the Dole requires. Many people will vegetate and become spiritual and intellectual zombies. And with nothing to do, many will turn to sex as a way to kill time, and that will fuel an even bigger population increase. But at this point, for the time being, I think increasing public aid is the unfortunate corner to which we have painted ourselves into.
The truth is, we need fewer people altogether, and I dread the ‘solutions’ we will come up with when that becomes obvious to many more than me.
Welcome to Boing Boing, comrade!
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I don’t think you need to assume they would save it for the nudge to matter. Simply having the extra in your check means you are better able to avoid some of the small, but possibly manageable shocks to your finances without taking on additional high interest consumer debt. Needing a new tire is less likely to incur debt if you have an extra 100 dollars on hand. It might move the purchase from the range of take out a payday loan, to the realm of pay most of it and borrow a few bucks from a friend until your next check. Even if you are in a position to put it on a credit card, you don’t have to put as much on the and you can pay it back faster. The difference between the cost of your debt and the interest in your savings is money you lose overall. Repeat that process over the small shocks of life on a four year scale and it adds up.
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If your reasoning held true we should expect to see notably higher unemployment in areas with a higher minimum wage, higher birth rates in areas with strong social safety nets, and wages moving with productivity. None of those three things are true.
Also of note, labor costs for Red Robin having been falling as a share of operating costs since 2013 at least according to their financial reports to shareholders see page 27 http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1hSFIwY0RvdkwyRndhUzUwWlc1cmQybDZZWEprTG1OdmJTOWtiM2R1Ykc5aFpDNXdhSEEvWVdOMGFXOXVQVkJFUmlacGNHRm5aVDB4TURjMU56TTFPU1p6ZFdKemFXUTlOVGM9JnR5cGU9MiZmbj1SZWRSb2JpbkdvdXJtZXRCdXJnZXJzSW5jLnBkZg== Their net income increased between 2013 and 2015, with a weaker year in between. What is putting a drag on their incomes is rising rents in their leased buildings, also listed on page 27. But it would be silly to talk about the $40 million in stock buybacks or the $63 million in new debt when we could blame the greedy busboy.
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It’s funny how people prop up 401ks as a panacea considering you have to pay into as early as possible and as much as possible to reap the benefits of it. If you start in your mid or late 30s then it sucks to be you (this is my situation right now). Plus, you can’t use it for anything else that you might need in the future. They’re just loans to investors who might pay you back a little more.
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