Yesterday we had a meeting at the fire station about various things (I am the assistant chief of our local volunteer fire department) and something interesting came up that offers a corollary to investing.There are several reasons I enjoy my involvement with the fire department including that fighting wildfires is completely different than anything I've done during other times of my life, there is no end to the learning and I like being able to help people. There is also camaraderie with the other firefighters.
The picture is of a piece of equipment called a Gated Y Valve. Gated Ys are are pretty standard in general but this one is different for us. The ones we've been using take water in (from below the way the picture is oriented) at 1.5 inch diameter and out the two at 1.0 inch diameter. The one pictured above reduces from 2.5 inches to 1.5 inches and this is new for us.
The potential utility here would be to push water through a 2.5 inch hose for 200-300 feet (maybe more depending on the water source) to an area where we can't drive to and then flank the fire off of each end of the Y. And while we would lose some pressure along the way we'd have more water in a difficult to reach area than with what we do now. There is still more learn which, circling back to the top is one of the reasons I enjoy the task so much.
This gets us to being an investor (or not) in a very pessimistic post by Felix Salmon. The general tone is that the typical 401k investor is hopelessly in over his head with regard to constructing a portfolio out of too many funds to choose from to being emotionally ill-equipped to navigate market cycles. Actually Felix says that having a 401k doesn't make you an investor necessarily. Although he did not use this word maybe having a 401k simply makes you a participant.
Felix addresses the need to save a lot of money (I'm obviously on board with this) along with very simplistic (for purposeful effect) ideas about to construct a 401k. For many people, their 401k will be their only savings vehicle of any consequence and we know that balances on average are far too low to do the heavy lifting they need to do. A few days ago I mentioned that one could argue that 401k plans are still in the experimental phase as we have not seen a lot of people retire and live off of them for extended time periods yet.
The answer is education but the first obstacle is indifference on the part of most people. The various behavioral issues come once the indifference has been recognized and overcome. How many friends do you have on Facebook? If you are reading this site you obviously have the requisite interest but how many of your friends do not? Most of my friends are not very interested, they might be saving adequately but they are not terribly interested.
Back to the new Gated Y Valve. The interest for me in learning about firefighting is the same for me as my day job. Both are important, in different ways to our (our meaning my wife and I) future. To the extent the 401k is so important to so many people it would be logical that more people would take suitable interest in their financial futures but if people were logical then behavioral issues would not be such an impediment to success.
Reading stock market blogs is evidence of trying to provide your own solution for your financial future. It is unlikely that all of society will take this on with the attention needed but certainly the number of people willing to make this effort can increase. I know some readers are the go to person for these questions among friends and coworkers which helps promote financial literacy and so maybe this grassroots type of thing can also be part of the solution. Maybe more people can take the ball in this context and run with it some.
10 comments:
Just as a matter of interest, what do you think of the idea of making 'Social Security' private? Personally I've always thought it a terrible idea for the very reason you mention: many people aren't interested.
For me; my wife and I have been retired for ten years and our investments are worth more now than they were when we retired. Inflation is out there but the wolf isn't at the door yet!
while i personally would love it, i believe 401k results provide evidence that it would be disastrous for society
What can you do? I occasionally offer to help people, but they generally ignore me. Hell, my wife ignores any advice I give her. hahaha
RR, I do an annual poll of freelance creatives (writers, editors, designers, etc.). This year, 40% of respondents said they don't contribute to a savings plan of any kind, tax-advantaged or otherwise.
I do my best to promote the idea, but feel like a voice crying in the wilderness...and I'm not quite sure who they're expecting to take care of them in their elder years.
may they think they will save money later and it will just work out....
Roger, I am a fan and agree that the political will to put even a small percentage of SS payments into stocks is not currently present, but I must say the comparison of SS and 401k's seems apples to oranges; for starters 401k's are voluntary (like IRAs) and controlled by the amateur owners, while SS is mandatory and presumably managed/controlled by professionals. I would also note that SS is the only pension fund that I am aware of that essentially "invests" solely in US bonds and you, yourself, have pointed out numerous times that investors generally need the growth that only stocks provide. Critics of investing in stocks say "Look at the market over the last decade"; OK granted, there are flat and even down periods, but if I were 32 (instead of the 62 I am) and had been dollar-cost-averaging into the market for the last decade, I would be celebrating and saying, "What a great time to have accumulated stocks that, if history is a teacher, will be significantly better off in 30 years when I start cashing out than will the money I am putting into SS today." Going back to the point of political will, the reason Democrats opposed putting any of the SS payments into stocks is because they do not want to lose control of the money they currently have access to, and they will any demagogue any such proposal to death and their base will swallow the arguments they make hook, line, and sinker. Out of curiosity, wonder what a conservative tax-deferred portfolio funded by 14.4% of the average US worker's wages with dividends re-invested, dollar-cost-averaged into the market over the last 40 years would be; several million, I suspect, that could safely be drawn down at the 4% per year rate over the next 30-40 years.
the reasons i think it would be disastrous are all behavioral. the behavior manifested in 401ks is what I think is the indicator.
If the picture contained two Havana Partagas Churchills posing as eyes, it would have been more enticing.
Regarding retirement saving, I'm set. However, if I had it all to do over again, I possibly would consider my Section 8 tenant approach.
Work for cash only, have government provide a free house, have Catholic Charities pay gas and electric, stiff the public water company because they won't come after poor folks (after a call to my Councilman), ditch the kids in Head Start and then public schools and have a different significant other every two years. Don't worry -- be happy!
T
The dilemma we have in society is what do we do with the laggards, including those that want to lag and those that have been hit by hard-times. Also, what do we do with those that will take advantage of another (such as Madoff and countless corporate executives).
Should we really provide SS for everyone?
Should we provide medical care for everyone?
We base our future investments in this country on the above premises that we have not answered.
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