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Mandatory pension funds: What are your thoughts?

Started by Laura Reed27 · · 👁 14 views · 349 replies

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Participants Laura Reed27frozenwalker4dustyjackal9Gerald Thomas11Kenneth Myers10vivideagle91Timothy Castillo6Mark Sullivan62analogtinker75Terry Torres6crimsonotter32Terry Cook3silentharbor60wiredviper76rowdyravenDavid Roberts8George Miller22ironsurfer10brightrider8Kimberly Nguyenelectricsailor13Steven ReedPaul Wood69Ronald Allen …
Ronald Allen Ronald Allen Active Member
160 messages
joined Oct 2010
#181 ·
ironsurfer10 said:Well, yeah, I know why... it's pretty obvious! The advisors over at Erste are just incredibly pushy and relentless. I've never had an advisor from AZ, PBZ, or Romfo stop me in the street, but those Erste guys practically grab you by the sleeve on every single corner!😲

🤣🤣🤣🤣🤣

Look, I wasn't even asking that for some deep reason, I just wanted to wrap my head around it myself. Can anyone actually explain how this all started? Like, from the moment the fund was first set up—what were the share prices like back then and how did everything move? Just trying to get a handle on things. 🙂 Can we keep the conversation like this from now on, maybe? 😉
Dennis Ruiz5 Dennis Ruiz5 Newcomer
2 messages
joined Mar 2008
#182 ·
Both of these funds have charts showing their unit value trends.
I'm assuming this data is reliable enough to trust?

Looking at them—those graphs are almost identical over certain periods!😲
It really makes me wonder if switching funds—like I mentioned in my previous post—actually offers any real benefit.

What's your take on this, ironsurfer10?🙂
ironsurfer10 ironsurfer10 Active Member
104 messages
joined Dec 2007
#183 ·
Dennis Ruiz5 said:Both of these funds have charts showing their unit value trends.
I'm assuming this data is reliable enough to trust?

Looking at them—those graphs are almost identical over certain periods!😲
It really makes me wonder if switching funds—like I mentioned in my previous post—actually offers any real benefit.

What's your take on this, ironsurfer10?🙂

those graphs follow the same direction, but the actual values aren't the same.
I haven't had a chance to sit down and look at them closely enough to give a more detailed explanation—I've been a little 😉
rushed.
Peter Cooper5 Peter Cooper5 Active Member
55 messages
joined May 2007
#184 ·
Digging this thread up from the grave... so, I showed up for work yesterday like a total sucker, only to find out I actually have to pick people to put money into my AZ mandatory pension fund. But honestly, looking at everything you guys have been saying here, it doesn't seem like much of a winning move, especially since you can just opt for something better like JPMorgan Chase or Wells Fargo instead... I guess the real question is, is it smarter to just grab a Vanguard fund now and see where things land in three years—even though I'm currently unemployed—or should I just wait until I actually land a real job and then figure out which Vanguard fund is leading the pack?
ironsurfer10 ironsurfer10 Active Member
104 messages
joined Dec 2007
#185 ·
I’m a little confused—are you saying you actually need to find people to join an AZ just to land a job?
😕😕😕

As for your situation, you have total control over which fund you pick. You can stay in one as long as you like, or switch things up whenever you feel the need. I believe the current rule is that you have to stick with a specific fund for at least a week before you can swap it out, but honestly, jumping around too often isn't worth the hassle since you'll get hit with exit fees.

Also, whether you have a steady job or not doesn't change the mechanics of it. The contributions hit your account when you're working, and they obviously don't show up when you aren't.
Peter Cooper5 Peter Cooper5 Active Member
55 messages
joined May 2007
#186 ·
It’s not even about landing a job, really. It’s more like I’m working for someone else to scout people for the AZ fund. You know how it goes—it's like a pyramid scheme; he gets a cut when he brings someone in, I get a cut, then there's some other guy under me getting a slice... you get the picture? But now, different firms like Vanguard are looking for their own "agents" to bring in clients... so honestly, I have no clue if being in an AZ fund is even worth the headache.

