INCLUDE_DATA

Jul

25

Words of Wisdom from Uber-Actuary Andy Lang!

Filed Under Uncategorized 

Lang, who has now started his own blog titled “Saving Social Security, Medicare and Capitalism”, posted again some wise comments about how to save Social Security along with some interesting history of how the insurance industry have subverted the implementation and spread of ideas/practices that would overturn their bread ‘n butter. 

when done right, a very good retirement can be had at very low cost–surprisingly low–when done right.But individuals will never get those returns because they (a) Are lousy investors, especially in stocks; (b) Pay far too much in commissions and fees, and typically enormous amounts in transaction costs (because they buy into the mantra from the retail sector of the financial service industry, that speculation and ‘trading’ is the way to easy riches); and(c) Many lack the disposable income, the time and the necessary knowledge of finance and economics, along with the basic contrarianism (and skepticism of basic human nature) to make intelligent long-term investment decisions. Lastly, the use of individual accounts places everyone at great risk of retiring at the wrong time, and also of having to buy overpriced and unnecessary annuities in order to get a lifetime pension.

The way to do the investment is collective, avoids all of the above and was invented 150 years ago, used for the first time for a pension system in 1923, and then in the early 1950s, began to get rid of the insurance industry as the sole provider of retirement ‘products’ and began to use ‘Fully Trusteed’, self insured defined benefit pension plans, which invested a significant portion in stocks–because the mathematics of good retirement planning both demanded it and it was perfectly safe for the participants, as well as quite safe financially in the long run when done right.

Andy also shares with us th best-kept secret of the insurance industry, that once you get about 1000 folks in a self-insurance plan and can reasonably prevent adverse selection, the plan can perform quite well with less overhead and without costly agents commissions.

Comments

Leave a Reply