How to fix the economy

Snopes had a recent expose of this hair brained idea:

For a total cost of 40 Billion you could solve our financial problems. There's about 40 million people over 50 in the work force. Pay them $1 million apiece severance with the following stipulations.

1) They leave their jobs. Forty million job openings
- Unemployment fixed.

2) They buy NEW American cars. Forty million cars ordered
- Auto Industry fixed.

3) They either buy a house or pay off their mortgage
- Housing Crisis fixed.

What is 'Financial Planning'?

One of our original goals for The Long Run Blog was to explain or examine general misconceptions about money. In my introductory post, I wrote

"financial decisions are becoming more complicated and more important to one's well-being at the same time. Traditional pensions are disappearing while self-directed 401Ks are on the rise. Businesses, salespeople and politicians twist, bend and contort economic statistics to sell you products or ideas. How can we tell fact from fiction?"

A bit about IRA's

We left off discussing pensions with the concept of using IRA's to save on your own instead of in a 401K. Let me start by reemphasizing the benefits of a 401K over an IRA. Four important things come to mind although there are more.

What Disappearing Pensions Mean To You

I remember as a kid hearing older relatives talk about getting their pension as in "Uncle Bob worked for them 35 years and now gets half his salary for the rest of his life". For better or worse, those traditional "pensions" are slowly fading into history. These "pensions" are plans where your benefit is determined by a formula and guaranteed for life. As people live longer, these plans are becoming more expensive for companies to provide. They also have downsides such as the requirement you must work for the same company for 35 years. It is just not terribly common to be a "company man" anymore. In addition, what are the odds that the company you start out in is going to survive and prosper in what becomes a mature industry 35 years later?