Anyway, I had a question about exit fees. Let's say I have $0.00 sitting in my account, I switch funds, and then I get my first paycheck of $667 (hypothetically, obviously)... will they just snatch the fee right out of that, or how does that work?
ironsurfer10 ironsurfer10 Active Member
104 messages
joined Dec 2007
#187 ·
Peter Cooper5 said:It’s not even about landing a job, really. It’s more like I’m working for someone else to scout people for the AZ fund. You know how it goes—it's like a pyramid scheme; he gets a cut when he brings someone in, I get a cut, then there's some other guy under me getting a slice... you get the picture? But now, different firms like Vanguard are looking for their own "agents" to bring in clients... so honestly, I have no clue if being in an AZ fund is even worth the headache.

Anyway, I had a question about exit fees. Let's say I have $0.00 sitting in my account, I switch funds, and then I get my first paycheck of $667 (hypothetically, obviously)... will they just snatch the fee right out of that, or how does that work?

I wouldn't recommend taking that job unless you are absolutely desperate for the cash. In my opinion, it’s just a thankless grind.

Peter Cooper5 said:It’s not even about landing a job, really. It’s more like I’m working for someone else to scout people for the AZ fund. You know how it goes—it's like a pyramid scheme; he gets a cut when he brings someone in, I get a cut, then there's some other guy under me getting a slice... you get the picture? But now, different firms like Vanguard are looking for their own "agents" to bring in clients... so honestly, I have no clue if being in an AZ fund is even worth the headache.

Anyway, I had a question about exit fees. Let's say I have $0.00 sitting in my account, I switch funds, and then I get my first paycheck of $667 (hypothetically, obviously)... will they just snatch the fee right out of that, or how does that work?

If you've selected a fund but there’s nothing left in the account (because your employer isn't making contributions), you won't be charged an exit fee because there's simply nothing to deduct from. Since there's no money in the account, the fund doesn't benefit from you, so there's no base to charge a fee against.
When you transfer to a different fund (today) and get paid (tomorrow), $33 of that $2,000 gross will be deposited into the new fund, and you'll have no further connection to the old one.
Ronald Allen Ronald Allen Active Member
160 messages
joined Oct 2010
#188 ·
ironsurfer10 said:I wouldn't recommend taking that job unless you are absolutely desperate for the cash. In my opinion, it’s just a thankless grind.

If you've selected a fund but there’s nothing left in the account (because your employer isn't making contributions), you won't be charged an exit fee because there's simply nothing to deduct from. Since there's no money in the account, the fund doesn't benefit from you, so there's no base to charge a fee against.
When you transfer to a different fund (today) and get paid (tomorrow), $33 of that $2,000 gross will be deposited into the new fund, and you'll have no further connection to the old one.

Spot on! Those "pyramid scheme" style gigs are always a total mess. I worked two of them back in the day, and trust me, it's such a massive load of crap. Once you realize how much grinding you have to do just to scrape together some pathetic commission—while everyone above you gets a cut of your hard work just because they signed you up—you'll want to tell them all to get lost pretty fast.
Peter Cooper5 Peter Cooper5 Active Member
55 messages
joined May 2007
#189 ·
I mean, I guess I believed it... I was thinking maybe just the two or three of us could jump in for some quick cash... but honestly, looking at the big picture now, I’d much rather just stick with Vanguard when the time eventually comes and I have to make those career moves.
Raymond Morales8 Raymond Morales8 Newcomer
3 messages
joined Jul 2008
#190 ·
Hey,
So, it’s been about four months since I started my job, and I haven't picked a mandatory pension fund yet. Then, like two weeks ago, some guy calls my cell claiming he's from the IRS (?) telling me that by law I'm required to choose a fund. He goes on for ten minutes straight, and I just sat there like an idiot listening because I figured he was someone important. After his little lecture, he tells me my best bet is Citigroup and that I HAVE to fax over the confirmation from the IRS directly to his personal name and number. What kind of scam is this? Is this guy just hunting for a commission? To top it off, he keeps blowing up my phone with texts saying I have three days left, then two days, and he'll probably hit me up again tomorrow. Also, does anyone here know how Fidelity Investments handles the money if you don't pick anything?
Thanks.
Kimberly Nguyen Kimberly Nguyen Regular
543 messages
joined Jul 2009
#191 ·
He’s actually right—there was a thread opened a while back covering a nearly identical issue, so you should probably go dive into those replies...
To make a long story short => for your own sake, you really ought to pick a Vanguard mandatory pension fund as soon as possible, but definitely NOT by doing it this way... there isn't some strict deadline looming over you... and let's be real, it's obviously just recruitment tactics... so just do your homework on the different funds and make your own call.
crimsonseal13 crimsonseal13 Active Member
61 messages
joined Nov 2009
#192 ·
Raymond Morales8 said:Hey,
So, it’s been about four months since I started my job, and I haven't picked a mandatory pension fund yet. Then, like two weeks ago, some guy calls my cell claiming he's from the IRS (?) telling me that by law I'm required to choose a fund. He goes on for ten minutes straight, and I just sat there like an idiot listening because I figured he was someone important. After his little lecture, he tells me my best bet is Citigroup and that I HAVE to fax over the confirmation from the IRS directly to his personal name and number. What kind of scam is this? Is this guy just hunting for a commission? To top it off, he keeps blowing up my phone with texts saying I have three days left, then two days, and he'll probably hit me up again tomorrow. Also, does anyone here know how Fidelity Investments handles the money if you don't pick anything?
Thanks.

