Jack Bogle Is Worried About U.S. Pensions

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Jack Bogle Is Worried About U.S. Pensions

Post by davidkw » Thu Dec 07, 2017 3:27 pm

Jack on pensions

Nice read in Bloomberg:
The founder of Vanguard Group thinks a conservative portfolio of bonds will only return about 3 percent a year over the next decade, and stocks won’t do much better, with a 4 percent annual gain over a similar period. This is “totally defeating” for pensions, which “are not going to be able to meet their 7.5 percent or 8 percent obligations,” Bogle said in a Bloomberg Radio interview that aired Thursday.
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Thesaints » Thu Dec 07, 2017 3:35 pm

It is not only true for pensions, but also for individual retirement accounts. In fact, it is a worst problem for them.
We are going to see a lot of people forced to work a lot later in life that they thought.
Low yields on bonds are a real killer.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by WhiteMaxima » Thu Dec 07, 2017 3:40 pm

Low interest is linked to low inflation. Pension won't adjust to inflation. So people would rather low inflation. Company would like high inflation cause pension liability is lower if the interest rate goes higher.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by livesoft » Thu Dec 07, 2017 3:47 pm

I am not worried. Pensions are so old-fashioned. Folks with 401(k)s and 403(b)s and IRAs aren't spending them down anyways. Unlike pensions, their heirs will benefit and probably won't spend down the 401(k)s and 403(b)s and IRAs either. In a generation or two, no one will have to work anymore because of all the savings that their parents and grandparents passed down to them.

Furthermore, people can live on a lot less money if they really have to.
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Thesaints » Thu Dec 07, 2017 3:53 pm

WhiteMaxima wrote:
Thu Dec 07, 2017 3:40 pm
Low interest is linked to low inflation. Pension won't adjust to inflation. So people would rather low inflation. Company would like high inflation cause pension liability is lower if the interest rate goes higher.
Low interest is actually linked to Federal Reserve's monetary policy, at least in the case at hand.

livesoft wrote:
Thu Dec 07, 2017 3:47 pm
I am not worried. Pensions are so old-fashioned. Folks with 401(k)s and 403(b)s and IRAs aren't spending them down anyways. Unlike pensions, their heirs will benefit and probably won't spend down the 401(k)s and 403(b)s and IRAs either. In a generation or two, no one will have to work anymore because of all the savings that their parents and grandparents passed down to them.

Furthermore, people can live on a lot less money if they really have to.
It will be interesting to see people applying the 4% rule when bonds yield is below 1% and stocks produce a 4% return.
Besides, personal retirement accounts in the US are notoriously underfunded, and not by a little, and only wealthy people can live on a lot less money.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by livesoft » Thu Dec 07, 2017 3:58 pm

^It is pretty clear that many retirees do not like to spend principal and will cut back on expenses rather than sell capital. It's a behavioral thing that many academics did not plan for. One way to get retirees to spend the money is to sell them annuities with monthly payouts.
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Thesaints » Thu Dec 07, 2017 4:04 pm

livesoft wrote:
Thu Dec 07, 2017 3:58 pm
^It is pretty clear that many retirees do not like to spend principal and will cut back on expenses rather than sell capital. It's a behavioral thing that many academics did not plan for. One way to get retirees to spend the money is to sell them annuities with monthly payouts.
Retirees still have to eat, whether they like to spend principal, or not. Academics (good ones) take that into account.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Sandtrap » Thu Dec 07, 2017 4:08 pm

livesoft wrote:
Thu Dec 07, 2017 3:58 pm
^It is pretty clear that many retirees do not like to spend principal and will cut back on expenses rather than sell capital. It's a behavioral thing that many academics did not plan for. One way to get retirees to spend the money is to sell them annuities with monthly payouts.
Very true. Whether generational, or otherwise, it's behavioral hard wiring. My FIL had a hefty military pension and a deferred annuity. Did not touch a substantial portfolio, ever.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by livesoft » Thu Dec 07, 2017 4:09 pm

My MIL would go through our kitchen garbage can to find things to eat if we didn't empty it before she showed up. My mom would get on the electric scooter at Costco and visit all the free food samples. So finding food was not a problem.
Last edited by livesoft on Thu Dec 07, 2017 4:10 pm, edited 1 time in total.
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Thesaints » Thu Dec 07, 2017 4:09 pm

