Frontline--The Retirement Gamble

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Re: Frontline--The Retirement Gamble

Postby Paul78 » Wed Apr 24, 2013 1:47 am

Silence Dogood wrote:Am I the only one having a hard time feeling sorry for some of the people interviewed for this?

You're making $70,000 a year but only have $20,000 in retirement savings? I make about a third of that, am 22, and have about the same amount in retirement savings.

And no, I don't have rich parents. Divorced; dad's been unemployed the past two years, mom makes probably around $30,000.

I get that I am super frugal and different than most in this regard, but I just can't get how someone can make that much and have so little saved. :confused



Indeed. Some of these "retirement saving" numbers are ridiculous. By boglehead standards I am really not "frugal" but with my salary (not too much more then the 70k example) I save 23k a year towards retirement.
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Re: Frontline--The Retirement Gamble

Postby Paul78 » Wed Apr 24, 2013 1:51 am

Christine_NM wrote:Mr. Bogle was in fine form. Overall, the show made it seem that the problem was unsolvable, which might discourage people on the fence about saving. For those of us who have already skinned the retirement cat, one way or another, it was fun seeing the bank fund guy and gal mumbling and chewing their lower lips.



If you are in your 40's to 50's with NO pension and basically no retirement savings (like the samples in the show) the problem does seem pretty "unsolvable".
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Re: Frontline--The Retirement Gamble

Postby lawman3966 » Wed Apr 24, 2013 1:57 am

Silence Dogood wrote:Am I the only one having a hard time feeling sorry for some of the people interviewed for this?


For me, it's not a matter of not feeling sorry for them, it's a matter of regretting that the show mixed up separate matters that detracted from the fee issue. I saw at least three issues in the segment: (a) insufficient savings rates; (b) inappropriate investment allocations; and finally (c) high and hidden fees.

It's just my opinion, but I think the overall segment would have been better if they'd picked one topic and stuck to it. There are things you can blame on the big-name advisory firms (such as the fees), but an insufficient savings rate isn't one of them.

I also noticed a contradiction in the presentation. The show lamented the presence of fees, and allowed J. Bogle to present a convincing case for low-cost investing. Then, in another part, the show interviews attendees at a 401K seminar and stresses the complexity of investing in general and why it was so wrong to expect participants to do this by themselves. The complainants can't have it both ways. If advice is too expensive, the plan should include a minimal number of index funds, and a few target date funds, not provide advice, and have low fees (which is precisely what my employer has done). Complaining about the lack of advice, and stressing how complex investing is seems to play into the advisory firms' hands.

This show was a good start. But, I would guess that will take hundreds of presentations like the one on Fronline to change the 401K system. In the meantime, participants need to educate themselves and press for different and better 401K providers, because the high-fee providers will not change their ways any time soon.
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Re: PBS Frontline: The Retirement Gamble

Postby Paul78 » Wed Apr 24, 2013 2:06 am

FredCouples wrote:
I teach Seniors in high school and am really scared for them.

As a teacher I have a pension; these kids won't have pensions so they will be forced to rely on "experts" and the financial porn that is out there. :x



A big reason why I stay in my lower paying (compared to what the private sector pays) federal job. Since it is a federal job I am assuming the pension will still exist when I retire. Do not get me wrong the government does makes adjustments to save money
-in 1987 they switch from CSRS to FERS which increased the min retire age from 55 to 57 and changed the yearly multiplier from 2.5% to 1%
-in 2013 they switch from FERS to FERS-rae which equals to a 2.3% paycut (with no extra retirement benefits) for ALL employees hired on Jan 1st, 2013 or latter

So just they will make adjustments in the future but I should be locked into the FERS system.

But yes it makes it so much easier if I can assume my pension with take care of a decent chunk of my retirement expenses.
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Re: Frontline--The Retirement Gamble

Postby Carl53 » Wed Apr 24, 2013 7:31 am

Good program. It is available at http://www.pbs.org/wgbh/pages/frontline ... nt-gamble/.

A transcript of the interview with Mr. Bogle is at http://www.pbs.org/wgbh/pages/frontline ... etirement/.

From the expanded interview transcript, even Mr. Bogle seems overly optimistic about future returns "So if we get a 7 percent return, I’m going to give you 6.95 in the index fund because it only costs 0.5 of 1 percent to run." (Should have been 6.5%).

The interviewer had just previously noted "… But once you subtract your fees, you adjust for inflation, and you subtract tax costs, you’re down into pretty paltry return, 1 or 2 percent." To which Jack did not take issue but stated, "We don’t tell people that, you see, in this business."

Mr. Bogle then talks about defined benefit plans and how their assumptions of 8 percent returns are impossible, and that 5% is likely the best with more likely 4% being reasonable.

Unfortunately poor returns is one of the reasons that defined benefit pensions got into so much trouble. Of course there is little reason to expect that we would do even marginally better than they would even with low index fees given that they trade in large quantities. Kind of depressing thinking we should not expect much in the way of future returns.
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Re: Frontline--The Retirement Gamble

Postby mike143 » Wed Apr 24, 2013 8:14 am

I am afraid of the retirement bail out that is going to be required in the future. I don't want my hard work and sacrifice to be distributed to those that refused to do the same. I really wished that hey taught financial well being in high schools or even earlier. It took a few years of making the wrong choices, realizing the hole I was in, and start digging myself out, to learn. Now I am out of the hole and at the base of the mountain with all my tools at the ready.
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Re: Frontline--The Retirement Gamble

Postby 3CT_Paddler » Wed Apr 24, 2013 8:15 am

Silence Dogood wrote:Am I the only one having a hard time feeling sorry for some of the people interviewed for this?


Yes, some of those examples kind of irked me. One guy said when complaining about fees... "It makes you mad, but what are we going to do? You are powerless." (this was in reference to an annuity that they purchased). I understand with 401k's, that in many cases you have little ability to change what fees you pay, but in all other cases you have all the power to make the right choice. Don't make excuses, because you didn't take the time to educate yourself on the subject.
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Re: Frontline--The Retirement Gamble

Postby Andyrunner » Wed Apr 24, 2013 8:19 am

Going to listento it while working today as I missed it.

