Wednesday, April 24, 2013

The Retirement Dice Roll

This afternoon a long-time member called to ask me if I had seen this.

Watch The Retirement Gamble Preview on PBS. See more from FRONTLINE.

"The Retirement Gamble" Facing Us All -- Retirement is big business in America, but is the system costing workers and retirees more than what they’re getting in return? ... The 401(k) was never designed with the middle class in mind, and may now be leaving a generation of Baby Boomers without enough to avoid poverty, says New School economist Theresa Ghilarducci. ...

Spending time on the board of trustees of a 401(k) retirement plan has educated me a bit. I do a lot of enrollment sessions with TAG members and I've read a lot of investment books, half from self-defense and half out of self-interest.

John Bogle, former CEO of Vanguard Mutual Funds, said this about 401(k) plans:

Their basic problem is that they are thrift plans, not retirement plans. You can take your money out pretty much whenever you want to. You can borrow from them. You can select funds on your own with as much help or non-help as you want. You can talk to your brother-in-law — not usually a good idea. And we know that those choices that are made are bad, unfortunate for investors. …

The member who phoned today was somewhat creeped out by the Frontline report. "The 401(k) fees!" she said. "The fees eat up your earnings! Your retirement!"

I allowed how this was true, but that there were ways around much of the problem: If participants went with low-cost index funds (and the TAG 401(k) Plan has a bunch of them), they could minimize the "eaten alive by fees" thing, and improve the chances of putting more money away for retirement. And they could live below their means and invest the extra money in low-cost, broadly diversified index funds outside retirement plans.

Many studies show that Americans are in deep manure if they have to rely on 401(k) Plans and Social Security for retirement. They take Social Security at age 62 or 63, thereby reducing their monthly checks; they put minimal amounts of their wages into 401(k)'s and so don't come close to funding retirement.

Happily, most TAG members will end up with a Defined Benefit Pension (monthly check) and a lump-sum payment (big stack of money called an "Individual Account Plan") when they hang up the daily grind of animation work and take retirement. But this doesn't take away the necessity of saving more for your hammock years. As the linked Frontline story demonstrates, most people in their twenties, thirties and forties are a long way from building a comfortable retirement. It's up to each of us to start now if we're to avoid being part of the underfunded majority.

Note: The Animation Guild will be holding a Panel Discussion about saving for retirement at its May 27 General Membership meeting. Be there if you can.


Celshader said...

As always, thank you for beating this drum. It's important.

Floyd Norman said...

Thanks again, Steve. This animation professional was lucky enough to make it to the finish line. It won't be as easy for my younger colleagues and that's a real shame.

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mark pudleiner said...

Every new artist joining the union should have to attend a meeting that explains the importance of looking after yourself financially.

Many of us do not search for help or information until the situation forces us to take action.

How wonderful if the union could truly help it's new members by having a mandatory meeting to join.

That way maybe the younger colleagues can be ready for the future as their careers has it's highs and especially the lows.

Steve Hulett said...

What a coinkydink.

As it happens, we offer every new member the opportunity to attend a "new member lunch," where we talk about the pension and health plans, also the 401(k) plan and the importance of saving for retirement.

We strive to lead our folks to the sparkling waters. (Drinking is up to them.)

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