Sandtrap wrote:
Thu Dec 07, 2017 4:08 pm
livesoft wrote:
Thu Dec 07, 2017 3:58 pm
^It is pretty clear that many retirees do not like to spend principal and will cut back on expenses rather than sell capital. It's a behavioral thing that many academics did not plan for. One way to get retirees to spend the money is to sell them annuities with monthly payouts.
Very true. Whether generational, or otherwise, it's behavioral hard wiring. My FIL had a hefty military pension and a deferred annuity. Did not touch a substantial portfolio, ever.
What if his pension had been not hefty, but paltry ?
livesoft wrote:
Thu Dec 07, 2017 4:09 pm
My MIL would go through our kitchen garbage can to find things to eat if we didn't empty it before she showed up. My mom would get on the electric scooter at Costco and visit all the free food samples.
Where can I get free medical care and utilities ?
Don't you realize you just pictured a nation of elder people going through garbage cans ?

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by livesoft » Thu Dec 07, 2017 4:14 pm

Thesaints wrote:
Thu Dec 07, 2017 4:09 pm
Where can I get free medical care and utilities ?
Don't you realize you just pictured a nation of elder people going through garbage cans ?
The US has free medical care for many people that show up at a hospital. I worked at such a hospital.

Also my MIL lived through the Great Depression which affected her for the rest of her life. At least our garbage can was under the kitchen sink, so she wasn't outside. Her investable assets when she died not including home were in the high 6-figures with gold mining stocks a big percentage of that.

But think about it: If you are 90 years old, are you still withdrawal/spending only 4% of your portfolio? Or have you upped your game to 10% or more?
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by cfs » Thu Dec 07, 2017 4:21 pm

This is becoming routine, every week I see articles about John Bogle worrying about something.

Stop worrying, just visit the nearest Mexican restaurant and enjoy some hot menudo aka breakfast for champions.

Merry Christmas, and thanks for reading.
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Thesaints » Thu Dec 07, 2017 4:30 pm

livesoft wrote:
Thu Dec 07, 2017 4:14 pm
Thesaints wrote:
Thu Dec 07, 2017 4:09 pm
Where can I get free medical care and utilities ?
Don't you realize you just pictured a nation of elder people going through garbage cans ?
The US has free medical care for many people that show up at a hospital. I worked at such a hospital.

Also my MIL lived through the Great Depression which affected her for the rest of her life. At least our garbage can was under the kitchen sink, so she wasn't outside. Her investable assets when she died not including home were in the high 6-figures with gold mining stocks a big percentage of that.

But think about it: If you are 90 years old, are you still withdrawal/spending only 4% of your portfolio? Or have you upped your game to 10% or more?
That's free emergency care you are referring to. 10% of your portfolio at age 90 could turn out to be less than 4% of that portfolio at age 65. That's exactly the problem with low yields.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by itstoomuch » Thu Dec 07, 2017 4:37 pm

Stop worrying, just visit the nearest Mexican restaurant and enjoy some hot menudo aka breakfast for champions.
Matter of fact, I did have pho with tripes and other meaty things in Seattle this past weekend. The evening meal after the TDAmeritrade seminar on options and again the next morning. :annoyed :oops:
For appetizer I had a TopPot donut and a a sampler of Seattle's finest distilled grain alcohols. (1st St). The pho was bad. The second pho restaurant was much better, I had been to this one a couple of times.
One foe to another pho.
:oops: ymmv :mrgreen:
Last edited by itstoomuch on Thu Dec 07, 2017 4:55 pm, edited 2 times in total.
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by informal guide » Thu Dec 07, 2017 4:39 pm

cfs wrote:
Thu Dec 07, 2017 4:21 pm
This is becoming routine, every week I see articles about John Bogle worrying about something.

Stop worrying, just visit the nearest Mexican restaurant and enjoy some hot menudo aka breakfast for champions.

Merry Christmas, and thanks for reading.
Ah, menudo, aka Tripe soup - -cures what ails you, particularly after a night of revelry!