Within three months of becoming eligible, employees need to visit a Fidelity Investments office or any local IRS branch to select their mandatory pension fund. If they don't choose one within that window, Fidelity Investments will automatically assign them to one of the existing funds per regulation. Once they send out the notice regarding the automatic assignment, they are simply informing you of your membership; it doesn't change your obligation to pay the required contributions. Once the enrollment is finalized—whether through personal choice or automatic assignment—your individual account is officially opened.
ironpilot38 ironpilot38 Member
10 messages
joined Aug 2008
#193 ·
I really need some help here, please. 😁

So, my thesis topic is basically the Importance of Mandatory Pension Funds in the USA. Right now, everything looks fine on paper—I’ve written out all the descriptions and copied over the details regarding the different types, names, pros, and cons of these mandatory funds. Specifically, I'm looking at the four main players: AZ, Citigroup, JPMorgan Chase, and Wells Fargo. But since the actual core of my thesis is the *importance* of these funds, I’m kind of stuck on what specifically to write about that. I guess you could argue their importance lies in how they kickstarted the capital markets, but honestly, that feels more relevant to voluntary funds or maybe even the second pillar. What about the actual significance of the MANDATORY funds themselves—you know, those first two pillars? 🤷

Anything 👍
Larry Williams5 Larry Williams5 Member
19 messages
joined Jul 2009
#194 ·
One of the primary characteristics of Vanguard's strategy is that they have allocated a massive portion of their assets into US Treasury bonds yielding somewhere between 4.2% and 4.7%.
Given that inflation is currently outpacing those returns—and since the drive toward higher wages and rising costs will keep inflation elevated—the government will end up spending less on interest than it does on adjusting first-tier social security benefits (based on the average wage growth and inflation). Consequently, the payouts from Vanguard's funds will continue to lag behind the basic social security adjustments.

Furthermore, the true objective behind both the first and second tiers, and indeed this entire pension overhaul, is to minimize total pension liabilities. With the retiree population exploding, they want to frame the whole thing as "personal responsibility" through "fund selection." It’s a clever way to obfuscate the fact that some people will see their pensions plummet while others see only a minor dip.
Take, for instance, people who choose to invest in their children's future instead of handing that money over to bankers; their retirement funds will be significantly smaller.

To wrap this up: the ultimate goal of this system is to line the pockets of bankers and fund managers. They designed the architecture, they collect a management fee every single year, and they leave all the underlying risk to the individual citizens.

Oh, and don't forget about those Treasury bonds—especially the long-term ones. When they mature, the government will have to buy them back. But since demographics are shifting toward fewer workers and more retirees, how do you think they'll fund that? By taxing pensions. Essentially, they'll use a tax on retirement income to redeem the bonds held by these pension funds, and then use that same money to pay out the pensions. Brilliant, isn't it?
Noah Rivera5 Noah Rivera5 Newcomer
2 messages
joined Sep 2008
#195 ·
A friend of mine offered me a decent commission if I convince people to switch their accounts over to JPMorgan Chase. Don't get me wrong, I’m not about to go out and harass strangers on the street or anything; I was just thinking about checking in with my parents, relatives, or close friends to see if anyone might be interested and how much I could realistically pocket. Most of them have had their money in the same fund for over three years now, so they wouldn't hit any exit fees. But what about the entry fees? Does that 0.8% charge apply to their total returns? For example, if someone allocates 15% of their income plus an extra 5% from their salary, say $300 monthly, after five years that totals 54 $0.00, making the 0.8% fee roughly $144. Is my math right here, and would I be screwing anyone over if I suggested they move their funds to JPMorgan Chase right now?