Funny how the first advertiser is GoldmanSachs.
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Re: Frontline--The Retirement Gamble

Postby steve r » Wed Apr 24, 2013 8:22 am

bottlecap wrote:Overall, I thought it was well produced. ...

I was disappointed in that they essentially set up a straw man opponent ....

and wax poetic about pensions


+1
aren't pensions by in large grossly underfunded. Someone is making out on the pensions (high fees, not enough put in, etc). And if you lose you job at a young age / you lost your pension.

Jack was great.
Focus on fees was great.
Revenue share was good.
I wish they spoke about "annuities" more ...

I agree with Mike
taught financial well being in high schools or even earlier

in addition to college.
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Re: Frontline--The Retirement Gamble

Postby investingdad » Wed Apr 24, 2013 8:26 am

Silence Dogood wrote:Am I the only one having a hard time feeling sorry for some of the people interviewed for this?

You're making $70,000 a year but only have $20,000 in retirement savings? I make about a third of that, am 22, and have about the same amount in retirement savings.

And no, I don't have rich parents. Divorced; dad's been unemployed the past two years, mom makes probably around $30,000.

I get that I am super frugal and different than most in this regard, but I just can't get how someone can make that much and have so little saved. :confused


First, I will say that there always cases where people have had a tough row to hoe. Medical problems, family deaths, accidents, etc. You never know if somebody has gone through a series of major life upheavals that none of us would wish on others.

Now, having said that, there are a LOT of people for whom 'live below your means' is a foreign concept no matter what your earnings. They spend and spend and spend on all kinds of fun and cool stuff and can often make you feel like you're missing out on something (cars, vacations, whatever). But eventually winter comes around and some squirrels haven't put away nearly enough nuts. That's when you'll hear others try to make the savers and investors feel guilty for having saved and invested while others were out making merry with no regard for the future.

I'll never forget when the mortgage crisis first started to blow up. Interviews with people underneat of massive debt where all over the public airwaves. I will never, NEVER forget an interview with this one woman that was massively underwater in her cash back, no money down mortgage. During the interview, the woman said that she 'didn't really read or understand the mortgage paperwork she signed'. INCREDIBLE! She admitted not reading or understanding what she was signing but signed it anyway. Then when she realized what she signed up for, her first instinct was to claim she was to ignorant to be accountable.

Amazing.
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Re: Frontline--The Retirement Gamble

Postby Grt2bOutdoors » Wed Apr 24, 2013 8:32 am

Paul78 wrote:
Christine_NM wrote:Mr. Bogle was in fine form. Overall, the show made it seem that the problem was unsolvable, which might discourage people on the fence about saving. For those of us who have already skinned the retirement cat, one way or another, it was fun seeing the bank fund guy and gal mumbling and chewing their lower lips.



If you are in your 40's to 50's with NO pension and basically no retirement savings (like the samples in the show) the problem does seem pretty "unsolvable".


I liked the opening of the program - Brooks Hamiton being quoted as "if you are not saving 15-20% of your income from day one of working, "in your 20's", you will not be able to retire at age 65". Very depressing, when you think about it, a very small percentage of folks in their 20's are saving and of those, I'd venture probably 5-10% of them (being optimistic here) are saving that much, everyone else is likely saving 3%.

The JP Morgan guy - I hope he took the rest of the week off :oops:. Can you imagine - an executive VP of retirement savings at a major institution - on national television, looked quite incompetent. Not that Wells Fargo did such a hot job either. Prudential, tsk, tsk, not keeping up with the ongoings of your competitors? Come on now, even the business majors at Rutgers know how to perform competitor analysis. Not aware of competitor research? Yeah right.
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Re: Frontline--The Retirement Gamble

Postby Grt2bOutdoors » Wed Apr 24, 2013 8:38 am

Andyrunner wrote:Going to listento it while working today as I missed it.

Funny how the first advertiser is GoldmanSachs.


In all honesty, Goldman would likely charge institutional levels of pricing for volume business - that means fractions of a penny per share. They make their money buying and selling or acting as agent for other parties. I don't see anything wrong with it if the level of execution provided is better than other providers of that service and the price is right. For all you know, Vanguard could be using Goldman on the other side of the buys and sells you do each time you invest - should you care, why no. You should only care that you are getting the best price for your shares.

Full disclosure - I hold no Goldman equity and have zero affilation with them.
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Re: Frontline--The Retirement Gamble

Postby Grt2bOutdoors » Wed Apr 24, 2013 8:39 am

mike143 wrote:I am afraid of the retirement bail out that is going to be required in the future. I don't want my hard work and sacrifice to be distributed to those that refused to do the same. I really wished that hey taught financial well being in high schools or even earlier. It took a few years of making the wrong choices, realizing the hole I was in, and start digging myself out, to learn. Now I am out of the hole and at the base of the mountain with all my tools at the ready.


If teachers are having a difficult time with their own retirement plans and finances, would you really want those who don't have a clue doing the teaching?
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Re: Frontline--The Retirement Gamble

Postby Andyrunner » Wed Apr 24, 2013 9:07 am

Grt2bOutdoors wrote:
Andyrunner wrote:Going to listento it while working today as I missed it.

Funny how the first advertiser is GoldmanSachs.


In all honesty, Goldman would likely charge institutional levels of pricing for volume business - that means fractions of a penny per share. They make their money buying and selling or acting as agent for other parties. I don't see anything wrong with it if the level of execution provided is better than other providers of that service and the price is right. For all you know, Vanguard could be using Goldman on the other side of the buys and sells you do each time you invest - should you care, why no. You should only care that you are getting the best price for your shares.

Full disclosure - I hold no Goldman equity and have zero affilation with them.


