• bvs23bkv33 (unregistered)

    in our country we have state pension fund, every enterprise pays pension tax for every hired worker, but our currency inflated 13 times since it was introduced 20 years ago

  • Appalled (unregistered)

    Huh? Duh? Tell us something we don't already know. Like why didn't you bring Enron into the discussion as well and REALLY treat us like idiots?

  • Computational Antique (unregistered)

    Hallelujah! Snoofle speaks truth. Heed his words.

  • Computational Antique (unregistered) in reply to Appalled

    What a pity we aren't all as smart as you are, Anonymous Asshole.

  • comments.Count.ToString + "th" (unregistered)

    Having worked for my national pension fund, I can confirm that this is sound advice. Especially the start saving early bit, even if it is just that, a bit.

  • fragile (unregistered)

    If they give you stock options, you should have a say in the company. Not just stupid stuff. Things like "we're selling the building, working from home, and paying out a dividend."

  • Rafa Larios (unregistered)

    In Colombia we have private pension funds and a government one. It is OBLIGATORY for all people to save for their pensions (if you are working or are independent, not if you are jobless).

    It doesn't matter if it is on a private or public pension fund. The interest is not much, but your money is safe, it doesn't collapse when a company fails because those funds diversify the hell out of them. All funds are backed by the government.

    For a country so big and advanced like the US, damn, you really have weird traditions regarding pensions and health.

  • Oliver Jones (google)

    Good advice, this. It doesn't hurt to repeat it, especially so people just coming up can hear it. Believe it or not, we all have colleagues who don't know about the 401(k) retirement-fund shenanigans at Enron that sent their CEO to jail for 14 years.

    Most people who sell retirement investment "products" (stocks, bonds, etc) are dangerous predators, and we are all their lawful prey.

    Maybe -- hopefully -- you trust the current management of your employer. But what if your employer gets sold? Be careful.

    One quibble: being in a unicorn company isn't necessarily good for the typical individual contributor with options. Those companies have large paper valuations but no way to turn a few thousand of those shares into cash or unmanaged index mutual funds or college tuition payments or whatever.

  • Tim (unregistered)

    "While the 2008 fiasco and dot-com bust will hopefully never be repeated". Anyone who's expecting this is naïve in the extreme. Just look at the state of the global finance system and you'll see the correction hasn't happened yet. 2008 was just a blip - the real crash will be much much bigger.

  • WTF? (unregistered)

    So USA is the WTF today?

  • Burner (unregistered)

    Look at Roth IRA's, you pay tax on earnings before invested, the interest/dividends are tax free on retirement. It'll be hard for the gov't to eliminate the Roth, it was designed by politicians so they could shield their money, so it's unlikely they'll pass a new law that'll hurt themselves. I've been burned by IRA/Company matching plans. I'll do my own investing, and I'd rather pay any taxes while I'm still earning rather than wait until I have no regular cash flow. The idea that you'll pay less taxes when you retire because you're not working only holds if you don't have any substantial investments funds. Besides, when you're just starting out in your 20's, you're paying the lowest tax rates overall, that you may ever do.

  • D-Coder (unregistered) in reply to Computational Antique

    Computational Antique (unregistered) 2017-12-05 spake:

    Hallelujah! Snoofle speaks truth. Heed his words.

    Amen! Sing it, brother! (or sister, as the case may be).

  • Jim B (unregistered)

    Agree 100% with this advice. I worked for a midwest stock brokerage that was acquired by a bank in 2007. A year later the bank went belly up because of many sour mortgages the bank had on it's books. It was acquired by another bank (think stagecoaches) in 2008 at a fire-sale price.

    The stock we had in the 401k was at $53 a share when the brokerage was bought. A year later it was worthless. I lost over $100k in my 401k. The only upside (if it can be called that) was I can write off part of the loss each year on my taxes for 34 years.

    So the advice: move your money as soon as possible. Or sooner.

  • Scott (unregistered)

    Intact. Not in-tact.

    My peeve being over, a related piece of advice which snoofle does not mention: be sure to take full advantage of any matching your company might do on IRA/401(k) type investments. One of the few places where it's wise to heed management: "we're going to give you free money to encourage saving".

  • LCrawford (unregistered)

    For a country so big and advanced like the US, damn, you really have weird traditions regarding pensions and health.

