How to Bust Unions: Wisconsin Edition

Tell Chuck Schumer to have shady back room deals that send the profits back to Wisconsin. Really! Moo!

if you like wisconsin so much why don't you just marry it!

> Tell Chuck Schumer to have shady back room deals that send the profits back to
> Wisconsin. Really! Moo!

Is Chuck shady when he defends Goldman, which profits everywhere else and sends it back to New York?

"Invent an imaginary budget crisis" - Right- the whole revenue shortfall that govts have due to the
9%+ unemployment rate and recession is "imaginary".

A teacher or subway employee should really be making more than a govt lawyer because they are unionized....totally justified!

This is all about Democrats engaged in partisan politics trying to weaken Republican gains. They've decided to make milk Wisconsin for all its worth. So much for the President putting party politics aside. The newly elected governor of Wisconsin is trying to get his fiscal house in order, and the Democrats in that state are going viral with this. The strategists and pr people on the Democrat's payroll are probably making 2 1/2 times over-time on this one.

Those union protests were pathetic. They are asked to pay half as much as equivalent private sector workers for their pensions and benefits and they freak out. Shameless.

Great tactic, walk out and hide
--------------------------------

MADISON, Wis. — Wisconsin law enforcement officers are searching for Democratic senators boycotting a Senate vote on Gov. Scott Walker's budget-repair plan Thursday in an attempt to bring the lawmakers to the floor to allow Republicans to act on the bill.

Read more: http://www.mcclatchydc.com/2011/02/18/109002/wisconsin-democrats-boycott-vote.html#ixzz1EK0tWy83

"Those union protests were pathetic. They are asked to pay half as much as equivalent private sector workers for their pensions and benefits and they freak out. Shameless."

It's those same "pathetic" protests 100 years ago that gave birth to the whole notion of the 8-hour workday, workplace safety standards, and fair wages.

Over the past 50 years, it was the "shameless" strikes and tough bargaining tactics that got us health benefits and pensions in the first place.

All victories that are being shared by ALL workers today.

You're welcome.

Matt believes that all protests for anything whatsoever in the history of the world are equivalent.

Sorry, bad logic on that one.

Yes when the protests were for working an 8 hour day instead of 16 hours in a factory and having 2 weeks vacation they were justified.

When they are for asking the public to pay for benefits they dont have themselves and large inflated salaries those protests are no longer justified.

Matt stands up for the little guy, just so long as it doesn't involve a tip.

"Yes when the protests were for working an 8 hour day instead of 16 hours in a factory and having 2 weeks vacation they were justified.

When they are for asking the public to pay for benefits they dont have themselves and large inflated salaries those protests are no longer justified"

Yeah, the union rationalizations are the moral equivalent of punching Japanese people in midtown claiming you're just trying to prevent Pearl Harbor.

I agree there's a huge difference between a safe working environment and reasonable working hours and maintaining retirement benefits not customary in the private sector. I believe we all agree ending sweat shops was a good thing, as well as ending discrimination in the work force, etc etc.

What we're discussing here are retirement benefits out-of-line with state and local income sources and the ability of the tax-base to reasonably fund it. We're also talking about a legal system that guarantees an advantage to unions in exchange for votes.

But those retirement benefits have only recently become not customary in the private sector. Do we as a nation want to aspire to the worst, or to the best? Do we want more stability, or less? When comparisons are made between benefits the private sector no longer gets, and those that have been maintained by collective bargaining, a rational private sector would organize, unionize, and demand stability. But we live in very dark times.

"A teacher or subway employee should really be making more than a govt lawyer because they are unionized....totally justified!"

Somebody did not do their research....

Job Title: Attorney-Advisor (PU)
Agency: Federal Communications Commission

SALARY RANGE: $123,758.00 - $155,500.00 /year

http://jobview.usajobs.gov/GetJob.aspx?JobID=96727623&JobTitle=Attorney-Advisor+(PU)&q=attorney&where=&brd=3876&vw=b&FedEmp=N&FedPub=Y&x=41&y=12&AVSDM=2011-02-10+10%3a02%3a00

"The newly elected governor of Wisconsin is trying to get his fiscal house in order"

Wisconsin's fiscal house is in order. That's not coming from me or the unions... that's coming from their own version of the CBO.

Scott Walker also passed $140 million in tax cuts jsut last month, including tax exemptions for health savings accounts, which I am sure will create lots of new jobs...