That is true they probably do a large number of volume business, but they also try to sell complex trading such as derivatives, options and other things to pension funds and insitutions which have greater margins. I know it is a contriversal book, but "Why I left Goldman Sachs" by greg smith goes into that a bit.
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Re: Frontline--The Retirement Gamble

Postby scrabbler1 » Wed Apr 24, 2013 9:07 am

lawman3966 wrote:For me, it's not a matter of not feeling sorry for them, it's a matter of regretting that the show mixed up separate matters that detracted from the fee issue. I saw at least three issues in the segment: (a) insufficient savings rates; (b) inappropriate investment allocations; and finally (c) high and hidden fees.

It's just my opinion, but I think the overall segment would have been better if they'd picked one topic and stuck to it. There are things you can blame on the big-name advisory firms (such as the fees), but an insufficient savings rate isn't one of them.

I also noticed a contradiction in the presentation. The show lamented the presence of fees, and allowed J. Bogle to present a convincing case for low-cost investing. Then, in another part, the show interviews attendees at a 401K seminar and stresses the complexity of investing in general and why it was so wrong to expect participants to do this by themselves. The complainants can't have it both ways. If advice is too expensive, the plan should include a minimal number of index funds, and a few target date funds, not provide advice, and have low fees (which is precisely what my employer has done). Complaining about the lack of advice, and stressing how complex investing is seems to play into the advisory firms' hands.

This show was a good start. But, I would guess that will take hundreds of presentations like the one on Fronline to change the 401K system. In the meantime, participants need to educate themselves and press for different and better 401K providers, because the high-fee providers will not change their ways any time soon.


Good points, lawman (and a nice post overall).

What the show (and you) said about these things made me think back to the mid-1980s when I first began saving in my old company's 401(k). Our investment options were just 2 - a Stable Value fund and an S&P500 fund. The SV fund had its expenses picked up by my company and the S&P500 fund had low expenses, of course. We could choose only 25% increments for our allocation and the company matched 50% up to 3% of our salary. Pretty simply yet very effective. Of course, we did not have the "education" we have today, but still.

In the 1990s, as my company changed plan administrators a few times, we saw more investment options. Thankfully, being good at math and the fact that I began investing in mutual funds on my own in taxable accounts, I realized the importance of expense ratios, especialy over the long term. So when I saw how these new, more exotic funds had much higher expense ratios, I pretty much stuck with the two options I had been in the whole time. Too bad it didn't stay that way for everyone else.
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Re: Frontline--The Retirement Gamble

Postby Grt2bOutdoors » Wed Apr 24, 2013 9:24 am

Andyrunner wrote:
Grt2bOutdoors wrote:
Andyrunner wrote:Going to listento it while working today as I missed it.

Funny how the first advertiser is GoldmanSachs.


In all honesty, Goldman would likely charge institutional levels of pricing for volume business - that means fractions of a penny per share. They make their money buying and selling or acting as agent for other parties. I don't see anything wrong with it if the level of execution provided is better than other providers of that service and the price is right. For all you know, Vanguard could be using Goldman on the other side of the buys and sells you do each time you invest - should you care, why no. You should only care that you are getting the best price for your shares.

Full disclosure - I hold no Goldman equity and have zero affilation with them.


That is true they probably do a large number of volume business, but they also try to sell complex trading such as derivatives, options and other things to pension funds and insitutions which have greater margins. I know it is a contriversal book, but "Why I left Goldman Sachs" by greg smith goes into that a bit.


It's a buyer beware market out there. It's like one of the other fellers on here who posted on another thread about being taken out for nice lunches by his financial advisers - it's buyer beware, he was the one who was taking them out with the high fees he was paying them. The same could be said of all those public pension funds who are being wined and dined, but they figure "hey it's a free lunch, because I'm not paying for it, instead the taxpayers owe me one since I'm only being paid a fraction of my worth" :oops: But that is exactly what goes on in the world of sales and it doesn't have to be financial sales only.
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Re: Frontline--The Retirement Gamble

Postby laughlinlvr » Wed Apr 24, 2013 9:28 am

I was quite disappointed in this program – except for the delightful denials by the spokespeople already mentioned. To me, this program reminded me of the kinds of sub-par investigative documentaries that have been held on credit cards and mortgages. To me, they smack of budget journalism. Go round up a bunch of victims who for one reason or another took advantage of their unsecured credit card loans and now are in trouble. Woe is me! Alas I never realized… Oops, back on topic: “Why should I have to go to the library or bookstore and buy “Investing for Dummies” or one of the “Little Book of…” series. Why isn’t it all done for me?
The presenter should have had one of his staff interview him as to how the Livestrong branded target returns got into the 401k plan that his own company (which he said he owned) offers. “How did that get in there?” was his feeble response.
One of the items of substance that accords with my own observations was that for the Boomers retirement investing coincided with the Great Moderation period. (Which I take as lasting from when Volker eliminated inflation through to the dot com crash.) Twice in the program reference was made to compounding. During the Great Moderation investments behaved largely like passbook savings. Libraries and bookstores had plenty of books about bull and bear markets, but why bother when the nice person at the annual benefits talk explains how good their funds are. “And look how well they have been doing.”
Besides, what should you expect when employees are told all they have to do is put away a modest amount and they’ll have the lifestyle on the glossy 401k packet – you know, the one with the silver-haired couple getting out of their SUV with the two kayaks on top.
The program made the point that it’s been at least 25 years since the superiority of index funds has been demonstrated. It’s been even longer since “Easy come, easy go” has been around.
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Re: Frontline--The Retirement Gamble

Postby Imbros » Wed Apr 24, 2013 9:53 am

I was extremely frustrated when the Prudential lady said something like she hasn't seen any good research that shows Indexing is at least as good as active investing. Really? It takes you a few clicks at the industry leader's, Vanguard's, website to see bunch of white papers. You are a senior manager at a competitor company and you didn't know that?! :?

IMO, for what its worth, Wells Fargo manager seemed to be the most prepared for the interview among the managers interviewed.
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Re: Frontline--The Retirement Gamble

Postby BolderBoy » Wed Apr 24, 2013 9:57 am

JM13004 wrote:Martin Smith of Frontline did a fabulous job interviewing the financial industry executives......boy did they seem uncomfortable. The Prudential executive's response to index funds was priceless. Hopefully viewers will realize that the financial industry is not your friend.