    It's mostly so that the politicians can point to those elderly poor and say "you shiftless single mother who could only earn 21K per year across 3 jobs, because of your sinfulness and because you have no Roth, I'm going to cut your social security and welfare"

  • Steve_The_Cynic (nodebb)

    Snoofle's analysis of the reasons for the crash isn't quite right. Unless I missed something fairly fundamental about mortgages:

    • If the saleable price of your home (hint: its "value" is "well, hey, it's where I live, ffs") drops, the amount you owe doesn't change, and nor does the monthly payment. (Not directly, see below)

    • Many of the mortgages that were bundled up were made to people who were absolutely unable to afford the payments, and the people arranging the loans (not normally the lenders, another WTF) were almost certainly aware of that. (Those people weren't bearing the risk of the loan in any way, shape, or form, but were given power to create that risk, while the entity that bore the risk had no say over how it was created. That couldn't possibly ever go wrong.)

    • The economy tanked for other reasons, enough that some of those megarisk borrowers lost jobs, had to take paycuts, and so on, and therefore couldn't afford the payments. There are suggestions that the loan-arrangers knew damned well that even before all that, some of them couldn't afford the payments.

    • The whole risk analysis was based on the assumption that a 5% default rate means that each year, 5% of borrowers default. The system was therefore not set up to handle the other extreme: in 5% of years, EVERYBODY defaults. (Actually, more like: 2.5% default each year, and in 5% of years, 50% default, but you get the idea.) This is known as "correlation risk", and it's actually quite hard to handle, although diversification (across asset types) helps a lot.

    • 2008 was one of the 5% of years, evidently.

    • The MBSes ("CDOs" = "Collateralized Debt Obligations" in strict pendantry) bundled up the risk and (using the assumptions noted above) ended up with a security backed by junk-grade loans having a top rating. The twisted maze of little passages that made up these CDOs was so twisted that nobody, not even the guys who set them up, really understood how they worked.

  • DrPepper (unregistered)

    All I ever pay attention to when I hear investing advice is "index funds". Low risk, low cost, nearly always beat managed funds when you take fees into account.

  • Steve_The_Cynic (nodebb)

    Here's the other point that I alluded to.

    If the economy tanks, interest rates go up (this happened in 2008). Variable rate mortgages tend to be cheaper than fixed-rate mortgages because the lenders want to protect themselves against rises, and if lots of borrowers took variable rate mortgages, they take a big hit when the interest rates go up.

  • Pete (unregistered) in reply to Appalled

    Why? Because apparently people have forgotten the lesson.

    (Oh, yeah, I was going to mention Enron as the poster child for not betting your retirement on company stock.)

    I started my career at Hewlett-Packard, back at the end of the Bill and Dave age. We had a stock purchase program and one option was to buy stock at a discount and (automatically and immediately) sell it. They cancelled that option because they believed employees should have a financial stake in the company. A few years later, someone pointed out that I've already got a huge financial stake in the company: my salary, my benefits, any options or restricted stock units I may have. It's unsound advice to add more to that pot.

  • Pete (unregistered) in reply to LCrawford

    Perhaps. I kind of like our system compared to pensions. When I have money in a retirement account, that's my money. No one can take it from me, modulo taxes. If I invest it reasonably (and that's a big "if"), it'll be there when I retire.

    If I have a pension with the company or state, I don't have that guarantee. Personally, I prefer to trust myself more than I trust a company and/or politicians to properly maintain a pension fund. However, this does lead the the original issue: I have to pay attention to my retirement and not screw it up.

    This doesn't work for everyone. I'm a well educated and very well compensated software engineer. At the risk of sounding paternalistic, some people are just clueless about finances. Fortunately, there are lots of products out there where you can just park your cash and are pretty likely to get a reasonable return.

  • Appalled (unregistered) in reply to Computational Antique

    You (all) are probably smart enough (although doubtfully as smart as me). You're just too ignorant or lazy to learn about of all this. I learned 40 years ago, am retiring soon, haven't lost a dime to companies going bankrupt, and never will. To all you losers, smarten the hell up. WTF shouldn't be the avenue of your financial enlightenment.

  • Tom (unregistered)

    "e.g.: Don't put all your eggs in one basket" - Shouldn't that be "i.e."?

  • snoofle (unregistered) in reply to Steve_The_Cynic

    "The twisted maze of little passages"

    Best description I've ever heard.

    TRWTF was that the government tried to bail out the banks, brokerages and insurance companies that were choking on the loses instead of the national mortgage guarantors (FNMA, etc.) upon which the whole house of cards was built.

  • Shill (unregistered)

    FYI, the US has a government-run pension program, we call it Social Security. Participation is mandatory for workers. It is paid for by payroll taxes, where the government takes 6.25% of the worker's gross pay deducted from their paycheck. Another 6.25% is charged to the employer (which depresses wages for the employees). This is separate from the income tax which is currently in the news.

    Also, the SS payroll tax only applies to the first $118,500 in wages for 2016 (for 2017, it is $127,200). Remember this when there is a discussion about income tax brackets - the lower brackets should be increased by 6.25% (you could make a case for 12.5%) while the upper brackets are not.