"It's those same "pathetic" protests 100 years ago that gave birth to the whole notion of the 8-hour workday, workplace safety standards, and fair wages. "

that is called sophistry....

Seriously, is this all because of those shady back room deals? Moo

> $48 million for private health savings accounts -- a perennial Republican favorite.

well, this one is favored and used by many in the private sector. union workers wouldn't know about it cause their health care is still mostly free, generosity of the tax-payer. i expect that to change towards leveling the playing field. a few years from now public workers will be able to like the health savings accounts too, that is, if obama doesn't get rid of it.

Health savings accounts are great if you're young and exceptionally healthy; you can buy tylenol and get rhinoplasty and the like. Once you're older, you're crazy not to have a pooled-risk plan.

HSAs are loved by the same people who buy retirement homes that are single family residences and require cars ... people who think they'll never REALLY age and have to deal with the associated challenges; people who will be those tanned, smooth-skinned silver haired people in all advertisements aimed at old age persons.

HSAs are also loved by the same people who think they'll never wind up in a wheelchair, walker or crutches and be unable to independently access lots of places and things, including in their own homes. But they should really consider what likelihood there is that that will or won't happen, and figure out how unhappy and unable that will make them.

HSA: nonstarter when it comes to a core solution to healthcare.

"But those retirement benefits have only recently become not customary in the private sector. Do we as a nation want to aspire to the worst, or to the best?"

I wasn't aware that a $250k/year pension to a mechanic was "the best", especially with so many other people struggle to get buy.I wasn't aware that paying pensions to folks who committed fraud and didn't do their jobs while in office is "the best"

We can do better than that.

"Do we want more stability, or less?"

False choice.

Having the governmentgive lots of folks $100k makes those folks more stable... sure...at the cost of EVERYONE ELSE being LESS stable.

"When comparisons are made between benefits the private sector no longer gets, and those that have been maintained by collective bargaining, a rational private sector would organize, unionize, and demand stability."

Except if they knew those benefits were ridiculous, and would never be won in collective bargaining if they weren't getting the folks they negotiated with elected!

Now you're deliberately dodging around the issue with very specific, essentially anecdotal items. Today's so-called "reformers" are not targeting fraud, nor are they even questioning why overtime is included in pension calculations (which is something I agree with -- I don't see the rationale for overtime inclusion).

Instead, they're painting broad, bottom-seeking strokes. They're targeting elimination of defined-benefit pensions, because the private-sector has (very unsuccessfully) switched over to what was intended to be supplemental plan (401k, IRA) for a more luxe-life retirement.

And they're targeting elimination of retirement health insurance, an absolute necessity for anyone with middle-class-level assets ... and guess what, in the absence of a steady income (i.e. defined-benefit pension) a person/family with medical needs will spend down whatever 401k/IRA savings he has, and be left destitute.

And then they go on Medicaid and all the rest, and you pay for it.

National Health would be so much more sensible, would remove this whole issue from employers' plates (including state/local governments), and couldn't possibly leave us more dissatisfied with our healthcare compared with all those nations that have it (surveys say).

somewhereelse, key point: until 1980, virtually all employees in the US, union or not, private or public sector, had defined-benefit pensions, and solid health insurance.

It's not something that unions cooked up, and despite what pro-union people claim, it didn't arise from collective bargaining, but rather as perks that big private companies offered to recruit employees without increasing pay more than necessary. To recruit smart employees.

alan is oblivious that the outsized benefits the private sector unions had, and all the costs incurred by everyone else for retired union workers unlimited lifetime benefits is the reason why private sector unions have shrunk. It doesn't work. Government unions are especially egregious since they manipulate the politicians who are supposed to be negotiating for the taxpayers.

alan loves getting handouts from others and any system that facilitates the handouts.

LICcomm, I'm not the one getting handouts. What do you produce? Are you sure, even as unsuccessful as you are, that you're not merely an overpaid paper-shuffling clerk?

