Comment by themodelplumber | Hacker News Reader

Comment by themodelplumber | Hacker News Reader

themodelplumber

> 80 percent of the tax benefits go to the top 20 percent of taxpayers.

I hope someday we can all see why this is both amazing and ridiculous...

> In Rescuing Retirement, Ghilarducci and James promote what they call a “Guaranteed Retirement Account” (GRA), a system of federal retirement savings accounts that would combine features of defined benefit and defined contribution plans.

Nice to see a proposal in the article.

> GRAs would be professionally invested and would, Ghilarducci and James argue, generate greater returns than existing 401(k)s by taking advantage of access to the more profitable investments and lower fees that large pools of assets can offer. The accounts would follow workers throughout their careers, even if they changed employers. When the time came, the GRA would be transformed into an annuity, which, alongside Social Security, would pay out a consistent and lifelong income.

I don't know anything about 401(k)s but do they really operate on some foundational condition of less-profitable investments and higher fees?

> “Guaranteed Retirement Account” (GRA), a system of federal retirement savings accounts

Given Social Security, not only as a concept, but how it has been used as a piggy bank by a spendthrift Congress, the likelihood that a GRA would suffer a similar result is close to certain.

"Giving money and power to government is like giving whiskey and car keys to teenage boys."--P.J. O'Rourke

Just speaking from experience here: One P.J. O'Rourke quote and I'm off to where the minds are open--nothing personal.

Ejecting at the mere sight of a quote does not seem a hallmark of open-mindedness, but have fun wherever you light.

> I don't know anything about 401(k)s but do they really operate on some foundational condition of less-profitable investments and higher fees?

The (HR person of the) employer chooses what to allow in a 401k. Normally you have a dozen funds or so available. And the choice by the employer doesn't necessarily align with the employees interests, as the high fee funds would love to send you that amazon gift card, whereas the low fee funds wouldn't even reach out to you. ;-)

That's pretty wild! Wow. Seems like one of those setups that's one 401k-mockumentary away from imploding.

The key is the administrator. This might be Vanguard or Fidelity or it could be a much smaller company, probably local.

Some companies have experienced people looking at many companies and picking one based on the lowest costs and wide selections.

Other companies might pick Joe Blow Company because the salespeople are attractive and the lunches and dinners are expensive. Vanguard might have salespeople if you're big enough but most companies aren't.

Locally, there was a company that got its hands on a lot of union pension money. They took the trustees on safaris in Africa, etc. https://www.wweek.com/portland/article-23437-sept-21-2000-th... In a lot of cases, the people making the recommendations aren't evil but just overwhelmed by the personalized attention that a high-cost alternative can give them.

I don’t see what investment is more profitable and lower fee than a bog standard vanguard ETF

Vanguard ETF recommendations, the last-ditch concealed weapon of every contingency-focused investor in online discourse for like the last 20 years. :-) Funny to see that here.

You need the money to be there in forty years. What happens if, say, US stocks did in that time what Japanese stocks did in the past decades, and you bet wrong? Asking average people to be good at finance is potentially a big ask.

Nothing worse than if your manager screws up and loses everything, which is far more likely. Especially since the criteria for choosing who's going to manage these massive funds is going to be gamed.

I don't want to "bet" with my long term investments intended to provide for basic survival. Instead I want to deploy things to a weighted average of equities (small, big, domestic, and world), bonds, and other assets (real estate) and occasionally rebalance (take profits).

And, one doesn't need some magical financial acumen to do this. You can buy a "target retirement" fund which simply holds things in a ratio (based on financial industry consensus) recommended for your retirement age.

Dividends come in

The inflation adjusted annual return with reinvested dividends of the Nikkei is 1.3% annual over the past 30 years. Not great, but hardly a catastrophe.

Anyway, the general strategy is to move from stocks to bonds and then government bonds the closer you get to retirement. Definitely not something you need a money manager for

I am guessing the last part means on average. As a sole investor, the fees on any fund will always be higher than what is available to an institutional investor. And this would make quite a big institutional investor.

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