FYI: Here’s another Aussie term D.C. lawmakers should get to know: superannuation. That’s what Australia calls its retirement savings system, which in just two decades has become one of the most highly regarded in the world. Since its introduction in 1992, the Superannuation Guarantee program has grown to $1.52 trillion, more than the country’s gross domestic product, with more than 90 percent of workers putting money into the system.
Regards,
Ted
http://www.bloomberg.com/bw/articles/2013-05-30/in-australia-retirement-saving-done-right
Comments
"The U.S. is ranked ninth, with Mercer researchers faulting American 401(k) rules that allow savers to borrow from their accounts and take penalty-free distributions as soon as they reach age 59½."
There is this constant push to keep people working well into their 60's and into their 70's as well. Not all workers want to or can work that long. If the person has saved into their taxed deferred accounts throughout their work history, why not let them leave the work force early. That frees up jobs for the younger folks. I do agree with the idea regarding borrowing from retirement accounts. It should be a last resort.
As mentioned in another thread recently, travel is a great idea. Being able to do what you want and enjoy your senior years should not be lost. If you enjoy your work then that's fine. But for many, the senior years should be enjoyed with family and friends.
(Both contributions and investment earnings on them are subject to a 15 percent tax.)
DErf
This just plays into the fact that when it comes to saving and investing, we are our own worst enemies--- until (or if we ever) learn how NOT to be. It seems to me that a great many people simply do not possess the education, maturity and wisdom to forego a bit today so that it can be put aside and compound and grow exponentially, over long periods of time. And it seems to me that real leaders would not allow so very many people to screw themselves and be left bereft when old age comes. Ah, but of course, we get the leaders we deserve. "Compulsory," after the Australian model, is the right thing. But it won't fly in the USA. Whether or not they are personally to blame, there are too many of us who think and behave like "starving students:" anytime we get a few extra bucks, off we go to get the junk food, or the package store, or to get the gigantic Slurpee. Literally frittering away the future. And to get into the habit of paying with a debit card is self-defeating, too. It gets to be thought of as a regular part of what you are paying for on a routine basis--- as if it were necessary. Consumerism reigns. Madison Avenue has won the war. Purchases are too often made without regard to any standard at all. We just want it, so we buy it, before even thinking about it. Morley Safer (spelling?) from 60 Minutes once interviewed some sort of soda-pop corporate high mucky-muck. She said their recipe included a little something unique and proprietary (secret) which would deliberately make the beverage "addicting." Filth.
In the lead paragraph that Ted quotes above, we have the statement that over 90% of Australians put money into the system. That sounds to me like a low number for a system that is mandatory.
The article then goes on to say that in a 2011 EBRI study (the article itself is from two years ago), 40% of working Americans participated in an employer retirement plan. That looks very low compared with Australia (which is a point of the article), until one looks at what this 40% figure represents.
According to the EBRI paper, 75.2 million workers worked for an employer that provided a retirement plan (defined benefit, i.e. traditional pension, and/or defined contribution, like a 401k plan). Of these, 61.0 or over 80% participated. Remember too, that just because an employer offers a plan doesn't mean that all employees are qualified to participate. So the actual participation percentage of those eligible to participate is higher still. Getting pretty close to Australia's figures - and that's on a volunteer basis.
If one wants to find fault in the low participation rate, blame it on the fact that (according to EBRI) only 48.9% of workers even worked for an employer offering a retirement plan (whether or not they qualified to participate). If there's something to fix, it would seem to be getting more employers to offer retirement plans, not raising employees' interest in participating.
Here's the EBRI summary and paper.
I really appreciate your continued efforts, commentary, and even-handed contributions to this forum.
Regards- OJ
My employer used to offer a self-directed plan for those with a certain income level. Once I made it to that level, I was extremely excited to be 'free' to choose my own funds. They canceled it due to low participation.
It all is so very depressing. And thinking that anyone in Washington really gives a damn is even more depressing. It doesn't seem to be a priority to help people become independent. My political views aside, this doesn't seem all that difficult. No, we cannot expect all to know these things, but is it not in the national interest to not have an increasing number of citizens ever dependent on programs that cannot be maintained without constant manipulation.
I do not welcome having a one-size-fits-all solution, but a solution is needed. And, any solution should be a viable solution. And please don't mention Social Security since if it was a 'viable' solution, we would not be having this discussion.
Brian W.: "It would be nice if more employers offered 401k plans, but who would use them." At least 80% participate now, per the info from the EBRI paper msf quotes.