Even President Franklin Roosevelt, a friend of private-sector unionism, drew a line when it came to government workers: "Meticulous attention," the president insisted in 1937, "should be paid to the special relations and obligations of public servants to the public itself and to the Government....The process of collective bargaining, as usually understood, cannot be transplanted into the public service." The reason? F.D.R. believed that "[a] strike of public employees manifests nothing less than an intent on their part to obstruct the operations of government until their demands are satisfied. Such action looking toward the paralysis of government by those who have sworn to support it is unthinkable and intolerable." Roosevelt was hardly alone in holding these views, even among the champions of organized labor. Indeed, the first president of the AFL-CIO, George Meany, believed it was "impossible to bargain collectively with the government."

http://www.nationalaffairs.com/publications/detail/the-trouble-with-public-sector-unions

When it comes to advancing their interests, public-sector unions have significant advantages over traditional unions. For one thing, using the political process, they can exert far greater influence over their members' employers — that is, government — than private-sector unions can. Through their extensive political activity, these government-workers' unions help elect the very politicians who will act as "management" in their contract negotiations — in effect handpicking those who will sit across the bargaining table from them, in a way that workers in a private corporation (like, say, American Airlines or the Washington Post Company) cannot. Such power led Victor Gotbaum, the leader of District Council 37 of the AFSCME in New York City, to brag in 1975: "We have the ability, in a sense, to elect our own boss."

The political influence of public-sector unions is probably greatest, however, in low-turnout elections to school boards and state and local offices, and in votes to decide ballot initiatives and referenda. For example, two of the top five biggest spenders in Wisconsin's 2003 and 2004 state elections were the Wisconsin Education Association Council and the AFSCME-affiliated Wisconsin PEOPLE Conference. Only the state Republican Party and two other political action committees — those belonging to the National Association of Realtors and SBC / Ameritech — spent more. The same is true in state after state, as unions work to exert control over the very governments that employs their members.

This political dimension of public-sector unionism also changes the substantive priorities and demands of the unions themselves. Although private-sector unions in the United States have engaged in leftist "social activism," they have mostly concentrated their efforts on securing the best wages, benefits, pensions, and working conditions for their members: "pure and simple unionism," as longtime American Federation of Labor president Samuel Gompers used to call it. Rarely do they demand more hiring, since — given the constant private-sector imperative to keep operating costs minimal — increasing the number of a company's employees can limit wage and benefit increases for the workers already on the company's payroll.

By contrast, as economist Richard Freeman has written, "public sector unions can be viewed as using their political power to raise demand for public services, as well as using their bargaining power to fight for higher wages." The millions spent by public-employee unions on ballot measures in states like California and Oregon, for instance, almost always support the options that would lead to higher taxes and more government spending. The California Teachers Association, for example, spent $57 million in 2005 to defeat referenda that would have reduced union power and checked government growth. And the political influence of such massive spending is of course only amplified by the get-out-the-vote efforts of the unions and their members. This power of government-workers' unions to increase (and then sustain) levels of employment through the political process helps explain why, for instance, the city of Buffalo, New York, had the same number of public workers in 2006 as it did in 1950 — despite having lost half of its population (and thus a significant amount of the demand for public services).

For a case study in how public-sector unions manipulate both supply and demand, consider the example of the California Correctional Peace Officers Association. Throughout the 1980s and '90s, the CCPOA lobbied the state government to increase California's prison facilities — since more prisons would obviously mean more jobs for corrections officers. And between 1980 and 2000, the Golden State constructed 22 new prisons for adults (before 1980, California had only 12 such facilities). The CCPOA also pushed for the 1994 "three strikes" sentencing law, which imposed stiff penalties on repeat offenders. The prison population exploded — and, as intended, the new prisoners required more guards. The CCPOA has been no less successful in increasing members' compensation: In 2006, the average union member made $70,000 a year, and more than $100,000 with overtime. Corrections officers can also retire with 90% of their salaries as early as age 50. Today, an amazing 11% of the state budget — more than what is spent on higher education — goes to the penal system.[Correction appended] Governor Arnold Schwarzenegger now proposes privatizing portions of the prison system to escape the unions' grip — though his proposal has so far met with predictable (union supported) political opposition.

A further important advantage that public-sector unions have over their private-sector counterparts is their relative freedom from market forces. In the private sector, the wage demands of union workers cannot exceed a certain threshold: If they do, they can render their employers uncompetitive, threatening workers' long-term job security. In the public sector, though, government is the monopoly provider of many services, eliminating any market pressures that might keep unions' demands in check. Moreover, unlike in the private sector, contract negotiations in the public sector are usually not highly adversarial; most government-agency mangers have little personal stake in such negotiations. Unlike executives accountable to shareholders and corporate boards, government managers generally get paid the same — and have the same likelihood of keeping their jobs — regardless of whether their operations are run efficiently. They therefore rarely play hardball with unions like business owners and managers do; there is little history of "union busting" in government.