Remember when a bunch of tobacco execs stood before congress and swore...? I was thinking that these financial execs looked just like that in the interview.
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Re: Frontline--The Retirement Gamble

Postby Grt2bOutdoors » Wed Apr 24, 2013 10:00 am

When one's paycheck is dependent on those fees, you will make all sorts of statements and claims. The public is catching on to their little game and they are starting to feel the heat. I find it ironic that a New Jersey based company claims to have no knowledge of a firm founded by someone who grew up not to far away from Prudential's headquarters. Prudential's recent proxy statement shows just how well they are being compensated over there - being paid a kings ransom.
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Re: Frontline--The Retirement Gamble

Postby bottlecap » Wed Apr 24, 2013 10:49 am

Paul78 wrote:
Silence Dogood wrote:Am I the only one having a hard time feeling sorry for some of the people interviewed for this?

You're making $70,000 a year but only have $20,000 in retirement savings? I make about a third of that, am 22, and have about the same amount in retirement savings.

And no, I don't have rich parents. Divorced; dad's been unemployed the past two years, mom makes probably around $30,000.

I get that I am super frugal and different than most in this regard, but I just can't get how someone can make that much and have so little saved. :confused



Indeed. Some of these "retirement saving" numbers are ridiculous. By boglehead standards I am really not "frugal" but with my salary (not too much more then the 70k example) I save 23k a year towards retirement.


My wife also noted that almost anyone with a sob story and a low retirement balance on the program was pictured at home, typing away on their $1,300 MacBook Air... :oops:

JT
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Re: Frontline--The Retirement Gamble

Postby nirvines88 » Wed Apr 24, 2013 11:02 am

Grt2bOutdoors wrote:
mike143 wrote:I am afraid of the retirement bail out that is going to be required in the future. I don't want my hard work and sacrifice to be distributed to those that refused to do the same. I really wished that hey taught financial well being in high schools or even earlier. It took a few years of making the wrong choices, realizing the hole I was in, and start digging myself out, to learn. Now I am out of the hole and at the base of the mountain with all my tools at the ready.


If teachers are having a difficult time with their own retirement plans and finances, would you really want those who don't have a clue doing the teaching?


I agree that most teachers are pretty bad at this stuff, but not all of us! I try to tie in personal finance to my courses, and I hope to teach it one day as well. It's offered as an elective at most high schools, but I hope it will be mandatory one day. I plan on working to make that hope a reality.
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Re: Frontline--The Retirement Gamble

Postby Munir » Wed Apr 24, 2013 11:13 am

My wife watched Jack Bogle last night give an interview on Frontline titled "The Train Wreck Awaiting American Retirement" which she thought was very impressive. I missed it. I assume it is part of this series on "The Retirement Gamble". The interview is now available online: http://www.pbs.org/wgbh/pages/frontline ... etirement/
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Re: Frontline--The Retirement Gamble

Postby Mel Lindauer » Wed Apr 24, 2013 11:17 am

I thought one of the most telling parts of the show was when my friend, Jason Zweig from the WSJ, stated that many of the money managers who create and push those expensive active financial products actually invest in low-cost index funds with their own money.

Close behind was the stuttering and "deer-in-the-headlights" look of the one guy when asked about "fiduciary responsibility" and the unbelievable statement by the Prudential lady that she'd never seen any studies that show indexing consistently outperforms.
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Re: Frontline--The Retirement Gamble

Postby donaldfair71 » Wed Apr 24, 2013 11:20 am

Grt2bOutdoors wrote:
mike143 wrote:I am afraid of the retirement bail out that is going to be required in the future. I don't want my hard work and sacrifice to be distributed to those that refused to do the same. I really wished that hey taught financial well being in high schools or even earlier. It took a few years of making the wrong choices, realizing the hole I was in, and start digging myself out, to learn. Now I am out of the hole and at the base of the mountain with all my tools at the ready.


If teachers are having a difficult time with their own retirement plans and finances, would you really want those who don't have a clue doing the teaching?


Not that there is anything wrong with generalizing a whole profession's financial sensibilities by watching a few cherry-picked teachers chosen by Frontline.

I would venture to say that one could find enough teachers in every school qualified to speak on the topic. Should we have doctors speak about it? I can link the article from a few weeks ago where the married couple (both doctors) are just getting back in to market. Lawyers? No lawyer ever goes bankrupt. Retired managers from JP Morgan? You saw the guy they interviewed, I'm sure his ilk wouldn't coax the future of investors into the same game he played in his working years. Only 15% of professional planners work as fiduciaries. I assume the 85% wouldn't spout ethical just because the audience changes. But hey, let's single out teachers here.

The fact is that anyone, teachers included, could fall into the 2% ER trap (or variable annuity trap, or Permanent Insurance trap) thrust upon the investing public. Isn't that why Frontline made the program in the first place? I would also venture to say that teachers are as well-qualified as most at understanding the game once someone actually spent an hour showing them how savings can be eroded by high fees to the tune mentioned in the show.
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Re: Frontline--The Retirement Gamble

Postby Mel Lindauer » Wed Apr 24, 2013 11:24 am

bottlecap wrote:
Paul78 wrote:
Silence Dogood wrote:Am I the only one having a hard time feeling sorry for some of the people interviewed for this?

You're making $70,000 a year but only have $20,000 in retirement savings? I make about a third of that, am 22, and have about the same amount in retirement savings.

And no, I don't have rich parents. Divorced; dad's been unemployed the past two years, mom makes probably around $30,000.

I get that I am super frugal and different than most in this regard, but I just can't get how someone can make that much and have so little saved. :confused



Indeed. Some of these "retirement saving" numbers are ridiculous. By boglehead standards I am really not "frugal" but with my salary (not too much more then the 70k example) I save 23k a year towards retirement.


My wife also noted that almost anyone with a sob story and a low retirement balance on the program was pictured at home, typing away on their $1,300 MacBook Air... :oops:

JT


I noticed that, too. And the stainless steel appliances in the background.
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Re: Frontline--The Retirement Gamble

Postby Blues » Wed Apr 24, 2013 11:36 am

Mel Lindauer wrote:I noticed that, too. And the stainless steel appliances in the background.