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by jrbdmb » Thu Dec 07, 2017 5:55 pm

livesoft wrote:
Thu Dec 07, 2017 3:47 pm
I am not worried. Pensions are so old-fashioned. Folks with 401(k)s and 403(b)s and IRAs aren't spending them down anyways. Unlike pensions, their heirs will benefit and probably won't spend down the 401(k)s and 403(b)s and IRAs either. In a generation or two, no one will have to work anymore because of all the savings that their parents and grandparents passed down to them.
I think one can come to this conclusion if they hang out on Bogleheads too much, but out in the real world there are far more families with not nearly enough saved for retirement, and a precious few who will donate sizable retirement accounts to their children.

https://www.fool.com/retirement/2017/04 ... -away.aspx (In particular look at points #2 and #3.)

Or were you just being sarcastic above?
Last edited by jrbdmb on Thu Dec 07, 2017 6:22 pm, edited 2 times in total.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by munemaker » Thu Dec 07, 2017 6:01 pm

No disrespect to Jack, but the "experts" have been predicting negative returns in bonds for the past 5 or 6 years and low stock returns for the last year or two. Hasn't happened as predicted. Sure, if you keep forecasting a poor returns, you will be correct eventually. Even a broken watch is right twice a day. "Nobody knows nuttin."

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Thesaints » Thu Dec 07, 2017 6:06 pm

munemaker wrote:
Thu Dec 07, 2017 6:01 pm
No disrespect to Jack, but the "experts" have been predicting negative returns in bonds for the past 5 or 6 years and low stock returns for the last year or two. Hasn't happened as predicted. Sure, if you keep forecasting a poor returns, you will be correct eventually. Even a broken watch is right twice a day. "Nobody knows nuttin."
"experts" may have done what you describe. Real experts, no quotes, have been observing heightened correlation between stocks and bonds and saying that average future returns in the next 10 years or so will very likely be below the norm for both assets classes.
It has not happened yet, but the climber who has been warned about worsening weather conditions is subject to increased risk the higher he climbs while the sky is still blue.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by livesoft » Thu Dec 07, 2017 6:28 pm

jrbdmb wrote:
Thu Dec 07, 2017 5:55 pm
I think one can come to this conclusion if they hang out on Bogleheads too much, but out in the real world there are far more families with not nearly enough saved for retirement, and a precious few who will donate sizable retirement accounts to their children.

https://www.fool.com/retirement/2017/04 ... -away.aspx (In particular look at points #2 and #3.)

Or were you just being sarcastic above?
I'm not being sarcastic. I know a few people who have their parents who have moved in with them. My sister lives off of SS alone, too. Sure, some people are homeless or living out of their cars. And I know people still working in their 70's and 80's because they feel they don't have enough to retire. You might know them as cashiers in grocery stores.

And "donate" is not the right word. "Bequeath" is a better word. And defined contribution retirement plans have not been around long enough for everyone to have them and to build them up.
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by randomguy » Thu Dec 07, 2017 6:54 pm

Thesaints wrote:
Thu Dec 07, 2017 3:53 pm


It will be interesting to see people applying the 4% rule when bonds yield is below 1% and stocks produce a 4% return.
Besides, personal retirement accounts in the US are notoriously underfunded, and not by a little, and only wealthy people can live on a lot less money.
Why? The 4% rule would work fine with those conditions and our current inflation situation.

Lets say Jack is 100% right. Does it matter? It is only 10 years. The fact that stocks had negative 10 year returns from 2000-9 wasn't fun. But if you start looking at the 15 year time frame and things don't look anywhere near as grim.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Thesaints » Thu Dec 07, 2017 7:00 pm

randomguy wrote:
Thu Dec 07, 2017 6:54 pm
Why? The 4% rule would work fine with those conditions and our current inflation situation.
No, it does not. It is simple algebra.

If the average return from bonds is less than 4%, one is forced to take on more stocks. If the average return of bonds is a lot less than 4% and that of stocks is not too much above that number, one is forced to take almost all stocks. Portfolio volatility increases radically and risk of negative sequence of returns goes along with it, pushing the chances of making it through 30/35/40 years down to a minimum.


...and right on cue: https://vanguardblog.com/2017/11/16/wha ... t-success/

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by ncbill » Thu Dec 07, 2017 7:12 pm

Sandtrap wrote:
Thu Dec 07, 2017 4:08 pm
livesoft wrote:
Thu Dec 07, 2017 3:58 pm
^It is pretty clear that many retirees do not like to spend principal and will cut back on expenses rather than sell capital. It's a behavioral thing that many academics did not plan for. One way to get retirees to spend the money is to sell them annuities with monthly payouts.
Very true. Whether generational, or otherwise, it's behavioral hard wiring. My FIL had a hefty military pension and a deferred annuity. Did not touch a substantial portfolio, ever.
Grandma had to start selling stocks (no mutual funds - she was born during WWI) after granddad died, and monthly household income dropped from $3000 to $1200/month ($400/month state pension, rest Social Security)

Still, no federal taxes due on those very long-term capital gains.