Additionally, the rise and fall of businesses in the private sector means that unions must constantly engage in organizing efforts, reaching out to employees of newly created companies. In government agencies, on the other hand, once a union organizes workers, they usually remain organized — because the government doesn't go out of business. Public-employee unions can thus maintain membership levels with much less effort than can private-sector unions.

Finally, public-sector unions enjoy a privileged position in relation not only to their private-sector counterparts but also to other interest groups. Public-sector unions have automatic access to politicians through the collective-bargaining process, while other interest groups must fight for such entrée. Government unions can also more easily mobilize their members for electoral participation than other interest groups can — since they are able to apply pressure at the workplace and, in many cases, can even arrange for time off and other benefits to make members' political activism easier. Furthermore, most interest groups must devote a great deal of time and effort to fundraising; public-sector unions, on the other hand, enjoy a steady, reliable revenue stream, as union dues are deducted directly from members' paychecks (often by government, which drastically reduces the unions' administrative costs).

http://www.nationalaffairs.com/publications/detail/the-trouble-with-public-sector-unions

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management. The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations. The employer is the whole people, who speak by means of laws enacted by their representatives in Congress. Accordingly, administrative officials and employees alike are governed and guided, and in many instances restricted, by laws which establish policies, procedures, or rules in personnel matters.

Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees. Upon employees in the Federal service rests the obligation to serve the whole people, whose interests and welfare require orderliness and continuity in the conduct of Government activities. This obligation is paramount. Since their own services have to do with the functioning of the Government, a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable. It is, therefore, with a feeling of gratification that I have noted in the constitution of the National Federation of Federal Employees the provision that "under no circumstances shall this Federation engage in or support strikes against the United States Government."

http://www.presidency.ucsb.edu/ws/index.php?pid=15445

No one wants to read more than a few lines. Why do you bother?

A new poll from the Washington-based Clarus Group asked:

Do you think government employees should be represented by labor unions that bargain for higher pay, benefits and pensions ... or do you think government employees should not be represented by labor unions?

A full 64% of the respondents said "no."

That includes 42% of Democrats, and an overwhelming majority of Republicans. Only 49% of Democrats think public workers should be in unions at all.

http://www.politico.com/blogs/bensmith/0211/Poll_Public_unions_a_hard_sell.html

"Health savings accounts are great if you're young and exceptionally healthy; you can buy tylenol and get rhinoplasty and the like. Once you're older, you're crazy not to have a pooled-risk plan.

HSAs are loved by the same people who buy retirement homes that are single family residences and require cars ... people who think they'll never REALLY age and have to deal with the associated challenges; people who will be those tanned, smooth-skinned silver haired people in all advertisements aimed at old age persons.

HSAs are also loved by the same people who think they'll never wind up in a wheelchair, walker or crutches and be unable to independently access lots of places and things, including in their own homes. But they should really consider what likelihood there is that that will or won't happen, and figure out how unhappy and unable that will make them.

HSA: nonstarter when it comes to a core solution to healthcare."

*****

Wow.

I
totally
agree
with
every
word.

"They're targeting elimination of defined-benefit pensions, because the private-sector has (very unsuccessfully) switched over to what was intended to be supplemental plan (401k, IRA) for a more luxe-life retirement.

And they're targeting elimination of retirement health insurance, an absolute necessity for anyone with middle-class-level assets ... and guess what, in the absence of a steady income (i.e. defined-benefit pension) a person/family with medical needs will spend down whatever 401k/IRA savings he has, and be left destitute."

*****

Again, this is EXACTLY what I've been saying for years.

401(k) plans were never intended to REPLACE pensions, rather SUPPLEMENT them.

It is actually mathematically impossible for a household earning the national median income to save enough for retiring at anywhere near the lifestyle they enjoyed at $50K.

But hey, you all keep drinking the Kool-Aid and handing over 15% of your paycheck to Wall Street for it to "manage" for your "retirement" ... and keep patting yourself on the back about how self-sufficient you are, and thanking God that you're not one of those union mooches.

See you in the bread line in 2035.