Or is the entry fee only calculated based on that extra 5% portion of the salary... honestly, this is giving me a headache.
wearysurfer78 wearysurfer78 Member
20 messages
joined Dec 2008
#196 ·
If I decide to switch my mandatory pension fund, am I going to be hit with another entry fee from the new provider?

I've been sitting in this same fund for over three years now, so I'm definitely past the point of having to pay an exit fee...

I'm weighing the option of moving my assets from Citigroup over to AZ. 😁
dustymarlin10 dustymarlin10 Active Member
238 messages
joined Nov 2015
#197 ·
I purposely posted this on the general politics board, even though in a functional country, this would belong in Forbes. But hey, we aren't exactly running a functional country here, are we?

So, what's the deal?

I’m a "proud" member of a mandatory pension fund managed by the Federal Reserve. I fall into that lucky demographic that nobody bothered to ask if they actually wanted to be part of a pension reform where you're forced to subsidize current retirees, and when it's finally my turn to collect... who knows if anyone will give a damn?

I got my account statement the other day.

Back at the start of 2008, my balance was $10967.
During the year, I contributed about $1500.

By the end of the year, my account value sat at $10733.

Basically, I got robbed of $1733, which is nearly an entire month's salary for me.

Robbed—because there isn't any other way to describe what just happened.

Those brilliant fund managers, through their sheer genius in investing, managed to evaporate my entire year's worth of contributions, and then some.

Just beautiful.

If they had just left the cash sitting in the account, it would actually be worth more.
But then there wouldn't be much point in them existing, would there?
All those massive salaries, bonuses, the prestige...

Of course, they made sure to pay themselves their full salaries and bonuses all year long. Every single month. As if they were actually doing a good job.
What a bunch of top-tier economists. People who probably couldn't find Times Square if their lives depended on it.

They estimate that this kind of heist within Vanguard amounted to 3 billion dollars last year. And that's just here in the US.
Steven King13 Steven King13 Newcomer
7 messages
joined Jan 2009
#198 ·
Based on how the rules look right now, I’ve still got about 30 years before I can even think about retiring—unless they decide to push the retirement age up to like 85 or 90. Honestly, knowing how things go around here, I wouldn't even be surprised if they did.

And let's be real, I'm fully aware that my mandatory pension fund is most likely just gonnago belly up

Anyway, I can't find my latest statement right now to tell you how the other fund is doing.
loneranger88 loneranger88 Newcomer
3 messages
joined Jul 2008
#199 ·
I am curious: will they actually hold that banquet this year where they announce the fund and manager of the year? And more importantly, how exactly do they plan to present them? 🙂
dustymarlin10 dustymarlin10 Active Member
238 messages
joined Nov 2015
#200 ·
Steven King13 said:Based on how the rules look right now, I’ve still got about 30 years before I can even think about retiring—unless they decide to push the retirement age up to like 85 or 90. Honestly, knowing how things go around here, I wouldn't even be surprised if they did.

And let's be real, I'm fully aware that my mandatory pension fund is most likely just gonnago belly up

Anyway, I can't find my latest statement right now to tell you how the other fund is doing.

Word on the street is the others are even worse—for instance, the Fidelity Investments fund basically swallowed this year's entire contribution plus half of last year's.

Well, looking at today's rules, I have 22 years left to go—but let's be real, it won't stop there.
Think about it: when it stops being about how many years you worked and starts being about how many years you have left to live, does it even make sense to work for 44 years—which is what I'll end up doing—or 47 if you start at 18?
Wouldn't it be better to just stay unemployed, have maybe 5 or 6 kids, and let Jacqueline and the rest of the good people foot the bill for their food and schooling?

Man, I'm just totally over it...

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