The above and your post is why I've encouraged all my kids to go career military, especially given their preferred vocations.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Ron Scott » Thu Dec 07, 2017 7:40 pm

davidkw wrote:
Thu Dec 07, 2017 3:27 pm
Jack on pensions

Nice read in Bloomberg:
The founder of Vanguard Group thinks a conservative portfolio of bonds will only return about 3 percent a year over the next decade, and stocks won’t do much better, with a 4 percent annual gain over a similar period. This is “totally defeating” for pensions, which “are not going to be able to meet their 7.5 percent or 8 percent obligations,” Bogle said in a Bloomberg Radio interview that aired Thursday.
I don't read much about Bogleheads focusing on the notion of accepting risk based on the potential rewards vs. alternatives. (3% v. 4% makes things dicier for those who do.) Bogleheads seem to think mostly about a stock/bond asset allocation approach assuming implicitly that the past 70 years or so are a reasonable long term predictor of the next 15+ and say to themselves "don't worry about it". No one knows for sure.

If Bogle is correct companies that still offer pensions are going to have to give up profits to fund them, I guess, which won't help their stock price. And governments will need to raise taxes (ask people from the northeast how this game is played).


i personally like the 2% Rule!

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by munemaker » Thu Dec 07, 2017 7:58 pm

livesoft wrote:
Thu Dec 07, 2017 3:47 pm
Folks with 401(k)s and 403(b)s and IRAs aren't spending them down anyways.
If you are living off of your own investments, it is highly unlikely you can spend down your portfolio. You should plan financially to live to at least your nineties, and the average longevity is mid eighties. If you have money to survive to 95 and you die at 83, you are going to have a lot of money left.

If you want to spend down every cent, hold your nose and buy an annuity.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by stevewolfe » Thu Dec 07, 2017 8:07 pm

Thesaints wrote:
Thu Dec 07, 2017 7:00 pm
No, it does not. It is simple algebra.

If the average return from bonds is less than 4%, one is forced to take on more stocks. If the average return of bonds is a lot less than 4% and that of stocks is not too much above that number, one is forced to take almost all stocks.
Or they save more. The options presented aren't the only options.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Boglegrappler » Thu Dec 07, 2017 8:11 pm

Bogle is making a very important point. In calculating pension obligations, and funding percentages, an assumption (forecast) is made of the rate of return on the existing investment portfolio that is a large part of determining whether the pension is currently over or (usually) underfunded, and to what degree. Calpers uses rates of return of 5.0, 3.25, and 6.5 in calculating the necessary contributions to its pension funds. New York is using 7% as its projected return number. Obviously, if future returns turn out to be only 3+%, there will have to be even more contributions from taxpayers to fund the obligations. The same holds true for corporations who still have defined benefit plans if their rates of projected returns turn out to have been too high.
Pensions have generally lowered their returns targets over the past few years, but they’re still aiming for annual gains of more than 7 percent on average. To Bogle, that’s an unlikely scenario.

“It is almost a given that it will end badly,” he said.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by ImUrHuckleberry » Thu Dec 07, 2017 8:23 pm

munemaker wrote:
Thu Dec 07, 2017 6:01 pm
No disrespect to Jack, but the "experts" have been predicting negative returns in bonds for the past 5 or 6 years and low stock returns for the last year or two. Hasn't happened as predicted. Sure, if you keep forecasting a poor returns, you will be correct eventually. Even a broken watch is right twice a day. "Nobody knows nuttin."
I remember in the late eighties/early nineties everybody was worried Japan was buying up the USA and the US economy was going to be stagnant for decades and then we had a massive bull market instead.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by abuss368 » Thu Dec 07, 2017 9:04 pm