401k's work if the plans are adopted early. Where the plans run into trouble is when workers delay contributing until they've hit their 30's or worse 40's at which point the contributions required to offset those lost years contributions and compounding are massive. Another problem is that many workers stop contributing or borrow from their 401k'S when they buy a home. What's needed is counseling. The idea of 401k's is sound, what's not sound is how some workers use them.

But I do agree that 401ks are just one leg of a savings plan. The other is paying down debt and saving outside the 401k. And of course there's social security.

"401k's work if the plans are adopted early. Where the plans run into trouble is when workers delay contributing until they've hit their 30's or worse 40's at which point the contributions required to offset those lost years contributions and compounding are massive. Another problem is that many workers stop contributing or borrow from their 401k'S when they buy a home. What's needed is counseling. The idea of 401k's is sound, what's not sound is how some workers use them.

But I do agree that 401ks are just one leg of a savings plan. The other is paying down debt and saving outside the 401k. And of course there's social security."

****

Actually, they don't.

Assuming you're stuck in the Middle Class your entire working life (which most people will be, let's not kid ourselves), even if you start putting 15% aside every paycheck from age 18 onward, adjusting for inflation, you will have fewer than 5 years' worth of living expenses upon retirement age.

And that's assuming you're perfectly healthy.

Oh and by the way ... "saving outside the 401 (k)."

LOLOL.

Middle Class people can't afford that, especially if they have kids.

If you assume wage inflation contributions will grow, but that's complicated. Assuming one puts in 8,000 per year starting at age 25 and earns 8% annual the savings in that plan alone grow to over $2,000,000, but if you start at age 35 that same 8% growth only accomplishes $906,000 or roughly a loss of half the appreciation. The math is even worse if you start at age 45 which gets you to only $366,000
----------------------------------------------
n general, people facing problems today got too little advice, or bad advice. They didn't realize that a 6% annual contribution, with a 3% company match, might not be enough.

Some started saving too late or suspended contributions when they or their spouses lost jobs. Others borrowed against 401(k) accounts for medical emergencies or ran up debts too close to their planned retirement dates.

In the stock-market collapses of 2000-2002 and 2007-2009, many people were over-invested in stocks. Some bailed out after the market collapse, suffering on the way down and then missing the rebound.

Recently, Vanguard has begun urging people to contribute 12% to 15%, including the employer contribution, because of the stock market's weak returns and uncertainty about the future of Social Security and Medicare.

http://online.wsj.com/article/SB10001424052748703959604576152792748707356.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsTop

You are right though that the 401k was originally intended to supplement retirement.

It is amazing how often Matt makes completely incorrect conclusory statements with no factual support. Wow.

First of all, 8% is a fantasy right now.

Second, even assuming you'll end up with $2,000,000, that's in TODAY'S dollars.

If inflation continues along its current course, that projected $2,000.000 would be worth only $285,000 in today's dollars. Like I said .. about five years' worth of savings. BFD.

"...even if you start putting 15% aside every paycheck from age 18 onward, adjusting for inflation, you will have fewer than 5 years' worth of living expenses upon retirement age."

One would likely have more than 5 years worth of living expenses. Assuming 3% inflation, 5% return on 401K until retirement, 3% return (matching inflation) after retirement, and 70% of salary for living expenses at retirement, one would have about 15 years of living expenses, all adjusted for inflation. That calc does not even include any company matching.

"Assuming 3% inflation, 5% return on 401K until retirement, 3% return (matching inflation) after retirement, and 70% of salary for living expenses at retirement, one would have about 15 years of living expenses, all adjusted for inflation. That calc does not even include any company matching."

So you're barely breaking even.

On only 15% of what you're currently making.

So you'll be in good shape if you can figure out how to live on roughly one-sixth of your income in retirement.

You talked me into it. Gov't pensions for everyone! We can tax the guys in New Jersey to pay for it.

"Health savings accounts are great if you're young and exceptionally healthy; you can buy tylenol and get rhinoplasty and the like."

Oh no you can't. ObamaCare specifically prohibits the use of HSAs for over the counter drugs.

Matt, please try to know what you are talking about before you post. People with 401(k)s contribute a percentage of their salary. Wages increase with inflation. The numbers are based on today's dollars to keep the comparison simple. If someone invests $8000 per year (either on their own or 4 and 4 with company match) today, the amount invested in the future will rise as inflation rises.

"I wasn't aware that a $250k/year pension to a mechanic was "the best", especially with so many other people struggle to get buy."