Many years ago, early on in my federal career I was a "Revenue Officer" for a couple of years with the IRS in Brooklyn, NY.

One day I went on a compliance matter to visit a household in Brooklyn that was severely in arrears to the gov't both in terms of taxes owed as well as failing to file.

When I went into the apartment I was stunned by the assortment of high end electronics (stereos, tv's, etc).

When I asked the gentleman (who, as I recall was either a resident alien or naturalized citizen) how it was that he could afford all this high dollar equipment, he explained to me that filing bankruptcy was the "American way" and made no effort to hide how proud he was of his successful manipulation of the system.

:oops:
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Re: Frontline--The Retirement Gamble

Postby scouter » Wed Apr 24, 2013 11:38 am

...and the guy who said "I guess I'm gonna have to work the rest of my life", when they had just stated that he was unemployed, and they showed him sitting on the couch, watching a big, flat-screen TV.

Sorry to judge, but I see this attitude all the time with people we know, and I get really tired of people complaining about situations that are mostly their own fault.

Our investments earn more than we do, and we still don't have a flat screen TV. We'll get a really nice one when the CRT TV finally dies.
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Re: Frontline--The Retirement Gamble

Postby JMacDonald » Wed Apr 24, 2013 11:38 am

Mel Lindauer wrote:Close behind was the stuttering and "deer-in-the-headlights" look of the one guy when asked about "fiduciary responsibility" and the unbelievable statement by the Prudential lady that she'd never seen any studies that show indexing consistently outperforms.

Hi Mel,
If this was a court of law, you could claim that those executives would be guilty of "willful blindness."
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Re: Frontline--The Retirement Gamble

Postby Rager1 » Wed Apr 24, 2013 11:46 am

Carl53 wrote:...From the expanded interview transcript, even Mr. Bogle seems overly optimistic about future returns "So if we get a 7 percent return, I’m going to give you 6.95 in the index fund because it only costs 0.5 of 1 percent to run." (Should have been 6.5%)...


Bogle was correct. The Total Stock Market Index cost is 5 basis points (.05%...not .5%). So, if the Total Stock Market returns 7%, the index fund will return 6.95%. (7.00 minus .05 = 6.95)

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Re: Frontline--The Retirement Gamble

Postby B. Wellington » Wed Apr 24, 2013 11:49 am

I wanted to thank the OP on the advanced notice. I enjoy Frontline and this was done very well. Thanks to Mr. Bogle for continuing to fight the good fight for the small investors. I for one, would not be where I am today if it wasn't for Vanguard and Jack's focus on low costs and giving the small investor a good chance at reaching their goals.
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Re: Frontline--The Retirement Gamble

Postby leonard » Wed Apr 24, 2013 11:51 am

bottlecap wrote:
Paul78 wrote:
Silence Dogood wrote:Am I the only one having a hard time feeling sorry for some of the people interviewed for this?

You're making $70,000 a year but only have $20,000 in retirement savings? I make about a third of that, am 22, and have about the same amount in retirement savings.

And no, I don't have rich parents. Divorced; dad's been unemployed the past two years, mom makes probably around $30,000.

I get that I am super frugal and different than most in this regard, but I just can't get how someone can make that much and have so little saved. :confused



Indeed. Some of these "retirement saving" numbers are ridiculous. By boglehead standards I am really not "frugal" but with my salary (not too much more then the 70k example) I save 23k a year towards retirement.


My wife also noted that almost anyone with a sob story and a low retirement balance on the program was pictured at home, typing away on their $1,300 MacBook Air... :oops:

JT


Noticed it too...as I watched the show on my 5 yr old laptop :happy.
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Re: Frontline--The Retirement Gamble

Postby Munir » Wed Apr 24, 2013 11:55 am

Blues wrote:
Mel Lindauer wrote:I noticed that, too. And the stainless steel appliances in the background.


Many years ago, early on in my federal career I was a "Revenue Officer" for a couple of years with the IRS in Brooklyn, NY.

One day I went on a compliance matter to visit a household in Brooklyn that was severely in arrears to the gov't both in terms of taxes owed as well as failing to file.

When I went into the apartment I was stunned by the assortment of high end electronics (stereos, tv's, etc).

When I asked the gentleman (who, as I recall was either a resident alien or naturalized citizen) how it was that he could afford all this high dollar equipment, he explained to me that filing bankruptcy was the "American way" and made no effort to hide how proud he was of his successful manipulation of the system.

:oops:


As a naturalized citizen, I hope Blues is not meaning to stereotype naturalized citizens or resident aliens with his remarks. It IS the American Way for many among the public (native-born) to game the system and always get the "best deal". It then becomes a thin line when one is considered to be skirting the law or acting unethically in the eyes of another segment of the population. BTW, who decides what "The American Way" is?
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Re: Frontline--The Retirement Gamble

Postby Mel Lindauer » Wed Apr 24, 2013 11:57 am

JMacDonald wrote:
Mel Lindauer wrote:Close behind was the stuttering and "deer-in-the-headlights" look of the one guy when asked about "fiduciary responsibility" and the unbelievable statement by the Prudential lady that she'd never seen any studies that show indexing consistently outperforms.

Hi Mel,
If this was a court of law, you could claim that those executives would be guilty of "willful blindness."


Either willful blindness, outright lying, or simply being inept, since it's hard to believe that industry execs aren't keenly aware of the competition and the "mathmatical certainty" plus the numerous SPIVA reports showing that indexing outperforms 70-80% of active funds over time. Studying the competition is part of Management 101. How dumb do they think viewers are? Gimmeabreak!
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Re: Frontline--The Retirement Gamble

Postby snowman » Wed Apr 24, 2013 11:58 am

Thank you guys for the link. I thought it was very well done, I just wish they also offered a non-legislative alternative to fix the system - one that starts with consumers spending less and saving more.

