California Free Press

Off the Top of My Head

How Ya Gonna Pay For It?

by John Lawrence, July 27, 2020

This is the question they often asked Bernie Sanders when he talked about the various programs that he would seek to implement as President. Programs like a Green New Deal, Medicare for All, forgiveness of all student loan debt, free college, free pre-school etc. Bernie never really had a good answer except for taxing the rich. Well, that was a pretty good answer, but it is not even necessary to raise taxes on the rich to implement all of Bernie's programs. Modern Monetary Theory maintains that the US, as a currency issuer, can just issue the money into the economy. The US dollar, actually a Federal Reserve Note, is issued by the Federal Reserve bank. The Fed has created or "printed" trillions of dollars bailing out the banks in 2008, with its quantitative easing programs since then and now to fund the response to the coronavirus pandemic. It's obvious that the Fed can just print money and add it to the economy. It can buy up the national deficit and debt. There is no need to worry that the US, which has a sovereign currency can ever run out of money. While you and I, states and countries which do not have a sovereign currency or which have loans in other currencies do have to pay them off, any nation like the UK, Japan, the European Union and China do not have to worry about running deficits.

Republicans have traditionally run on the mantra that Democrats will raise your taxes. Remember George H W Bush's pledge: "Read my lips. No New Taxes." Then he did go ahead and raise taxes after he got elected. Well now it is becoming obvious that Americans don't have to worry about new taxes. Social programs as well as the military can be funded by the Fed just printing the money. Of course it would not be a good idea simply to flood the economy with money for which there is no good purpose. That would lead to inflation and to a loss of trust in the dollar. Under current conditions, however, the dollar is the world's reserve currency and that is not going to change any time soon. So prudent and responsible spending is still necessary. It's just that the US does not have to worry about deficit spending. Other central banks like Japan's are doing the same. In fact Japan has a greater deficit to GDP ratio than the US does.

Which brings us to social security. The conventional wisdom is that the Social Security Trust Fund is in deficit and will be exhausted by 2035. Modern Monetary Theory says that this is rubbish. The US as a sovereign currency issuer can never run out of money. Al Gore used to talk about putting social security in a lockbox. Not necessary. It is not even necessary to debit everyone's paycheck to provide revenues for social security. This is not a program that people who have worked all their lives have "earned." It is a social welfare safety net program pure and simple. To apply basic accounting to social security as if people's payroll tax contributions were necessary to fund it is not necessary or desirable. To argue over whether or not the payroll tax needs to be increased or whether the cap (the payroll tax is just taken on the first $137,700 of a person's earnings) needs to be lifted is pointless. There was an old saw about you can't have both "guns and butter." Well, you can have both and tax relief too! We just have to determine the prudent balance between guns and butter based on other criteria. It is not true that there is only a finite amount of money based on tax revenues that determines total expenditures.

Look at reality. The US has been running deficits for years. Now we're running trillion dollar deficits. Is any creditor coming after us? I don't think so. And there is no inflation. So we don't have to limit our thinking to the Federal government's just spending what it takes in in taxes. In fact we haven't done this in years since Clinton balanced the budget when he was President.

Joe Biden has some good benefits proposed for older retirees. From his website:

"The Biden Plan will provide the oldest beneficiaries – those who have been receiving retirement benefits for at least 20 years – with a higher monthly check to help protect retirees from the pain of dwindling retirement savings."

and

"Under the Biden Plan, workers who spent 30 years working will get a benefit of at least 125% of the poverty level"

The poverty level for a single individual is $12, 760. 125% of that is $15,950. So a minimum monthly payment would be $1329. This is over twice what I am now receiving so I would be very happy if Joe is able to implement this plank of his platform. There is no way a person can live on $641 a month. Fortunately, I don't have to. Currently, the minimum monthly payout for a single individual is $510 a month. That amount is approximately $2,000 less than the annual poverty threshold for an aged individual. Bringing monthly payments for the elderly up to snuff is something Republicans have resisted for years. Then, they have tried to defund all social and welfare programs. However, funding for the military-industrial complex has been relentlessly increased come hell or high water. For that expenditure, deficits don't matter. They shouldn't for infrastructure development and social safety net programs either.

This Is What Life Without Retirement Savings Looks Like

Many seniors are stuck with lives of never-ending work—a fate that could befall millions in the coming decades.

The Atlantic| Alana Semuels

 

A woman washes dishes in her trailer in Santa Monica, California. Photo by Lucy Nicholson / Reuters.

