Friday, October 16, 2009

201K, 401K, 801K

Moral: Wherein we consider the middle (401K) as it was nicely provided to us by IRS code and has become a cultural icon.


Why didn't the IRS also allow us to put more into IRAs (constrained, of course, but with a higher limit). For those who are too young to remember, in the early days (decades ago, yes, with the 's' but within recent memory of many), the limit was a mere $2,500 per family.

What are the 201K and the 801K? Well, the former is the situation of many who lost with the recent equity drop, or any of those drops within those decades alluded to earlier. That is, those folks who bought the equity hype which is going to be deconstructed here (give me some time to do so).

As an aside, and at the same time, a conservative strategy based upon more a more reason approach has sustained a growth that has been impervious to all the drops, including the latest, except for the fact of being slightly susceptible to the idiocy of one role, namely big guy Ben, and before him, Alan, of course. Their antics are more irritations than of any real substance. Oh wait, Ben's trashing the dollar; we'll all pay for that.

The 201K joke was used recently in a session dealing with a pension problem in a State, for which the 401K was offered as an alternative strategy. Oh, yes, the 401K which is an archetype for alleviating manager and leader of their concerns since they can just throw the problem over to the unsuspecting worker. This has been seen, up close and personal, many times (except for the approach mentioned above as an aside).

There is not much respect, yet, here for those in the financial advisement game, yet some more wise souls of that ilk could very well play a necessary role. And, that whole financial structure ought to be non-profit, in the classic sense.

How do you un-bankrupt a pension system? Plenty are asking. Why is this particular system in trouble? Well, under-funding may be an issue. But, behind that is a buy-in to the usual mania of the market. Oh yes, put in a little, earn a lot. Is not that mantra sickening with its implications of ignorance?

Gosh, these finance guys (and mangers) need to learn something about how attractive is the siren of the perpetual motion machine. Yes, they're all after that old 801K. It does not exist, folks, except for the few.

Granted we do see people earn a lot in the markets; well, with proper accounting we would also see multitudes more losing their shirt. That's called near zero. That old win-win presupposes a whole lot of stuff being pushed under the rug. Well, a State has to deal with that reality. Good ones actually pull this off and deserve kudos (intractable issues, for sure).

The issue is that pension funds, with the backing of the taxpayers and using more conservative rules, would be more able to pay when the time come. Leaving the matter to the worker, in the sense of the 401K, seems to, typically, end in the 201K. That is not necessary and would not be if those in finance thought about fiduciary responsibility.

Their malfeasance needs to be described. It's very much a type of malpractice. With the computer, which is now being exploited for the fat cats, we could very well put into place what is better for the commonweal. Of course, States are supposed to worry about that.

Finance, as currently defined and played as a game, is basically for 801K derivation (ah, many times by derivatives); wait, actually, they want the 25601K. Yes, indeed.


06/05/2012 -- This piece was 1/2 jest and mostly not. Of course, at its time, October of 2009, we hadn't seen how things would unfold. Double-dip, as in W, was still a concern. The 787 had not flown (that was about two months away). We hadn't heard, yet, from the OWS (see 10/18/2011 Remarks, below). But, from this, you can see that 801K and 25601K are of the uppers (less than some small fraction of a percent). Savers didn't know that Ben was going to keep sacking them until 2014 (and probably beyond, thanks guy). Then, we have people arguing for unbridled leveraging.

10/18/2011 -- Hopefully, the OWS will bring this type of thing to public awareness.

11/08/2009 -- The gigantic chimera needs proper attention.

10/21/2009 -- Of course, Congress authorized the plan. IRS is the front man. Retirement USA's suggestions are interesting.

Modified: 06/05/2012

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