Some of those interviews - especially the JP Morgan guy, but Prudential lady as well - reminded me of Stewart and Colbert interviews. They actually made me laugh...
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Re: Frontline--The Retirement Gamble

Postby Grt2bOutdoors » Wed Apr 24, 2013 12:07 pm

Mel Lindauer wrote:
JMacDonald wrote:
Mel Lindauer wrote:Close behind was the stuttering and "deer-in-the-headlights" look of the one guy when asked about "fiduciary responsibility" and the unbelievable statement by the Prudential lady that she'd never seen any studies that show indexing consistently outperforms.

Hi Mel,
If this was a court of law, you could claim that those executives would be guilty of "willful blindness."


Either willful blindness, outright lying, or simply being inept, since it's hard to believe that industry execs aren't keenly aware of the competition and the "mathmatical certainty" plus the numerous studies that show that indexing outperforms 70-80% of active funds over time. Studying the competition is part of Management 101. How dumb do they think viewers are? Gimmeabreak!


They are narcissists, they actually "believe" in the product. I liken them to snake oil salesman - they would put their family members into it.
I actually had a conversation with one of my neighbors who sells very high ER mutual funds on an institutional basis, and the line is always the same "you can't beat an index, you only get what the market returns, why be average? at our firm we are all above average :oops: or my favorite - they compare their fund against the wrong benchmark " This fellow knows I'm an indexer and even admitted to me if everyone went my way, he'd be out of a job.
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Re: Frontline--The Retirement Gamble

Postby Blues » Wed Apr 24, 2013 12:09 pm

Munir wrote: As a naturalized citizen, I hope Blues is not meaning to stereotype naturalized citizens or resident aliens with his remarks. It IS the American Way for many among the public (native-born) to game the system and always get the "best deal". It then becomes a thin line when one is considered to be skirting the law or acting unethically in the eyes of another segment of the population. BTW, who decides what "The American Way" is?


Not at all, Munir. I was simply shocked by how proud he was of working the system when (as I recall) he came to the U.S. from an economically disadvantaged or politically repressive state.

Nope, my roots in the U.S. go back no further than my grandparents (only one of whom was born in the U.S.).

I am proud of my immigrant heritage (to the extent anyone can be proud of something they are not responsible for) and proud of the fact that this country afforded them the opportunity for a better life upon arrival.

My apologies if my wording allowed my meaning to be misconstrued. :beer
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Re: Frontline--The Retirement Gamble

Postby bottlecap » Wed Apr 24, 2013 12:12 pm

snowman wrote:Some of those interviews - especially the JP Morgan guy, but Prudential lady as well - reminded me of Stewart and Colbert interviews. They actually made me laugh...


It's funny, the interviews reminded me of (very real) John Stossel interviews. The one dude was absolutely horrible. I have friends that work for big name outfits whose defenses of active management would make that guy look like the mail clerk. Before anyone goes crazy on me, I mean no offense to mail clerks.

JT
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Re: Frontline--The Retirement Gamble

Postby Grt2bOutdoors » Wed Apr 24, 2013 12:15 pm

donaldfair71 wrote:
Grt2bOutdoors wrote:
mike143 wrote:I am afraid of the retirement bail out that is going to be required in the future. I don't want my hard work and sacrifice to be distributed to those that refused to do the same. I really wished that hey taught financial well being in high schools or even earlier. It took a few years of making the wrong choices, realizing the hole I was in, and start digging myself out, to learn. Now I am out of the hole and at the base of the mountain with all my tools at the ready.


If teachers are having a difficult time with their own retirement plans and finances, would you really want those who don't have a clue doing the teaching?


Not that there is anything wrong with generalizing a whole profession's financial sensibilities by watching a few cherry-picked teachers chosen by Frontline.

I would venture to say that one could find enough teachers in every school qualified to speak on the topic. Should we have doctors speak about it? I can link the article from a few weeks ago where the married couple (both doctors) are just getting back in to market. Lawyers? No lawyer ever goes bankrupt. Retired managers from JP Morgan? You saw the guy they interviewed, I'm sure his ilk wouldn't coax the future of investors into the same game he played in his working years. Only 15% of professional planners work as fiduciaries. I assume the 85% wouldn't spout ethical just because the audience changes. But hey, let's single out teachers here.

The fact is that anyone, teachers included, could fall into the 2% ER trap (or variable annuity trap, or Permanent Insurance trap) thrust upon the investing public. Isn't that why Frontline made the program in the first place? I would also venture to say that teachers are as well-qualified as most at understanding the game once someone actually spent an hour showing them how savings can be eroded by high fees to the tune mentioned in the show.


Sorry you felt offended, but the fact remains if you interviewed the average person out there - and it could be in "any" occupation and any level of management, don't have a clue about basic personal finance, let alone saving and investing techniques. And reading a book for an "hour" does not make qualified to be teaching this subject matter. A competent teacher is one who can both read, comprehend and apply knowledge in practical situations - this is a general comment so please don't be offended. The manager at JP Morgan is likely a salesman who had done well and was promoted to rank of manager, however his compensation is based on how well his subordinates do in the sales of high margin product. It is well known that JP Morgan is a sales oriented culture - just step into a retail branch if you want to experience it at a ground floor level. We already know that most lawyers and doctors are the featured "prey" for financial advisors. They are the "deer in the headlights" population.
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Re: Frontline--The Retirement Gamble

Postby tuckeverlasting » Wed Apr 24, 2013 12:21 pm

Parts of the show were a great vindication of the Bogle(head) Philosophy (which I am eternally grateful to have stumbled across when I needed it), even if it wasn't spelled out as such. I was happy to see the mention of index funds, but wish the overall impression had not been left that investing is some enormously complex impossible puzzle no ordinary mortal can possibly figure out--so maybe we should just give up. Everyone here knows it doesn't have to be that way. Still, we need more shows like this to get the message out.
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Re: Frontline--The Retirement Gamble

Postby Grt2bOutdoors » Wed Apr 24, 2013 12:21 pm

Blues wrote:
Munir wrote: As a naturalized citizen, I hope Blues is not meaning to stereotype naturalized citizens or resident aliens with his remarks. It IS the American Way for many among the public (native-born) to game the system and always get the "best deal". It then becomes a thin line when one is considered to be skirting the law or acting unethically in the eyes of another segment of the population. BTW, who decides what "The American Way" is?