CORONA, Calif.—Roberta Gordon never thought she’d still be alive at age 76. She definitely didn’t think she’d still be working. But every Saturday, she goes down to the local grocery store and hands out samples, earning $50 a day, because she needs the money.

“I’m a working woman again,” she told me, in the common room of the senior apartment complex where she now lives, here in California’s Inland Empire. Gordon has worked dozens of odd jobs throughout her life—as a house cleaner, a home health aide, a telemarketer, a librarian, a fundraiser—but at many times in her life, she didn’t have a steady job that paid into Social Security. She didn’t receive a pension. And she definitely wasn’t making enough to put aside money for retirement.

So now, at 76, she earns $915 a month through Social Security and through Supplemental Security Income, or SSI, a program for low-income seniors. Her rent, which she has had to cover solo since her roommate died, is $1,040 a month. She’s been taking on credit-card debt to cover the gap, and to pay for utilities, food, and other essentials. She often goes to a church food bank for supplies.

More and more older people are finding themselves in a similar situation as Baby Boomers reach retirement age without enough savings and as housing costs and medical expenses rise; for instance, a woman in her 80s is paying on average $8,400 in out-of-pocket medical expenses each year, even if she’s covered by Medicare. Many people reaching retirement age don’t have the pensions that lots of workers in previous generations did, and often have not put enough money into their 401(k)s to live off of; the median savings in a 401(k) plan for people between the ages of 55 and 64 is currently just $15,000, according to the National Institute on Retirement Security, a nonprofit. Other workers did not have access to a retirement plan through their employer.

That means that as people reach their mid-60s, they either have to dramatically curtail their spending or keep working to survive. “This will be the first time that we have a lot of people who find themselves downwardly mobile as they grow older,” Diane Oakley, the executive director of the National Institute on Retirement Security, told me. “They’re going to go from being near poor to poor.”

The problem is growing as more Baby Boomers reach retirement age—as of early 2018, between 8,000 to 10,000 Americans turn 65 every day, according to Kevin Prindiville, the executive director of Justice in Aging, a nonprofit that addresses senior poverty. Older Americans were the only demographic for whom poverty rates increased in a statistically significant way between 2015 and 2016, according to Census Bureau data. While poverty fell among people 18 and under and people 18 to 64 between 2015 and 2016, it rose to 14.5 percent for people over 65, according to the Census Bureau’s Supplemental Poverty Measure, which is considered a more accurate measure of poverty because it takes into account health-care costs and other big expenses. “In the early decades of our work, we were serving communities that had been poor when they were younger,” Prindiville told me. “Increasingly, we’re seeing folks who are becoming poor for the first time in old age.”

This presents a worrying preview of what could befall millions of workers who will retire in the coming decades. If today’s seniors are struggling with retirement savings, what will become of the people of working age today, many of whom hold unsteady jobs and have patchwork incomes that leave little room for retirement savings? The current wave of senior poverty could just be the beginning. Two-thirds of Americans don’t contribute any money to a 401(k) or other retirement account, according to Census Bureau researchers. And this could have larger implications for the economy. If today’s middle-class households curtail their spending when they retire, the whole economy could suffer.

The retirement-savings system in the United States has three pillars: Social Security, employer-sponsored pensions or retirement-savings plans, and individual savings. But with the rise of less stable jobs and the decline of pensions, a larger share of older Americans are relying only on Social Security, without either of the two other pillars to contribute to their finances. This by definition means they have less money than they did when they were working: Social Security replaces only about 40 percent of an average wage earner’s income when they retire, while financial advisors say that retirees need at least 70 percent of their pre-retirement earnings to live comfortably.

Today’s seniors are so reliant on Social Security in part because companies that once provided pensions began, in the 1970s, to turn the responsibility of retirement saving over to individuals. Rather than “defined benefit” plans, in which people are guaranteed a certain amount of money every year in retirement, they receive “defined contribution” plans, which means the employer sets aside a certain amount of money per year. This switch saved companies money because it asked employees, not employers, to take on the risks associated with long-term investing. This means that the amount people receive is more affected by the ups and downs of the stock market, their individual wages, and interest rates. In 1979, 28 percent of private-sector workers had participated in defined-benefit retirement plans—by 2014, just 2 percent did, according to the Employee Benefit Research Institute, a nonprofit. By contrast, 7 percent of private-sector workers participated in defined-contribution plans in 1979—by 2014, 34 percent did.  