Who is this mechanic getting a $250k a year pension? Is he your imaginary friend? Because he certainly does not exist in real life.

"a few years from now public workers will be able to like the health savings accounts too, that is, if obama doesn't get rid of it."

I pray that he does get rid of HSAs. Destroying HSAs is absolutely necessary on the road to single payer.

"Wages increase with inflation."

Not for the middle class.

If wages truly did increase with inflation, the median household income would be over $100K today.

This comes from Consumers Union, not exactly a partisan or liberal group:

We believe that HSAs are harmful from a societal point of view and to those who most need help
with health care expenses. While some healthier and wealthier individuals may benefit from
HSAs, when Federal debt is increasing roughly $1,000,000,000 a day, this is not where
additional health care dollars should be spent.
The evidence is quickly mounting that HSAs are primarily attractive to upper income people and
people who tend to be healthier.
The tax shelter nature of HSAs is revealed by a GAO report1 that some people actually pay for
medical expenses out-of-pocket rather than draw down their tax sheltered HSA accounts. This
may or may not be good savings and tax policy for upper income people, but it has little to do
with good health policy.

Polling by the Employee Benefit Research Institute and the Commonwealth Fund2 show that
people with HSAs are
--less satisfied than those with traditional insurance coverage,
--often forgo needed care,
--may actually spend more on health care and have higher out-of-pocket costs, and
--generally have a difficult time shopping for health care (finding hospital and doctor
quality and cost data).

http://www.consumersunion.org/pub/0628%20HSA%20statement.pdf

So not only are HSAs totally ineffective, they actually INCREASE health care costs.

"Wages increase with inflation."

Not for the middle class.
------------------------
Finally someone gets why Ben Bernanke is killing this country by targeting more inflation.
Matt said it, inflation is a tax on the middle class.

Continued from above:

A promotional pamphlet for a health savings account (HSA) boasts, “If you plan correctly, you may find that you spend far less for health care than ever before.” True, if you could plan to avoid cancer, being hit by a car, or growing older. But you can’t.

The reality is that these schemes shift increased financial risk to consumers and will surely weaken our already fragile
health-insurance system. HSAs provide little assurance of affordable, quality health care to those with chronic
illnesses, families with children, those of moderate incomes, or older Americans with more health-care needs. HSAs
do nothing to address the factors that really drive up health costs: care for those with chronic diseases; overuse of
technology; hospital care; prescription drugs; and end-of-life care.

-----------------------------------------

This part of the report is the most telling:

"So, who, besides the wealthy, benefits from HSAs? Employers do, since they are shifting health-care costs to their employees and are more able to predict health-care expenses. And financial institutions offering HSAs are poised to reap billions in profits from the fees they can charge in setting up those accounts."

There you go: only 2 sentences, but pretty much summarizes why Republicans support HSAs so much

NYCMatt: "So you'll be in good shape if you can figure out how to live on roughly one-sixth of your income in retirement."

I said 70% of salary at retirement (as in future salary), not one-sixth. With social security and possibly other savings, a middle class person consistently putting 15% of their salary in 401K can have a comfortable retirement. Whether one does that consistently or make early withdrawals from it is another story. I was only addressing your math that 15% contribution would net only 5 years of living expenses. As noted above, my calc did not include company matching. The numbers obviously will look even better if that is included.

what happens if your 401K craters because the underlying investments do poorly?

alanhart, I agree with most of what you wrote, including the call for national healthcare. However, I do believe changes need to be made with regards to public sector unions so that the balance of power is restored. Unions that become too strong tend to cause the employers to declare bankruptcy. We can disagree on how powerful these unions are currently, but the fact that the general public seems to be anti-union tells you something...

Great 401k article in the WSJ. I thoguht it deserved its own thread, but here it is again:

http://online.wsj.com/article/SB10001424052748703959604576152792748707356.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsTop

columbiacounty: "what happens if your 401K craters because the underlying investments do poorly?"

You mitigate that with proper diversification and do not make irrational/fear driven decisions. Allocate to less risky funds as you get closer to retirement.