Not at all, Munir. I was simply shocked by how proud he was of working the system when (as I recall) he came to the U.S. from an economically disadvantaged or politically repressive state.

Nope, my roots in the U.S. go back no further than my grandparents (only one of whom was born in the U.S.).

I am proud of my immigrant heritage (to the extent anyone can be proud of something they are not responsible for) and proud of the fact that this country afforded them the opportunity for a better life upon arrival.

My apologies if my wording allowed my meaning to be misconstrued. :beer


Without going off-topic, don't kid yourself, both immigrants and natural citizens are looking to get ahead. If that means "gaming the system to maximize gains" then that's what they will do, because as humans most seek the "easy way out".

We are all in one shape, form or another immigrants whos ancestors or current family arrived here from another location unless you are Native American of a documented tribe. I already pointed out in another thread how a certain group of immigrants are gaming the auto insurance market by using PA plates even though they reside along with their garaged automobile in NY. If that isn't gaming the system, then I don't know what is.

I will tell you this though, there will be no gaming of the retirement system, you either save or you will pay a steep price for not doing so.
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Re: Frontline--The Retirement Gamble

Postby leonard » Wed Apr 24, 2013 12:23 pm

Also, the reporter/interviewer was way, way to softball with his questions - especially when the industry people started salesman double talk on "whether indexing was better" and on the "fiduciary responsibility" question. I bit disappointed at his somewhat passive approach on those interviews. He got garbage answers and didn't push accountability.
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Re: Frontline--The Retirement Gamble

Postby Blues » Wed Apr 24, 2013 12:25 pm

Grt2bOutdoors wrote:Without going off-topic, don't kid yourself, both immigrants and natural citizens are looking to get ahead. If that means "gaming the system to maximize gains" then that's what they will do, because as humans most seek the "easy way out"...snip)


Since you quoted me...after 25 years of federal law enforcement investigating and prosecuting everything from international money laundering to arms smuggling and anti-terrorism you're not telling me anything I didn't know...but thanks, I'll keep it in mind. :beer
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Re: Frontline--The Retirement Gamble

Postby JMacDonald » Wed Apr 24, 2013 12:34 pm

Grt2bOutdoors wrote:
Mel Lindauer wrote:
JMacDonald wrote:
Mel Lindauer wrote:Close behind was the stuttering and "deer-in-the-headlights" look of the one guy when asked about "fiduciary responsibility" and the unbelievable statement by the Prudential lady that she'd never seen any studies that show indexing consistently outperforms.

Hi Mel,
If this was a court of law, you could claim that those executives would be guilty of "willful blindness."


Either willful blindness, outright lying, or simply being inept, since it's hard to believe that industry execs aren't keenly aware of the competition and the "mathmatical certainty" plus the numerous studies that show that indexing outperforms 70-80% of active funds over time. Studying the competition is part of Management 101. How dumb do they think viewers are? Gimmeabreak!


They are narcissists, they actually "believe" in the product. I liken them to snake oil salesman - they would put their family members into it.
I actually had a conversation with one of my neighbors who sells very high ER mutual funds on an institutional basis, and the line is always the same "you can't beat an index, you only get what the market returns, why be average? at our firm we are all above average :oops: or my favorite - they compare their fund against the wrong benchmark " This fellow knows I'm an indexer and even admitted to me if everyone went my way, he'd be out of a job.

This may say it best:
"It is difficult to get a man to understand something when his job depends on not understanding it."
Upton Sinclair
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Re: Frontline--The Retirement Gamble

Postby statsnerd » Wed Apr 24, 2013 12:44 pm

Grt2bOutdoors wrote:The JP Morgan guy - I hope he took the rest of the week off :oops:. Can you imagine - an executive VP of retirement savings at a major institution - on national television, looked quite incompetent. Not that Wells Fargo did such a hot job either. Prudential, tsk, tsk, not keeping up with the ongoings of your competitors? Come on now, even the business majors at Rutgers know how to perform competitor analysis. Not aware of competitor research? Yeah right.


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Re: Frontline--The Retirement Gamble

Postby Munir » Wed Apr 24, 2013 12:48 pm

Blues wrote:
Munir wrote: As a naturalized citizen, I hope Blues is not meaning to stereotype naturalized citizens or resident aliens with his remarks. It IS the American Way for many among the public (native-born) to game the system and always get the "best deal". It then becomes a thin line when one is considered to be skirting the law or acting unethically in the eyes of another segment of the population. BTW, who decides what "The American Way" is?


Not at all, Munir. I was simply shocked by how proud he was of working the system when (as I recall) he came to the U.S. from an economically disadvantaged or politically repressive state.

Nope, my roots in the U.S. go back no further than my grandparents (only one of whom was born in the U.S.).

I am proud of my immigrant heritage (to the extent anyone can be proud of something they are not responsible for) and proud of the fact that this country afforded them the opportunity for a better life upon arrival.

My apologies if my wording allowed my meaning to be misconstrued. :beer


Blues, thank you for the explanation. I did not think you intended any offense and I appreciate the calarification in case anyone may misinterpret what you were saying.

I sill wonder about who sets the standards for what is considered the "American Way" or the "ethical" way. Bogleheads mostly agree (but not all) on what the basic tenets of the Boglehead way is, but we are a small group that communicates often with each other and therefore can reach some agreement. In the larger society, some may honestly feel they are acting ethically because that's how most people they relate to behave, but to others outside that circle, it is unethical. Maybe some finance and investment individuals feel that way too. I think that it's difficult to set firm standards of behavior on a number of issues in a society as large and varied as ours is. We can agree about what traffic lights mean but maybe not on whether a certain financial transaction is ethical or not. That should not stop a group like the Bogleheads from advocating for what we believe is the proper and ehtical way is in conducting our financial affairs, but let us be more understanding of others who may disagree.
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Re: Frontline--The Retirement Gamble

Postby snowman » Wed Apr 24, 2013 12:53 pm

statsnerd wrote:
Grt2bOutdoors wrote:The JP Morgan guy - I hope he took the rest of the week off :oops:. Can you imagine - an executive VP of retirement savings at a major institution - on national television, looked quite incompetent. Not that Wells Fargo did such a hot job either. Prudential, tsk, tsk, not keeping up with the ongoings of your competitors? Come on now, even the business majors at Rutgers know how to perform competitor analysis. Not aware of competitor research? Yeah right.