The recession and economic trends in the years since have also worsened the finances of millions of seniors. Some bought homes during the housing boom and then found they owed more on their homes than they were worth, and had to walk away. Others invested in the stock market and saw their investments shrink dramatically. Jackie Matthews, now 76, lost her investments during the recession, and then had to sell her Arizona home in a short sale, netting only $3,000. She now lives near her family in Southern California, renting a room in a friend’s apartment, and budgets her finances carefully, skimping on meat and never buying anything new.

But even people who emerged from the recession relatively unscathed may have a hard time saving, according to a 2017 report from Government Accountability Office. Average wages, when adjusted for inflation, have remained near where they were in the 1970s, which makes it hard for workers to increase their savings. This has had a significant impact on the bottom 80 percent of workers, for whom average wages have remained relatively constant, even as income increased for the top 20 percent of households in the past three decades.

Deborah Belleau, age 67, at the mobile-home park where she works in Palm Springs. Photo by Alana Semuels / The Atlantic.

For many seniors, the answer to this lack of savings has meant working longer and longer, as Roberta Gordon is doing. In 2018, about 12.4 percent of the population aged 65 or older is still in the workforce, up from 3 percent in 2000, according to Oakley. I met a woman named Deborah Belleau who is 67 and works as a manager at a mobile-home park in Palm Springs, California. She worked as a waitress for 30 years, and often relied on government assistance as she raised her two children as a single mother. “You just don’t think about tomorrow” when you’re more worried about getting food on the table, she said. That means that today, though she receives money through Social Security, she can’t afford a cellphone or a TV. Her rent is $600 a month. She works full-time at the mobile-home park, despite aches and pains in her back and feet. Sometimes, when she wakes up, she can’t walk. But, she says, “I can’t quit. There’s no way I can live on $778 a month,” the amount she receives from Social Security.

These troubles can be particularly hard on women. That’s in part because they typically receive lower benefits than men do. In 2014, older women received on average $4,500 less annually in Social Security benefits than men did. They received lower wages when they worked, which leads to smaller monthly checks from Social Security. They also are more likely to take time off from work to care for children or aging parents, which translates to less time contributing to Social Security and thus lower monthly benefit amounts.

At least Belleau and others are physically able to work. Some seniors without retirement savings or a safety net have become homeless in recent years as housing costs have risen and they find themselves without the ability to generate income. “I see more homeless seniors than I’ve ever seen before” Rose Mayes, the executive director of the nonprofit Fair Housing Council of Riverside County, just east of Los Angeles, told me. In America in 2016, nearly half of all single homeless adults were aged 50 and older, compared to 11 percent in 1990.

What can be done to help today’s seniors and generations to come? There are two approaches, Prindiville says: help people save for old age and make retirement more affordable. As for the first approach, some states have been trying to establish programs that help people save for retirement through payroll deductions even if their employers don’t offer any retirement-savings accounts, for example. But the Trump administration in May 2017 repealed an Obama-era rule from the Department of Labor that would have made it easier for states to help people to set up these plans. And the federal government is winding down a program, called myRA, that tried to encourage middle- and low-income Americans to save for retirement. “There are no new initiatives or strategies coming out of the federal government at a time when the need is growing,” Prindiville said.

The second approach might mean expanding affordable housing options, creating programs to help seniors cover medical costs, and reforming the Supplemental Security Income program so that poor seniors can receive more benefits.But there does not seem to be much of an appetite for such ideas in Washington right now. In fact, the Trump administration has proposed cutting money from SSI as well as the Social Security Disability Income program.

These initiatives can make the difference between having a home—and some semblance of stability—and not. Roberta Gordon, in Corona, was barely scraping by when I talked to her. A few months later, she was much more stable. Why? She’d gotten off a wait list and been accepted into the housing-voucher program known as Section 8, which reduces the amount of income she has to put towards housing. She’s still working at 76, but she feels a little more secure now that she has more help. She knows, at least, that she’s one of the lucky ones—able, in her older years, to keep food on the table and a roof over her head.

Alana Semuels is a staff writer at The Atlantic.

Off the Top of My Head

The New Retirement Calculations

by John Lawrence, January 30, 2019

Retirement has become a fuzzy concept. It used to be that there was a standard retirement age - 65 - that applied to everybody after which you drew a pension and with that, social security and your savings, you lived happily ever after. That scenario doesn't apply any more for most people. First of all pensions are a thing of the past. Most people have their retirement aspirations embodied in 401(k)s which means the stock market. If the stock market wins, you win; if the stock market loses, you lose.

