The Great Retirement Debate Rages On

On Tuesday, we started off the new year with a close look at "The 401(k): A Regrettable Revolution?"

At the conclusion of the article, I asked you for some information that would help me craft future messages in both the Afternoon Edition and in our Uncommon Wisdom Daily newsletters.

The key question here was:

Is your 401(k) your primary savings and investment tool for retirement? Or, do you use it in conjunction with either a pension or your own investment accounts?

Well, that question unleashed a torrent of great responses, many more so than I had anticipated.

The consensus view here is that the 401(k) remains the primary source of savings/income for most of our readers. And while we do have a few lucky pensioners, most readers report their 401(k) remains the chief retirement honey pot.

Here’s what several readers had to say about their retirement pictures.

Scott writes:

Hi Brad, I am retired and use my 401(k) with other savings and investments. I look forward to your comments on this important subject.

Jim K. writes:

My 401(k) is 90% of my savings.

Allen N. writes:

My 401(k) and IRA are my primary vehicles for saving for retirement.

Brad response: Those three responses represented a good portion of the total. But then there were those who do have traditional pensions.

***

Carol writes:

I am 57 years young and my retirement consists of a pension from Lucent Technologies (if there is any money left by the time I turn 65), a pension from the state of Oklahoma, a substantial 401(k)/IRA, Social Security (if the government doesn’t steal it) and stock outside my 401(k)/IRA. I feel like I am better-prepared than most, but there is always room for improvement.

Zilyunz writes:

I am 61. In one more year I will begin collecting from a traditional pension from a job I had for over 20 years, but from which I was let go about 10 years ago. I have a 401(k) with my current employer. I have IRAs from old 401(k)s, and other sources. And a little in cash accounts. Thanks, and great job!

Brad response: Here it seems like those with a blend of 401(k) and traditional pensions naturally feel much more secure (and why not?). Multiple retirement income streams are great, if you can get them. But there is always the need to augment your investment picture.

***

That’s exactly what one reader, Blaine, told us:

I have worked for the same Fortune 100 company for 29 years. They had a traditional pension until a merger, but thankfully I was grandfathered in and still have that pension. Being somewhat of a pessimist, and not wanting to rely on someone else to fund my future, I started participating in my company’s 401(k) plan soon after being hired. I have contributed the maximum amount for 29 years and on good years, my company has matched a certain percentage. I am thankful that the 401(k) plan was available and I had enough sense to participate.

Brad response: Bravo, Blaine. The notion of not wanting to rely on someone else to fund your future is just about the best advice one can get, and I want all readers to drink in that wisdom.

***

Now, there were also a few colorful comments on the mere existence of 401(k) plans, some positive and some not so positive.

One of the more thoughtful comments came to us from Allen, who writes:

It seems to be the fad today to trash the 401(k) program. It is one of the best things the government has ever done. It encourages you to save, invest and reduce taxes all at the same time. If it were not for the program, many today would have nothing for retirement but SS.

Because some people don’t take advantage of it, or some companies handle it poorly, is not the fault of the program. It is NOT the responsibility for companies to pay for your retirement anyway. It is your responsibility to prepare for your own future. It is nice if they do, but where does it say it is their responsibility? The same is true of medical insurance or any other benefit or perk.

Brad response: I must say that I largely agree here with Allen, especially when it comes to the part about individuals not taking advantage of the plan, and companies handling the administration poorly.

Neither of these issues are problems with the nature of a 401(k). Rather, they are problems with peoples’ personal choices, and some companies that fail to take the administration of their plans seriously.

Here at Uncommon Wisdom Daily, our goal is to help you maximize your investment picture, and to help you successfully manage not only your 401(k) account … but all of your investment accounts.

That’s been our goal since we started, and it’s going to continue to be our goal in 2017 — and far beyond.  

***

Let’s keep this discussion going! If you’d like to weigh in on this issue, or on any of the issues we cover in the Afternoon Edition, then please share your thoughts with me by leaving me a comment on our website or sending me an e-mail.

***

The S&P 500 and Nasdaq ended the week on a high note — rather, an all-time high note — as each notched a record closing high today. The Dow also advanced, but the much-anticipated 20K remained just out of reach. The Industrials’ intraday high was 19,999.63.

• Techs led the markets higher, likely buoyed by excitement coming out of the Consumer Electronics Show in Vegas. The usual suspects did well — Facebook (FB) gained 2.3%, Apple (AAPL) gained 1.1% and Amazon (AMZN) gained 2%. CES attendee Energous Corp. (WATT) also got a charge today. WATT gained 1.5% after showcasing its wireless charging technology.

• The economy added 156K jobs in December, according to the Labor Department. This translates to 2.16 million for 2016 — the sixth year in a row there were gains above 2 million — and 75-straight months of job gains.

• The unemployment rate ticked up slightly to 4.7%. But if the data included the 5.5 million Americans who want a job but didn’t search for work last month, the number would be closer to 8.2%. (Quartz.com)

• Paychecks rose by the most since 2009, with wages gaining 2.9% year-over-year.

• Healthcare and social assistance saw the biggest gains, with 63,000 new job adds. The country also saw growth in the number of factory workers and people in the leisure/hospitality business.

• Sears (SHLD) is selling its Craftsman tool brand, which it bought for $500 back in 1977, to Stanley Black & Decker (SWK) for $900 million. Unfortunately, that 180,000,000% return is overshadowed by the fact that the company is closing 150 Sears and Kmart stores, about 10% of its base, in early 2017. SHLD shares fell 8% in Friday’s session.

Good luck and happy investing,

Brad Hoppmann
Publisher
Uncommon Wisdom Daily

Your thoughts on “The Great Retirement Debate Rages On”

  1. Hi Brad,

    Pensions are an amazing entity. On the one hand, there are government “public servants” who have EXTREMELY generous “defined benefit” pensions by Today’s standards vs. most private workers who have been forced off defined benefit plans and put onto defined contribution plans in order to reduce private company costs. We have public workers retiring with in many cases over 50% of salary for LIFE, while we have mostly private sector workers with nothing but their 401K which THEY have to FUND and MANAGE. In many cases, executives of corporations have executive pension plans, while rank and file are excluded. Lord knows, with out a doubt, that this is setting up for a very serious gap between the “have” defined benefit worker and the “have not” defined contribution pension worker. Given the worlds MASSIVE DEBT and what the cycles convergence is predicting, it is quite possible we will see a major restructuring of pensions going forward, especially the defined benefit plan as they can no longer be funded and supported by a struggling private sector.

  2. Brad, 401ks are great for those old enough to have participated in the stock market bubble of the past 35 years; woe to those who did not time their birth so well. To wit, when my grandchildren are ready to start funding their own 401ks, the stock bubble will have burst, and the outlook for stock appreciation will be miserable. What then?

  3. Sorry, but I don’t understand the difference between 19,999.63 and 20,000 on the Dow. I seem to be missing something meaningful here!

    1. It’s definitely a psychological number. I came across this quote from Mohammed El-Erian that explains the hype a bit:

      “Let’s start by acknowledging that the DJIA is far from comprehensive when it comes to analytical content … Dow 20,000 will be the stuff of front-page headlines … Many hope that all this will act as a catalyst for wider participation of the general population – and millennials in particular – in stock ownership.

      “After all, a bigger investor base is the best contributor to a fundamentally healthy and less volatile market. The problem is that it may take a lot more than headlines and social media likes for this to happen.”

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Brad Hoppmann originally grew up in Florida, but has lived in Baltimore, Charlotte and New York as well throughout his career. Always an athlete, he played varsity football and water polo at the University of Florida and received All-SEC/SCC honors.