  • Paul M (unregistered)

    years ago I worked for PSINet and the share options were pretty good. unfortunately I was lazy and I didn't diversify, so when the stock crashed I lost about US$30,000 because I didn't sell enough options in time.

  • Circuitsoft (unregistered) in reply to Steve_The_Cynic

    My understanding is that the reason house values falling matters is because if you default on the loan, selling the house won't get you out of debt.

  • Jeff Dege (unregistered) in reply to Appalled

    I was working on a software project for Enron back in the day, and I gave them exactly this advice - they should sell all of their company stock the moment it was vested. Having more of your savings in your place of employment than is absolutely necessary is simply stupid.

    They told me I was an interfering idiot, and pointed at the stock price chart. Which truly was astounding, until it wasn't.

  • Worf (unregistered) in reply to Steve_The_Cynic

    Actually, if you want a really down to earth explanation of what happened in 2008, watch The Big Short. It's about 4 people who saw what was happening, and made it big because they bet against the market. But in the meantime, they explain all the little things everyone tosses around - CDOs, MBSes, etc and explain it in the clearest possible language. And it even explains Credit Default Swaps, which was invented by one of those 4 people.

    And no, it was not easy on the 4, either, because cashing out turned out to be far more difficult - with all the financial institutions on shaky foundations, they were in no position to be able to pay out their obligations!

    It's a must-see movie if only to see what all the shenanigans were.

    My favorite part? When they explain what "sub prime morgages" actually meant. They literally said "When you hear sub-prime, think shit. Because that's what a sub-prime mortgage is - it's a shit mortgage not worth anything".

  • dkf (nodebb)

    before they repeal the fiduciary rule

    Say what? Congress want to effectively make it legal for financiers to steal from their customers? Are they out of their tiny little minds?!

  • snoofle (unregistered) in reply to dkf

    That's the way it used to be before they instituted the fiduciary rule; financial advisers could recommend something they had in inventory (so they could get the sales commission, even it was bad for your financial goals). With the FR in place, they had to tell you that it was bad for you and could only sell it to you if you still insisted upon it after knowing the truth. Basically, it forced them to let you know you were making a bad investment before you made it, so you could at least ask to be steered toward something that actually met your needs, and they were obligated to tell you the truth, even if you didn't know to ask.

  • Doug (unregistered) in reply to DrPepper

    I'm surprised I had to read so far down before someone said "index funds". I second the motion -- wherever you are in the world, they're low cost, low(er) risk, and (on average) higher returns than mutual funds.

  • Ross Presser (google)

    It sounds as if you are very wealthy, snoofle. (If you believe a majority of your audience here has comparable wealth, please think again.)

    It also sounds as if you are somewhat more human than most of the very wealthy. For that I commend you.

    Nevertheless it finally sounds as if, like many of the very wealthy, you believe those who do not become very wealthy have missed out in a big way. I submit that this may not be true.

  • Dave (unregistered) in reply to LCrawford

    Someone earning 21k USD a year is in the top 3.5% globally. But any lie will do if you get to gas the Jews, right?

  • TheCPUWizard (unregistered)

    Great Advice in general. I 100% agree that "forgetting" is a key problem. OTOH, if one is diligent items such as focusing initial buys in company stock (not necessarily leaving the fund there forever) and taking (appropriate percentage) in stock options - the results can be quite rewarding.

  • RLB (unregistered) in reply to Dave

    Congratulations, you just lost every single shred of credibility you still had clinging to your bare cheek.

  • Anonymous (unregistered) in reply to WTF?

    No just today unfortunately

  • serguey123 (nodebb) in reply to Pete

    Yeah, i am one of those clueless idiots that have no idea how most of that stuff works. I just mumble and pretend to understand when my colleagues talk about investing or charitable donations and that is why I pay like 1/3 of my salary in taxes

  • campkev (nodebb) in reply to Dave

    $21K is not the same everywhere. In some parts of the world, you could live very nicely for $21K US, in others, you'd barely be getting by.

  • MiserableOldGit (unregistered)

    As this fundamentally misrepresents the cause of the crash I'm a bit sceptical about the advise it pushes out. It was nothing to do with bank lending policies and idiotic people borrowing all they can get hold of, and all about valuation of complex financial instruments ... the other two problems are eternal and would not have been problems if the capital wasn't freely available due to what amounted to (still) unpunished fraud in the derivatives market.

    Mixing your investment is a good plan to reduce risk, but the trick is knowing how to actually make sure it is mixed and that's not so easy. Well, easy for me, as I never got enough cash to do much with anyway. Regardless, the mechanics of this advice is all about US tax so it means nothing to me anyway. So Snoofle managed to dump his ill-gotten gains successfully, good for him, but I don't see anything here that tells me there was repeatable wisdom, in other words, good for him. Forget this nonsense, give us some more shite code to bitch at.