The only significant calculation is the amount of money you need to last you the rest of your life. The longer you live, the more money you'll need. If you run out of money before you run out of life, it'll be out on the street for you with all the rest of the homeless. It's a shame to see 80 and 90 year olds forced to live on the street where their demise will probably come rather quickly.

The Washington Post reported:

[There is] a growing crisis in American cities, which have seen a recent surge in deaths of homeless people due to soaring housing costs, extreme weather, the opioid epidemic, violent attacks and deadly viruses.

Across the country, in cities big and small, the hundreds of thousands of people who lack permanent shelter are facing elevated health risks as communities unsuccessfully search for solutions.

In metropolitan Denver, advocates and social workers documented the deaths of 231 homeless people last year, an increase of 35 percent over 2016, according to John ­Parvensky, president of the Colorado Coalition for the Homeless. New Orleans officials reported a record 60 homeless deaths last year, a 25 percent increase in two years. In Seattle, 169 homeless people died last year, double the number of homeless deaths recorded in King County, Wash., five years ago, according to the medical examiner.

So let's say the age you retire has nothing to do with your actual age. You could retire at 35 if you're rich enough by then. You could still be working at 80 if you still needed the money you get from working - earned income - in addition to whatever money you had from unearned or passive income. Passive income could be from savings, social security, rental income etc. However, there will come an age at which you have to retire - not because the government or some corporation said so - but because you're physically and/or mentally incapable of doing any more work. At this point you would have to have enough in savings which, when added to your passive income, would last you the rest of your life.

Now for some sample calculations. Let's say that when you reach the 'must retire' age, you figure that you might live another 20 years. So if you must retire at age 80 due to health reasons, you figure the longest you will live would be until age 100. Then you figure how much you need to draw down your savings on an annual basis to supplement your passive income. Let's say that's $5000. Then you would need to have $100,000. in savings by age 80. Of course, if you die sooner than age 100, the rest of the money in savings would go to the next generation which, if you care at all about your children, is the right thing to have happen. The more the better. Intergenerational transfer of wealth is what is greatly responsible for prospering families. The lack thereof is responsible for intergenerational poverty.

My off the cuff calculation roughly accords with the "4% rule" that a financial planner came up with. It works like this:

"the "4% drawdown rule," as it is known, says you should take out 4% — later revised to 4.5% — of your savings the year after you stop working. You then withdraw the same amount, adjusted for inflation, each year after that."

The accumulation of wealth was discouraged by Jesus. In the Bible Matthew says:

“Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also."

Furthermore, Jesus said, "If you want to be perfect, go, sell your possessions and give to the poor, and you will have treasure in heaven. Then come, follow me."

This is not very good advice for people who don't want to become homeless themselves. Did the homeless take Jesus too seriously?

Off the Top of My Head

Elderly Workers Paying into Social Security But Getting Less in Their Monthly Social Security Check

by John Lawrence, November 17, 2018

At the ripe old age of 77, I'm still working. Fortunately, I have good health and am still able to do so. I actually get pleasure at being a functioning, productive member of society. However, my monthly social security check, which I started receiving at the age of 62, gets less with each passing year despite the fact that I still pay into social security due to a self-employment tax of 15.3%. Because I am self-employed as an Uber and Lyft driver, I pay the employer's and the employee's share of social security tax. The social security tax is 12.4% and I also pay 2.9% Medicare tax despite the fact that I pay a Medicare premium each month for health insurance. So old people working get screwed six ways to Sunday.

In 2016 I received a monthly social security benefit of $735.90. My Medicare monthly premium was $104.90. So the amount that the Social Security Administration deposited in my checking account each month was $631. Now despite the fact that I'm still working and paid $430. self employment tax in 2017, which should have given me an increase in my monthly social security check because the amount you get depends on the total amount paid in and I'm still paying in, the amount deposited in my account each month has gone down to $618. How could this be possible, you might ask? The answer is simple. I was given a paltry $1 a month increase in social security based on the fact that I paid $430 into it so the government made $418 off me in self employment tax for 2017. However, my monthly Medicare premium went up to $134. So my Medicare premiums are going up much more than the paltry amounts the government thinks I should get because I'm still working and paying in to social security. In short I'm getting ripped off as an elderly person who still works.

You know the government likes to screw the old and the poor. It announced in my annual letter the following: "Your Social Security benefits will increase by 2.0% in 2018 because of a rise in the cost of living." So despite the fact that I'm still paying into social security and despite the fact that I got an increase in my benefits due to a "rise in the cost of living" my monthly social security check which is deposited directly into my checking account went down by $13! How's that for a screw job?