The pension crisis has been below the surface for well over a decade. At some point this is going to bubble up.
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by TheTimeLord » Thu Dec 07, 2017 9:10 pm

davidkw wrote:
Thu Dec 07, 2017 3:27 pm
Jack on pensions

Nice read in Bloomberg:
The founder of Vanguard Group thinks a conservative portfolio of bonds will only return about 3 percent a year over the next decade, and stocks won’t do much better, with a 4 percent annual gain over a similar period. This is “totally defeating” for pensions, which “are not going to be able to meet their 7.5 percent or 8 percent obligations,” Bogle said in a Bloomberg Radio interview that aired Thursday.
Bogle is just a fountain of positivity lately.
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by nedsaid » Thu Dec 07, 2017 9:13 pm

livesoft wrote:
Thu Dec 07, 2017 6:28 pm
jrbdmb wrote:
Thu Dec 07, 2017 5:55 pm
I think one can come to this conclusion if they hang out on Bogleheads too much, but out in the real world there are far more families with not nearly enough saved for retirement, and a precious few who will donate sizable retirement accounts to their children.

https://www.fool.com/retirement/2017/04 ... -away.aspx (In particular look at points #2 and #3.)

Or were you just being sarcastic above?
I'm not being sarcastic. I know a few people who have their parents who have moved in with them. My sister lives off of SS alone, too. Sure, some people are homeless or living out of their cars. And I know people still working in their 70's and 80's because they feel they don't have enough to retire. You might know them as cashiers in grocery stores.

And "donate" is not the right word. "Bequeath" is a better word. And defined contribution retirement plans have not been around long enough for everyone to have them and to build them up.
My best guess is that the extended family and multi-generational households might be coming back. The retirement model where everyone is a retirement millionaire with oodles and oodles of Long Term Care insurance is just not realistic. Parents moving in with kids was how generations in the past did it and we might have to go that way again.
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by TheTimeLord » Thu Dec 07, 2017 9:27 pm

Just when I start thinking about retiring in 2018, Bogle pulls me back in. I guess I need a few more OMYs.
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by iamlucky13 » Thu Dec 07, 2017 9:40 pm

Lately his comments seem to have fairly consistently been on the theme of low returns. The pension angle is a bit interesting because pension funding obligations for companies with underperfoming pensions should feedback as an additional drag on the market.

For what it's worth, a decade of 4% stock returns wouldn't really surprise or deeply worry me. It does seem like we're at pretty high valuations right now,, and 4% is hardly worst 10-year return the S&P 500 has endured (-3% nominal, -6% real). If this site is right, historically somewhere around 15% of 10-year periods saw worse than 4% nominal returns.
https://dqydj.com/sp-500-historical-return-calculator/

That's the kind of thing we have to be prepared for, both mentally, so we don't make unwise investment decisions chasing yield, and financially, so that we don't have so little margin in our savings that retirement runs beyond our target, or much worse, beyond our ability to keep working.

I understand why a lot of posters here disagree with what Jack has been saying lately, but some people seem even a bit sour about it. I'm not changing my plan based on his predictions, and not very confident that's what will actually happen, but consider this:

What happens if you listen to Jack, and he's wrong on this one? You overfunded your retirement. That's not exactly a devastating outcome.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by technovelist » Thu Dec 07, 2017 9:51 pm

iamlucky13 wrote:
Thu Dec 07, 2017 9:40 pm
Lately his comments seem to have fairly consistently been on the theme of low returns. The pension angle is a bit interesting because pension funding obligations for companies with underperfoming pensions should feedback as an additional drag on the market.

For what it's worth, a decade of 4% stock returns wouldn't really surprise or deeply worry me. It does seem like we're at pretty high valuations right now,, and 4% is hardly worst 10-year return the S&P 500 has endured (-3% nominal, -6% real). If this site is right, historically somewhere around 15% of 10-year periods saw worse than 4% nominal returns.
https://dqydj.com/sp-500-historical-return-calculator/

That's the kind of thing we have to be prepared for, both mentally, so we don't make unwise investment decisions chasing yield, and financially, so that we don't have so little margin in our savings that retirement runs beyond our target, or much worse, beyond our ability to keep working.

I understand why a lot of posters here disagree with what Jack has been saying lately, but some people seem even a bit sour about it. I'm not changing my plan based on his predictions, and not very confident that's what will actually happen, but consider this:

What happens if you listen to Jack, and he's wrong on this one? You overfunded your retirement. That's not exactly a devastating outcome.
The possible downside is that you worked several years longer than you had to. Those several years could have been spent doing something else that you would have preferred to continued work.

