Based on the interview Olen seems to feel there is very little hope for Americans to accumulate enough for their retirement. She also seems to believe that most market participants will not come anywhere close to getting the returns they need. Financial literacy won't solve the problem she believes for a couple of different reasons including that the people doing most of the teaching are industry professionals with seriously conflicted interests. Although she never used the word charlatan that seemed to be what she was saying about people like Suze Orman and Dave Ramsey of whom she said that they did not get rich and then start helping people but instead have gotten rich by helping people but of course it is not real help.
There is of course truth to what Olen is saying and while it is probably correct that a large percentage of Americans will never understand the full extent of the conflicts and other warts on the industry I don't think anything new is being unveiled with this discussion.
When I hear these kinds of threads I circle back to the idea of simply staying on your own mat (this is a yoga term which means don't be concerned with how someone else is doing the poses, just focus on your own practice). Financial literacy may not work for most people (although I am not as pessimistic as Olen) but it can work for you. Maybe most people can't save enough but that doesn't have to mean you can't. Maybe most people can't overcome their own behavioral quirks but that does not mean you can't learn to overcome yours. You obviously see where I am going here.
When I go down this road there will often be comments left about the "penalty" for being responsible that many people think is coming like social security means testing as one example. I do think means testing is coming but I choose to view more positively (that may not be the right word). While I hope the following is an extreme example I think it makes the point; I don't ever want to have wait in line all day for a free bag of groceries stressing out over the possibility that they might run out of free grocery bags before my turn comes up. That is just a made up example but the concept influences my ideas on savings, spending and debt.
Human nature being what it is there will be people who know better who use Olen's argument (she's not the only one making it) as an excuse for not taking care of their own business; there will be people playing the victim in addition to actual victims.
One last point on this which is a repeat from the other day is that no one will care more about your savings or retirement or financial plan more than you.
The picture is not a metaphor, just a neat shot of a buggy stuck in the mud from the Dakar Rally which ended over the weekend.
22 comments:
I understand what this woman is saying, but IMO she may be a bit harsh. But hey, it sells books!
Would I listen to explicit investment advice from, say, Ramsay? No. But the core of his advice is to get out and stay out of debt. Is that bad advice? No.
Sure, I've read the "cut 1 latte a day" advice, and it's overdone but at the core, it's really telling people to stop spending money on crap and start saving. There's nothing wrong with that.
I'm not sure how to fix this. We could have classes in school, which would, of course, create millions of political arguments. Someone could hire me to make TV commercials and tell people to "STFU and listen" but I'm not sure that's gonna happen.
I am not sure or unsure Ramsey knows anything about investing. I like his saving vs debt approach.
I know even less about Suze Orman but she seems ok also.
Social Security is a Ponzi scheme and as the initial people do not get their money due to means testing and their being "rich" and the later people do not get there money due to means testing and their having "enough" more and more people will stop saving and investing.
There is excessive Public, and Private debt in addition to too many government promises like social security that can not be met.
But be happy it looks like a bull market or a blow off top - I really do not know which.
SEG
The problem with having a bag of your own groceries when they run out is they will take 1/2 your bag and give it to the ones they run out on. They will not run out until everyone runs out.
MLM
Social Security is not a Ponzi scheme despite the fulminations of simple-minded critics and vacuous talk show hosts. It is not a means-tested welfare program, although some would make it that, which is why we must elect candidates who champion the defense of the program. I think many of the despairing, "woe is Social Security" crowd are actually fat cats seeking to destroy the universal aspect of the program and turn it into a "poverty" program to lessen the "onerous" tax burdens on their overly-inflated incomes.
the max tax for ss and medicare is about $15k for self-employed and half that for w-2 employees. That is not an onerous amount for fat cats.
spoken like dear leader Obama
"fulminations of simple-minded critics"
I understand people choose to attack other posters than to defend a ponzi scheme (SS) that can not possibly make the payments it has promised.
Roger,
you are just wrong on this. $15K for a self employed person making $100 to $110k is a lot of money on top of other federal and state taxes. Grouping them with fat cats is mindless repetition of leftist comments. Sorry but you are just way off on this one.
I agree that $15k is a lot for someone making $100k-$110k, I never said otherwise. It is a lot for people making $150k-$175k.
But I don't think that income level meets any reasonable definition of fat cats which is the comment i was responding to. I don't know where fat cat starts but it is well north of $200k.