Meanwhile, the rich got a huge tax break due to Trump's giveaway to the rich. Inequality grew even greater. The gap between the rich and the poor widened. The ranks of the homeless increased. You can't even rent a room for $618. much less buy food or medicine. The government will give much more in a monthly social security check to millionaires who don't even need it than it will to poor people that have paid into it for 60 years or more.

I am fortunate. I have other sources of income than my monthly social security check, and I'm still in good health so I can still work. I only work part time so I still get to take a 4 hour break in my work as an Uber and Lyft driver each day during which I swim, have lunch and take a nap. So I'm still able to do everything I want to do in retirement. But, if this government gave a hoot about old people, they wouldn't require them to keep paying into social social security after retirement age despite the fact they might be still working. That would have saved me $430. last year.

Off the Top of My Head

Uber and Lyft Work For Me

by John Lawrence, June 25, 2018

As a recent retiree, I found that I wasn't quite meeting monthly expenses without taking money out of my reserves. This was not a good situation as eventually my reserves would be totally depleted. So the wolf was getting closer and closer to the door. When the reserves get down to zero, the wolf is at the door, and, finally, he gets inside, and the next thing you know, you're on the street. Not a good situation.

Luckily, I got the idea of replenishing my reserves by driving for Lyft and Uber. I'm glad I checked them out. Before long I was significantly adding to my reserves on a weekly basis, and the work was fitting completely into my lifestyle as a retiree. I still got my swim and my nap in. Anything else that came up that I wanted to do, I did that too. As someone said once, "You're never late for work." That's because you have complete and total control over your time. You do it when you want to do it, and, when you don't, you don't. There are not too many jobs that require essentially no training (I got 15 minutes with Lyft), no credentialing, no course taking, nothing but a good driving record and a decent car. It sort of puts the kibosh on 5 years of college and a ton of student loan debt.

I've heard a lot of blather about how Uber and Lyft drivers get no "employee benefits" because they are self-employed. It's BS. I was self-employed for 40 years of my life as a window cleaner. Not only do you get no employee benefits as a self-employed person, but you have the privilege of paying both the employer's and the employee's social security contribution which amounts to approximately 15% of your income. Still it's worth it to be your own boss in my opinion, and have the freedom to decide when and where you want to work.

Employee benefits don't amount to too much in my opinion. They used to have "defined benefit" pensions. That meant that you paid a little money to your employer out of your paycheck, and your employer invested that money so that, when you retired, you got a monthly check. However, all that money you paid in belonged to your employer, not you, so that when you died, your employer kept the rest of the money. It did not go to your heirs. Sweet for your employer, a screw job for you and your family.

Now they have the "defined contribution" retirement plan or 401(k). You can contribute part of your paycheck to the stock market. There is no guarantee that you'll ever realize enough from it to pay your monthly expenses when you retire. If the stock market crashes, you may lose all your money. It's basically a plan that enriches Wall Street. You still do not have control over your investments so, for instance, you can't invest in real estate.

As a self-employed person, you have to think about investing on your own terms so that the wealth you create can be passed down to your heirs and not go to enrich some corporation or Wall Street. For me, that meant real estate. So the idea is that you have to be in the business of creating wealth not just living on a monthly stipend as wages when you're working and a pension when you retire. Creating wealth means that you will be able to cash that in when you can no longer work. Hopefully, you will have enough at some point so that you don't have to work. You will have a nestegg or reserves.

That's where Uber and Lyft came in. I found that my nestegg wasn't big enough to sustain me even when my rental and social security income was taken into account. My social security income was about equivalent to what I can make in one week with Lyft and Uber, and that's even after the privilege of paying both the employee's and employer's share into it. I pity the other seniors who have to live off of that. Fortunately, I did invest in California real estate early on so I have some rental income. It's just not quite enough, that's all. I should have take this wealth creation bit more seriously, but that's not how I (or most people my age) were raised. I was raised to be an employee and have my employer take care of me. (Actually they were mostly taking care of themselves.)

So driving for Lyft and Uber, getting my swim and my nap in each day, and getting the wolf farther and farther from my door is a happy situation for me. I have a 5 year plan. When my new Toyota Camry Hybrid is 5 years old, it will probably be shot with the miles I'm putting on, and I will probably be shot too. At that time, I will probably be able to live off my reserves as a supplement to my other monthly income, and I will have the knowledge that I can pass it all on to my heir when the time comes for me to depart the planet.