Anyone who left their 401k alone during the recession would have recovered their losses by now, assuming a diversified portfolio.

my guess is that a high proportion of people currently aged 60 and over sold out a big part of their holdings two years ago and never got back in. a system that requires everyone to have nerves of steel and be financially brilliant is not workable. its one thing to be twenty plus years away from retirement and let it ride; quite different if you're 70 and see half your nest egg disappear in 6 months.

columbiacounty, I agree. I admit that not making fear driven decisions and allocating to less risky funds closer to retirement is easier said than done. More education is definitely needed. However, laziness and greed is hard to fight too. That is why we must make sure social security does not fail and I also support a national healthcare program. I am not interested in having people keep their pre-retirement life style, that is their own responsibility. BASIC healthcare, food and shelter is a different story; that I support.

"Today's so-called "reformers" are not targeting fraud, nor are they even questioning why overtime is included in pension calculations (which is something I agree with -- I don't see the rationale for overtime inclusion)."

The folks I support are...

columbiacounty: "what happens if your 401K craters because the underlying investments do poorly?"

You mitigate that with proper diversification and do not make irrational/fear driven decisions. Allocate to less risky funds as you get closer to retirement.
------------------

You shift away form risky high returning assets into safer more stable ones as retirement gets closer. There's an old rule called invest (100-your age) into stocks, the remainder bonds. You get older you put more into fixed income(better yet safe AAA funds with low duration). As you get nearer to retirement you shift from growth to capital preservation.

"somewhereelse, key point: until 1980, virtually all employees in the US, union or not, private or public sector, had defined-benefit pensions"

And that makes little sense.

The fact that government is one of the few places that still has it...

It needs to end.

> and solid health insurance.

And then costs skyrocketed... partially because of the government...and partially because of... get this... unions, empowered by the government.

You noticing a theme here?

"It's not something that unions cooked up, and despite what pro-union people claim, it didn't arise from collective bargaining"

Yes, true, the smart approaches don't come from the unions....

Why on earth would someone five years from retirement be 100% equity . The answer isn't getting rid of 401k's, it's providing investor education. How can a country be filled with I-Phone geniuses who can't figure out compound interest or risk adjusted returns?

sunday.

i think you raise a very important and overlooked fact. why should one be able to maintain the same lifestyle in retirement as when you are working?

that is a recent fantasy similar to the fantasy of maintaining your looks/body as you age.

the problem of course is that there are many constituencies busy propagating both these myths and we have entered an all or nothing phase. quite a complex issue. only one small part....should you be able to stay in your home in retirement? the old thinking was: yes, if you paid it off. now, with the years of rapidly escalating property taxes, that becomes far more difficult.

and on and on.

Property taxes are rising because of city unions earning egregious benefits and gov't paying entitlements it can't afford and offering tax breaks it hasn't funded.
Funny how it comes full circle.

"and offering tax breaks it hasn't funded."

DING DING DING. The smartest thing you ever said on SE.

columbiacounty: "...should you be able to stay in your home in retirement?"

This goes with the pre-retirement lifestyle question. I would not go as far as to call it a fantasy. If someone save and plan properly, it is definitely possible. The thing is, many middle class folks put part of their retirement money in building equity in their house. The mortgage is paid off by the time they retire, but with smaller 401k/IRA accounts. Nothing wrong with that as long as they recognize that they have to eventually cash in that house like any other retirement accounts.

I do not have a problem with financial advisers working with clients assuming pre-retirement life style or 85% of their working income after they retire. Of course we know that most will fail to achieve that goal at the end, but hopefully they will have BASIC healthcare, food, and shelter with limited government assistance...

One of the ways I plan on achieving the goal of a pre-retirement lifestyle during retirement is to live a modest pre-retirement lifestyle, regardless of my income growth. In other words, keep the hurdle as low as possible. With any luck, early retirement would be possible.

that's great Sunday. Just don't plan on getting sick.

Socialist: "Just don't plan on getting sick."

That is why I have health insurance, life insurance, and long term disability insurance even though it is very expensive. My spouse and I do not smoke or drink. We eat healthy and are not over weight. Still, I understand there are no guarantees, but I do not worry about things that I do not have control over. With that mindset, I also have very low stress levels.

its sad and funny...

socialist represents one of the voices that makes it impossible to have a real conversation (much less policy making decisions) about these difficult but solvable problems.

One of the ways I plan on achieving the goal of a pre-retirement lifestyle during retirement is to live a modest pre-retirement lifestyle, regardless of my income growth. In other words, keep the hurdle as low as possible. With any luck, early retirement would be possible.