The problem isn't with entertainers like Ortman or Ramsey, but with financial advisors working under the suitability standard rather than acting as fiduciaries for their clients.High fees, kickbacks, and awful products that put the advisors' interests ahead of their clients- is it any wonder that so many investors are turning to the low cost ETF model?Both the Dodd/Frank bill and forthcoming Labor Dept. regulations seem to be moving toward a fiduciary standard for all financial advisors.Of course financial advisory is a big rich industry, which will do everything in its power to prevent changing the status quo. Maybe you'd like to weigh in on this. I don't recall you ever describing yourself as a fiduciary.
RIA (what I am)= Fiduciary
and I have talked about this before,
thanks for giving me the benefit of the doubt--sarcastic comment by me
There is a discussion on the Boglehead's forum where the SEC prohibits a person describing themselves as a RIA. Only a firm can be a RIA.
Not sure that is correct but ok, our firm is an RIA
I watched a Suze Ormann show one time at the request of a friend. I thought it was awful -- a hectoring, mother-knows-best style that included implicit (not direct) pitches of her products -- but ignoring that, a lot of the advice seemed reasonably sound and I could see how it might do folks who had trouble figuring out their first serious financial move some good provided they didn't accept her pronouncements (or those of any other guru) as gospel.
In fairness there are folks who swear by Suze and I'm sure others like Ramsey et al so FWIW. A problem with a lot of financial advice is that, particularly in cases where it depends to some degree on cult of personality, is the disadvantage of information asymmetry any relative novice faces must still be surmounted and this would seem to require at least enough knowledge to engender trust in the adviser; bit of a Catch 22 there.
NB: Metaphors have their place and so does hyperbole but comparing SS to a Ponzi scheme doesn't work. Either the definition of Ponzi has to be so loose as to become useless, boiling down to any plan where future payouts depend on the growth of deposits over time, or the structures of the SSA trusts and macroeconomics have to be ignored.
That is, the assertion of Ponzi must assume SS primarily depends upon adding more/new taxpayers rather than depending on growth in GDP. The notion of a taxpayer/beneficiary ratio can make a case for a "Ponzi-like" structure but ignoring productivity growth or even assuming it will be inadequate cannot be justified based on current evidence (e.g, http://tinyurl.com/c5ww6br ) therefore this line of argument doesn't stand up. Note however that if improvements in technology and productivity growth were to flat-line a lot of bad things would start to happen and reduction of SS benefits would only be part of it, possibly a small part to boot.
Can't help adding that most of this probably wouldn't be an issue now if workers had been receiving their fair share of productivity gains (with wages to match) over the past four decades but they haven't so there it is and here we are.
If people pay a bunch of money in to SS and later are never allowed to get any significant money out, then that is a ponzi scheme.
I heard Barney Frank say no one with an income over $100k should get a dime from SS and 10 seconds later he corrected himself and said their SS should be taxed at 90% level so there was the pretense they were getting SS. Either way that is a Ponzi scheme as contributors never get there money back.
If you do not think ponzi scheme works for a system where people never get there contributions back I guess you are trying to sell me a ponzi scheme.
It would be helpful if you could provide some proof of that statement. Google doesn't find any.
Frank has proposed removing the cap on SS taxes - i.e. everyone would pay it, even one income goes past $110k or whatever it is now.
Frank was one of the guys in Washington who has had a clue over the last 5 years.
Wonder what Suze and Dave would say about the TV commercials showing the wise and knowing parents who have taken out life insurance on their babies? That is almost criminal.
Stephen
I do not know if all Franks statements are in google, but he was speaking on Bloomberg or CNBC which I have on a lot of the time.
Too bad Frank didn't have a clue when Fannie and Freddie needed reforms and he resisted them insisting they were fine. Whoops!
Now he has a clue...gimme a break.
A comment from a legislator makes a convincing case but data, logic and math do not ...this is a gag, right, a dig on Poe's Law? Oh snap!
I can take a joke but, really now, people pay insurance most of their adult lives: for their cars, their home, their health, their lives and I guess even their kids. Some of that insurance is mandatory but, regardless, no one presumably wants to receive a dime in return and they certainly don't regard it as Ponzi if they are lucky or skilled enough to avoid the circumstance that would initiate a payoff.
Now if could no longer work and did not have the means to support myself adequately I would certainly hope that a policy I had paid into my entire working life would pay off. If it didn't I'd likely be screaming something a lot worse than Ponzi but that hasn't happened nor is there any evidence it will within the foreseeable future so I guess I really have no idea where this stuff is coming from.
The stock market is a vehicle to move money from the active to the passive. If this is true, wouldn't a significant shift of investors to the passive side destroy the market? If everyone wised up would it be the end?
The stock market is a vehicle to move money from the active to the passive.
never heard that one before
I think that "active to passive" epigram may be what is called "counter-intuitive," Roger - aka "off the wall." I'll say this for it, it's probably an original!
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