I'm not saying he's wrong. I'm saying that there is a cost to being too conservative, although it isn't generally as big a cost as being too liberal with one's assumptions.
In theory, theory and practice are identical. In practice, they often differ.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by anoop » Thu Dec 07, 2017 9:56 pm

Thesaints wrote:
Thu Dec 07, 2017 3:35 pm
It is not only true for pensions, but also for individual retirement accounts. In fact, it is a worst problem for them.
We are going to see a lot of people forced to work a lot later in life that they thought.
Low yields on bonds are a real killer.
Except that they may not be employable...

I think we can expect to see an increase in homelessness and people being forced to downgrade/downsize their current lifestyle, possibly relocating to countries with lower cost of living to make ends meet.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by technovelist » Thu Dec 07, 2017 10:01 pm

anoop wrote:
Thu Dec 07, 2017 9:56 pm
Thesaints wrote:
Thu Dec 07, 2017 3:35 pm
It is not only true for pensions, but also for individual retirement accounts. In fact, it is a worst problem for them.
We are going to see a lot of people forced to work a lot later in life that they thought.
Low yields on bonds are a real killer.
Except that they may not be employable...

I think we can expect to see an increase in homelessness and people being forced to downgrade/downsize their current lifestyle, possibly relocating to countries with lower cost of living to make ends meet.
That's what I would do if I had no other choice. You can live pretty well on a modest Social Security check in a number of countries that are fairly friendly to Americans.
In theory, theory and practice are identical. In practice, they often differ.

anoop
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by anoop » Thu Dec 07, 2017 10:10 pm

technovelist wrote:
Thu Dec 07, 2017 10:01 pm
That's what I would do if I had no other choice. You can live pretty well on a modest Social Security check in a number of countries that are fairly friendly to Americans.
I think they will be forced to raise the age for receiving social security benefits to 70 or even 75--I just don't see any other choice there.

For those in their 40's now, I think it would be somewhat pollyannish to assume they will receive benefits similar to what are being given today. There will likely be a combination of raising the age AND lowering the benefit. And I'm not even sure what happens with medicare, but I assume it will also involve raising the age and increasing the contribution/copays.

The best course of action, IMO, is so plan to depend on one's own savings/resources as much as possible.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by iamlucky13 » Thu Dec 07, 2017 10:11 pm

technovelist wrote:
Thu Dec 07, 2017 9:51 pm
iamlucky13 wrote:
Thu Dec 07, 2017 9:40 pm
I understand why a lot of posters here disagree with what Jack has been saying lately, but some people seem even a bit sour about it. I'm not changing my plan based on his predictions, and not very confident that's what will actually happen, but consider this:

What happens if you listen to Jack, and he's wrong on this one? You overfunded your retirement. That's not exactly a devastating outcome.
The possible downside is that you worked several years longer than you had to. Those several years could have been spent doing something else that you would have preferred to continued work.

I'm not saying he's wrong. I'm saying that there is a cost to being too conservative, although it isn't generally as big a cost as being too liberal with one's assumptions.
Totally correct of course, but if you're going to err one way or the other, do you err on the side of losing that time doing what you want, or on the side of running out of money in retirement? One can hurt a lot more than the other.

By the way, I was curious about where Jack got this 4%, and noticed that when one of his past interviewers asked him about his forecast, he promptly corrected that he doesn't consider it a "forecast," but a "reasonable expectation." I get the sense that if you forced him to give a forecast, he'd call 4% a slightly pessimistic forecast that more conservative investors might want to plan on, and might put his middle ground at 5-6%.
http://news.morningstar.com/cover/video ... ?id=830763

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Boglegrappler » Thu Dec 07, 2017 10:12 pm

I'm not saying he's wrong. I'm saying that there is a cost to being too conservative, although it isn't generally as big a cost as being too liberal with one's assumptions.
That last sentence qualifies as gospel. :)

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by technovelist » Thu Dec 07, 2017 10:29 pm

anoop wrote:
Thu Dec 07, 2017 10:10 pm
technovelist wrote:
Thu Dec 07, 2017 10:01 pm
That's what I would do if I had no other choice. You can live pretty well on a modest Social Security check in a number of countries that are fairly friendly to Americans.
I think they will be forced to raise the age for receiving social security benefits to 70 or even 75--I just don't see any other choice there.