  • Scarlet_Manuka (nodebb) in reply to Worf

    "When you hear sub-prime, think shit. Because that's what a sub-prime mortgage is - it's a shit mortgage not worth anything."

    That's a bit of an exaggeration. Sub-prime basically means high risk - specifically, high enough that the borrower couldn't get a normal loan. Naturally they come with significantly higher interest rates than normal loans, to make up for the increased risk. So the ones that work out are quite profitable, but there's a high rate of defaults. In average economic conditions, they are overall decently lucrative, which was why there was such a push from mainstream lenders to get into them in the years leading up to the GFC. So to say it's not worth anything isn't really accurate.

    Obviously, most people don't want a large amount of risk in their portfolio. So with the number of subprime mortgages increasing dramatically, the search was on to find a way to make them into a suitable investment vehicle. This was and is done (oversimplifying) by combining them with normal loans to make a package with acceptable overall risk, and then selling off that package in chunks to various investors. This spreads the risk out; if a cluster of subprime mortgages goes bad it doesn't affect any one investor too badly.

    The problem was that the risk of the combined packages was not properly understood (by anyone). It was OK for average economic conditions. But in bad economic conditions, the rate of defaults for the sub-prime loans doesn't increase at the same pace as it does for normal loans; it skyrockets. So instead of clusters of sub-prime mortgages going bad, you had giant swathes of them. And because that risk was spread out among a stack of investors, suddenly everyone had much bigger than expected losses, in already difficult conditions. Then they had to sell off "good" loans to cover it, which is pretty much a textbook example of the proverbial throwing good money after bad, except that very few people were in a position to buy at that point, so the value of the "good" ones also plummeted....

  • Carlos (unregistered)

    Not on the same level, but the whole cryptocurrency fad seems bound to crash and burn. I'm staying clear of it.

    Glad to have finally understood how to manage my savings after ~8 years into my working life. Wish I started sooner, but better late than never.

    Indexed funds FTW.

  • Dramakweenz (unregistered)

    Another nugget: if you want to have social security payments when you retire, don't vote for the political party that wants to kill the system. I think you'll find they call it "entitlement reform","providing choice", and "reducing government overreach", things like that. They would be the ones pushing the idea that switching a government benefit to a for-profit system is somehow better for the recipients. On a related note, now's a great time to liquidate your IRA and move it to Bitcoin.

  • Ulysses (unregistered) in reply to Appalled

    Ah, it looks like you have A Year of Experience N Times after all! :D

  • cheong (nodebb) in reply to Steve_The_Cynic

    If the saleable price of your home (hint: its "value" is "well, hey, it's where I live, ffs") drops, the amount you owe doesn't change, and nor does the monthly payment.

    In a lot of place, when the house value drops below the value you borrow by mortgage, the lender will demand you to pay the difference immediately. (a.k.a.: margin calls)

    [quote https://www.propertyguru.com.sg/singapore-property-resources/singapore-mortgage-and-loan-guides/what-every-homeowner-should-know-about-margin-calls ] So what is a margin call? A margin call happens when the market value of your property falls significantly. If the value of your property depreciates to be less than what you owe the bank, you may be asked to pay the difference. [/quote]

    When the economy goes tough, and people start to lose their job, they don't have that extra money to pay the difference. And therefore the lender collects the house.

  • Dave, from Oz (unregistered)

    Work for money.

    Not promises. Not stock. Not time-in-lieu. Not "work for free, and maybe you will get status an preferment later on". Accept payment in money. A person or organisation that is not paying you in money is not your employer.

    Don't do unpaid overtime. If they need their workers to do overtime, and they can't pay them, that means that the project is unfunded. If a project is unfunded, then that means it isn't important. Don't work ten-hour-days at 80% your normal rate for something that the organisation does not think is important.

    It may be true that stock ownership makes you part owner of the company. Technically. But ownership means nothing without control. If you don't get to say how it's going to be, then your part ownership is illusory, a bookkeeping fiction.

    Work for money.

    (With love, from Gen X).

  • Anonymous (unregistered) in reply to Dave, from Oz

    That's pretty stupid advice, globally.

    The reason most of the boomers still have so much money is because they WEREN'T working for money. They were working for a pension, which USED TO BE a legally-enforced guarantee of retirement funds.

    It took acts of state legislatures, courts, and Congress to strip them of those benefits, it had nothing to do with markets.

    The reason the legislatures, courts, and Congress were able to strip them of those benefits?

    Most of the boomers vote Republican.

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