"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair


While this may be true, I actually think they are those same people telling Jason 2 beers later that 90% of their own investments are in indexes. OK, maybe not the JPM guy, he clearly looked worried he might be missing something, but the Prudential lady for sure.
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Re: Frontline--The Retirement Gamble

Postby donaldfair71 » Wed Apr 24, 2013 12:58 pm

Grt2bOutdoors wrote:
donaldfair71 wrote:
Grt2bOutdoors wrote:
mike143 wrote:I am afraid of the retirement bail out that is going to be required in the future. I don't want my hard work and sacrifice to be distributed to those that refused to do the same. I really wished that hey taught financial well being in high schools or even earlier. It took a few years of making the wrong choices, realizing the hole I was in, and start digging myself out, to learn. Now I am out of the hole and at the base of the mountain with all my tools at the ready.


If teachers are having a difficult time with their own retirement plans and finances, would you really want those who don't have a clue doing the teaching?


Not that there is anything wrong with generalizing a whole profession's financial sensibilities by watching a few cherry-picked teachers chosen by Frontline.

I would venture to say that one could find enough teachers in every school qualified to speak on the topic. Should we have doctors speak about it? I can link the article from a few weeks ago where the married couple (both doctors) are just getting back in to market. Lawyers? No lawyer ever goes bankrupt. Retired managers from JP Morgan? You saw the guy they interviewed, I'm sure his ilk wouldn't coax the future of investors into the same game he played in his working years. Only 15% of professional planners work as fiduciaries. I assume the 85% wouldn't spout ethical just because the audience changes. But hey, let's single out teachers here.

The fact is that anyone, teachers included, could fall into the 2% ER trap (or variable annuity trap, or Permanent Insurance trap) thrust upon the investing public. Isn't that why Frontline made the program in the first place? I would also venture to say that teachers are as well-qualified as most at understanding the game once someone actually spent an hour showing them how savings can be eroded by high fees to the tune mentioned in the show.


Sorry you felt offended, but the fact remains if you interviewed the average person out there - and it could be in "any" occupation and any level of management, don't have a clue about basic personal finance, let alone saving and investing techniques. And reading a book for an "hour" does not make qualified to be teaching this subject matter. A competent teacher is one who can both read, comprehend and apply knowledge in practical situations - this is a general comment so please don't be offended. The manager at JP Morgan is likely a salesman who had done well and was promoted to rank of manager, however his compensation is based on how well his subordinates do in the sales of high margin product. It is well known that JP Morgan is a sales oriented culture - just step into a retail branch if you want to experience it at a ground floor level. We already know that most lawyers and doctors are the featured "prey" for financial advisors. They are the "deer in the headlights" population.


No one is offended. Nor did anyone say an hour of reading a book makes one qualified to teach. I said that the cost piece, which can be explained in about an hour, would certainly have highlighted to these people how much of a rip-off the investment was. Hence, they wound up on Frontline discussing these investments.

I understood your point (and I have misunderstood people before) to be that the teachers highlighted from the show represent that, perhaps, teachers shouldn't be teaching the material. Such was your original statement. But anyone can find a teacher who has read, comprehends, and applies quantum physics at the highest level buy couldn't speak well to much of World History. Or a Math teacher who could understand Linear Algebra just fine, but you wouldn't to teach elementary-level trumpet. What makes it such a shock that an elementary teacher wouldn't know how to compare annuities, or compare the costs of a target plan vs. slice and dice in an IRA?

There are plenty of high school teachers qualified to teach this stuff at basic levels (trust me, the 17-year old would lose interest in 12b definitions above that-- and the types of moves that would provide savings, such as an understanding of Expense Ratios/Load Fees/etc., are VERY basic).
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Re: Frontline--The Retirement Gamble

Postby Grt2bOutdoors » Wed Apr 24, 2013 12:59 pm

snowman wrote:
statsnerd wrote:
Grt2bOutdoors wrote:The JP Morgan guy - I hope he took the rest of the week off :oops:. Can you imagine - an executive VP of retirement savings at a major institution - on national television, looked quite incompetent. Not that Wells Fargo did such a hot job either. Prudential, tsk, tsk, not keeping up with the ongoings of your competitors? Come on now, even the business majors at Rutgers know how to perform competitor analysis. Not aware of competitor research? Yeah right.


"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair


While this may be true, I actually think they are those same people telling Jason 2 beers later that 90% of their own investments are in indexes. OK, maybe not the JPM guy, he clearly looked worried he might be missing something, but the Prudential lady for sure.


Nah! The Prudential lady's investments are in "whole life insurance, variable life annuities and Prudential stock". :twisted:
Last edited by Grt2bOutdoors on Wed Apr 24, 2013 1:02 pm, edited 1 time in total.
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Re: Frontline--The Retirement Gamble

Postby Blues » Wed Apr 24, 2013 1:00 pm

If you want to know about unethical financial transactions...

I don't know how many of you saw the movie "Boiler Room" a few years back but when I first got out of college and was looking for jobs I spent a few weeks at a company that sold commodities futures contracts via cold calls from Dun & Bradstreet index cards.

I don't even think they actually bought any of the underlying securities involved, I'm pretty sure it was a Ponzi scheme from the get-go and was glad I got myself out of there once the hair on the back of my neck started standing on end.

I'm not sure how one (even after due diligence) can ever be entirely at ease (or less than vigilant) when it comes to the people and institutions that handle their hard earned investments. And so it goes...
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