For those in their 40's now, I think it would be somewhat pollyannish to assume they will receive benefits similar to what are being given today. There will likely be a combination of raising the age AND lowering the benefit. And I'm not even sure what happens with medicare, but I assume it will also involve raising the age and increasing the contribution/copays.

The best course of action, IMO, is so plan to depend on one's own savings/resources as much as possible.
Certainly. But regardless of where you get the money, moving to a lower-cost country could be a way to improve living standards.
In theory, theory and practice are identical. In practice, they often differ.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by technovelist » Thu Dec 07, 2017 10:29 pm

Boglegrappler wrote:
Thu Dec 07, 2017 10:12 pm
I'm not saying he's wrong. I'm saying that there is a cost to being too conservative, although it isn't generally as big a cost as being too liberal with one's assumptions.
That last sentence qualifies as gospel. :)
Thanks!
In theory, theory and practice are identical. In practice, they often differ.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by technovelist » Thu Dec 07, 2017 10:30 pm

iamlucky13 wrote:
Thu Dec 07, 2017 10:11 pm
technovelist wrote:
Thu Dec 07, 2017 9:51 pm
iamlucky13 wrote:
Thu Dec 07, 2017 9:40 pm
I understand why a lot of posters here disagree with what Jack has been saying lately, but some people seem even a bit sour about it. I'm not changing my plan based on his predictions, and not very confident that's what will actually happen, but consider this:

What happens if you listen to Jack, and he's wrong on this one? You overfunded your retirement. That's not exactly a devastating outcome.
The possible downside is that you worked several years longer than you had to. Those several years could have been spent doing something else that you would have preferred to continued work.

I'm not saying he's wrong. I'm saying that there is a cost to being too conservative, although it isn't generally as big a cost as being too liberal with one's assumptions.
Totally correct of course, but if you're going to err one way or the other, do you err on the side of losing that time doing what you want, or on the side of running out of money in retirement? One can hurt a lot more than the other.
I have chosen the former, although not fanatically. That is, I have taken a couple of jobs after "retirement" so I could conserve our assets for later use, and have developed several programs that I'm trying to sell to raise some extra money. But I still spend most of my time relaxing, including here. :sharebeer
Last edited by technovelist on Thu Dec 07, 2017 10:33 pm, edited 1 time in total.
In theory, theory and practice are identical. In practice, they often differ.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by randomguy » Thu Dec 07, 2017 10:33 pm

Thesaints wrote:
Thu Dec 07, 2017 7:00 pm
randomguy wrote:
Thu Dec 07, 2017 6:54 pm
Why? The 4% rule would work fine with those conditions and our current inflation situation.
No, it does not. It is simple algebra.

If the average return from bonds is less than 4%, one is forced to take on more stocks. If the average return of bonds is a lot less than 4% and that of stocks is not too much above that number, one is forced to take almost all stocks. Portfolio volatility increases radically and risk of negative sequence of returns goes along with it, pushing the chances of making it through 30/35/40 years down to a minimum.


...and right on cue: https://vanguardblog.com/2017/11/16/wha ... t-success/
You need ~1% real to get a 4% SWR. You can get that with a 50/50 (i.e. not some crazy risky portfolio) and you can get that with Jacks numbers. Heck you can buy TIPs today and get it.

Again go back and look at US history. We have had decades of 4% stock returns and the 4% rule held. One of them even had low bond yields if memory serves. You need decades with lower returns and for them to be followed up by some more bad years for things to break down. It can happen.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by randomguy » Thu Dec 07, 2017 10:37 pm

technovelist wrote:
Thu Dec 07, 2017 10:30 pm
iamlucky13 wrote:
Thu Dec 07, 2017 10:11 pm
technovelist wrote:
Thu Dec 07, 2017 9:51 pm
iamlucky13 wrote:
Thu Dec 07, 2017 9:40 pm
I understand why a lot of posters here disagree with what Jack has been saying lately, but some people seem even a bit sour about it. I'm not changing my plan based on his predictions, and not very confident that's what will actually happen, but consider this:

What happens if you listen to Jack, and he's wrong on this one? You overfunded your retirement. That's not exactly a devastating outcome.
The possible downside is that you worked several years longer than you had to. Those several years could have been spent doing something else that you would have preferred to continued work.