Off the Top of My Head

Part Time Retired, Part Time Worker

by John Lawrence, April 19, 2018

I thought that with lowered expenses, two rental incomes, social security and a nestegg in savings, I could be fully retired and meet my monthly expenses. Gee, was I wrong. It seems like whatever budget you figure out, your expenses are always double that amount. My nestegg was diminishing rapidly. Emergency type expenditures were always coming up.

So I started as a ride sharing driver. I started with Lyft working out of my house. The rides were intermittent but at least I got my feet wet. Then I stepped it up a bit by doing both Lyft and Uber. I started making some real money, at least enough to supplement my other income. I could even look forward to paying my property taxes without taking money out of savings. The thing I liked about it the most is that I could set my own hours, work when I wanted and not work when I didn't want. It fit in perfectly with my lifestyle. It was a lifestyle that I had become accustomed to since I was self-employed for 40 years.

I would get up in the morning, have my coffee, write for the California Free Press, do stuff around the house and then turn on Uber and/or Lyft around 8:30 AM. I'd do that for 3 hours or so and then head for the YMCA where I would swim or work out. Then I would go home, have lunch and take a nap. I would go back online around 4 PM and work till 7 PM, go home, watch the news, have something to eat, listen to music and read. Sometimes I would hang out with my girlfriend. In fact she called me spur of the moment one Sunday and asked if I wanted to meet her for lunch. When she got close I turned off the app, had lunch with her after which I continued Ubering and Lyfting. We had a nice lunch and I still made $150 that day.

I must say I've met a lot of nice and interesting people driving them around. I only had one serious incident in two years with a woman who refused to get out of the car. Other than that I've got to see a lot of beautiful sunsets, spend time driving around a beautiful city and give tourists advice on what to see and do. The income supplements my "retirement" income and puts me in a position to add to my nestegg. It works for me and fits in with my lifestyle. I was self-employed for 40 years, and I'm still self-employed. That's the beauty of it.

401ks Invested in the Stock Market Equal Mucho Angst for Retirees

Just a short time ago pensions were of the defined benefit variety whereby the employee was guaranteed a certain monthly amount for life, and the employer took all the risk in the investment of funds to provide that pension. Then thanks to Reaganomics and the "Ownership Society" almost everyone (with their acquiescence) was converted to 401ks for which the individual employee has the great pleasure of assuming all the risk of his or her pension themselves.

Now we all get to succeed or fail with our pensions as the stock market crests or tanks. Individual anxiety has replaced peace of mind. But a secure retirement as a reward for working 30 years is not based on free market principles. Instead of corporations taking the risk for its retirees, it's a far better solution (for the corporations) for individual employees to take all the risks. And we've all fallen for the ploy that the stock market is our friend and will net us a far heftier retirement than we would have had with a stodgy old defined benefit plan. Now we have a defined contribution plan that guarantees us absolutely nothing in retirement if it's invested in the stock market.

If we are all to take responsibility for our own retirements, then we shouldn't be invested in high risk environments. Anyone invested in the stock market these days who is not a "player," should realize that the extreme volatility makes it unlikely that the plodding investor will ever get anything out of it. The player makes money off the volatility. He makes money when the market goes up; he makes money when the market goes down. And if you're a 401k investor, he's playing with your money.

The first thing to realize is that we've been sold a bill of goods by going along with the conversion from defined benefit pension plans to 401ks. (By the way our good Congress persons and most people in the military-industrial complex still have defined benefit plans.) The second thing to realize is that we've been sold a bill of goods that we should invest our retirement savings in the stock market. It has just been a bonanza for financial product purveyors and those with seats on the trading floor because now they have your money to play with.

Instead, put your money in CDs and rent producing real estate. I hear there are some great bargains out there (foreclosures? immediate postive cash flows from Day 1 anyone?). Although real estate can fluctuate up and down, if you have a positive cash flow from rent, fluctuation of the underlying asset doesn't really matter. Rents have remained remarkably stable throughout the latest financial crisis. If anything, they are only going up as more former homeowners become renters. And as a final note renters did just fine during the runup in house prices during the late housing bubble. Rents did not rise commensurately with housing prices. You could rent the same house for far less than the monthly mortgage payment you would have had if you bought it. So why were people willing to pay far more in monthly payments to own rather than to rent? Because the value of the house, the equity, was going up so rapidly. Unfortunately, after the runup came the crash and an actual loss of equity. It is not hard to understand why, then, it made far more sense to become a renter rather than an owner, especially if you put nothing down, and to walk away from your mortgage.