Another way is not to subscribe to $200 cable packages
$100 I-phone packages
lease expensive cars.
purchase a 2nd home

buy new electronic gadgets every 12 months, eat out on a sensible basis
and not buy more house than one needs.

is cream cheese ok?

only if you're high income. otherwise eat your damn bagel dry.

happy retirement equals savings and active intelligent management of said savings, which is not available to most. RS's list is ridiculous. if you make $5m a year, your $100 i-phone package is meaningless. if you make $40k, it matters.

and RS, you'd better hope that people continue to buy 2nd homes, because it's what is keeping the condo market alive.

Anyone besides the criminal classes has to eat creme chiss instead. Or creme American pasteurized processed chiss food spread, on fancy occasions, like when your family posts bail.

or sometimes when the family can't post bail, because, well, you're just celebrating because not everyone's in jail.

ar: "active intelligent management of said savings"

I do not believe the savings have to be "actively" managed. It just has to be diversified. I think consistency in savings/contribution is the most important part.

until the market crashes.

sunday, i don't agree. if you look at the s&p over the last twenty or thirty years people really needed to be actively involved.

if you're saying they just need to keep up with inflation, maybe simple diversification will work. but most people don't have enough excess funds to save enough. we save well over 20% of our pre-tax income, but i have no clue how most people save much at all right now.

columbiacounty, various markets crashes on a semi regular basis. A well diversified retirement account would do fine over time (30-40 years). People tend to remember only the drop associated with the crash, but forget about the gains from the bubble times.

actually, the s&p until recently was very close to where it was how many years ago? sunday, i just don't agree. buy and hold is not a good plan. and i suspect it will be far worse in the future.

ar, an average person cannot expect to get better than average returns in their investment. Most who try will fail. You and your hubby are not average. You have a good shot at actively managing your funds and succeed in having a good retirement even with fluctuating savings/contributions. With consistent savings/contributions, you will have a good retirement even if you do not actively manage your diversified funds. If you actively manage it, your chances are even better, but not a "requirement."

Diversified does not mean just a mix of stocks. It means a mix of stocks, bonds / munis, money market, high interest savings, real estate, etc...

just like what the average person understands and can manage.

just go to charles schwab.

sorry, sunday, it ought to work, but it doesn't. most people have NO clue as to what a diversified portfolio means.

columbiacounty, that is why I think the average person should concentrate on the saving part and not try to actively manage their accounts. Get some advices from a combination of trusted friend/relative and financial adviser and come up with a plan for a diversified portfolio. Do not be greedy (no easy money, high return = high risk), active management usually only benefit the banks/financial institutions.

and hope like hell that the market doesn't tank when they're over 60. it doesn't work. it would be nice if it did but it doesn't.

ar, most people have trusted friends/relatives who do. With a bit of common sense (high return = high risk) and realistic expectations, financial advisers can be used too.

ar, the charles schwab ads really irritate me for some reason.

what percent of people do you estimate have a trusted friend or relative? what percent of those trusted friends or relatives knows what they are doing?

what would your advice (or your trusted friend or relative) been to someone who was 68 in february of 2008?

sunday, i'm really not trying to be confrontational. i very much value your insights. but i just don't think it's true for anyone out of maybe the top 10% of people (in terms of portfolio performance), and even there i don't think they necessarily do a good job. i think a lifetime economics management course should be required in high school.

>about these difficult but solvable problems

Columbiacounty, weren't you the guy who said this nonsense?

"so...here's how we get started.

a politician stands up and says: there are no easy answers anymore. for a viable future, we need to have shared sacrifice. rather than try to figure out how and which programs to cut, lets start with a lengthy dialogue aimed at creating a process that is fair."

and now.

hfscomm1.

Columbiacounty, which politician do you want to stand up and begin this lengthy dialogue for a shared sacrifice for a viable future?

how many different names have you posted under besides hfscomm1?

columbiacounty, may father in-law retired in 2009 at 69. He never made above 40K/yr in his life. He came to the states in late 70's with nothing in his pocket. His house is paid for. He never received any government help (no food stamp, medicaid, etc., ever..). He survived the market crash at the beginning and end of last decade very well with healthy amount in his ira/401k/savings. His retirement life style is even better than pre-retirement and is unlikely to require government help in the future.

that's great news for him. but, what's your point? it worked out for him so anyone who got screwed is an idiot?

columbiacounty is counting on a politician to solve our problems, or at least begin a lengthy dialogue

butt out hfscomm1