I'm not saying he's wrong. I'm saying that there is a cost to being too conservative, although it isn't generally as big a cost as being too liberal with one's assumptions.
Totally correct of course, but if you're going to err one way or the other, do you err on the side of losing that time doing what you want, or on the side of running out of money in retirement? One can hurt a lot more than the other.
Exactly.

Yep losing out on time is far worse in that you never get to do the things you want while with lack of money you will adapt.:) In the end this is the type of thing that isn't worth worrying about till you need to. I am not going to adjust my AA based on any of these predications (i.e. see how accurate any of them have been over the past 20 years). It isn't til you get to the OMY state that you have to decide if you want to settle for a 5%, 4% or 3% SWR and if you want to plan on living to 90,95,100 or 105.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Bigbonds » Thu Dec 07, 2017 10:38 pm

TheTimeLord wrote:
Thu Dec 07, 2017 9:27 pm
Just when I start thinking about retiring in 2018, Bogle pulls me back in. I guess I need a few more OMYs.
The other half of the country that pays no federal taxes appreciate all your OMY’s, keep it up. ;)

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by anoop » Thu Dec 07, 2017 10:56 pm

Just saw this:
https://www.fidelity.com/viewpoints/ret ... retirement

For a completely different approach to downsizing... :D
https://www.youtube.com/watch?v=_POpCkJToEQ

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victorb
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by victorb » Fri Dec 08, 2017 12:45 am

That is one of the reasons I opted for a lump sum distribution and invested it a low expense ratio fund.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by alpine_boglehead » Fri Dec 08, 2017 1:59 am

iamlucky13 wrote:
Thu Dec 07, 2017 9:40 pm
e. It does seem like we're at pretty high valuations right now,, and 4% is hardly worst 10-year return the S&P 500 has endured (-3% nominal, -6% real).
Yes, much lower returns than 4% are a real possibility. So if you want to worry about something, you might choose a really worrisome scenario.
iamlucky13 wrote:
Thu Dec 07, 2017 9:40 pm
What happens if you listen to Jack, and he's wrong on this one? You overfunded your retirement. That's not exactly a devastating outcome.
That might indeed be his rationale - rather caution people with the risk of being too pessimistic than have them caught on the wrong foot by making too optimistic prognoses.

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Fudgie
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Re: Jack Bogle Is Worried About U.S. Pensions

Post by Fudgie » Fri Dec 08, 2017 9:21 am

anoop wrote:
Thu Dec 07, 2017 10:10 pm
technovelist wrote:
Thu Dec 07, 2017 10:01 pm
That's what I would do if I had no other choice. You can live pretty well on a modest Social Security check in a number of countries that are fairly friendly to Americans.
I think they will be forced to raise the age for receiving social security benefits to 70 or even 75--I just don't see any other choice there.

For those in their 40's now, I think it would be somewhat pollyannish to assume they will receive benefits similar to what are being given today. There will likely be a combination of raising the age AND lowering the benefit. And I'm not even sure what happens with medicare, but I assume it will also involve raising the age and increasing the contribution/copays.

The best course of action, IMO, is so plan to depend on one's own savings/resources as much as possible.
What we need is an opt-out provision. I know I have no desire to participate in the program. Those who wish to remain in the program can have their taxes increased to a level sufficient to pay for it.
"That's entertainment!" - Vlad the Impaler

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by midareff » Fri Dec 08, 2017 9:34 am

abuss368 wrote:
Thu Dec 07, 2017 9:04 pm
The pension crisis has been below the surface for well over a decade. At some point this is going to bubble up.
Pensions are generally funded by portfolios of stocks, bonds and real estate. If you believe in reversion to the mean stocks and bonds are going to have significant headwinds going forward. Anyone remember the lost decade? Pension plans that have their payouts based on projected 7% to 8% annual gains will have significant issues, which may be even more individually significant when your personal capital has been exhausted.

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Re: Jack Bogle Is Worried About U.S. Pensions

Post by livesoft » Fri Dec 08, 2017 9:45 am

technovelist wrote:
Thu Dec 07, 2017 10:01 pm
That's what I would do if I had no other choice. You can live pretty well on a modest Social Security check in a number of countries that are fairly friendly to Americans.
Now that's an interesting thought: We will export our old people to other countries to help with any trade imbalance. Win-win!
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