No, You Can't Retire

[Chaplin]

https://www.linkedin.com/pulse/you-cant-retire-chris-wiles-cfa

Lots of the usual stuff in here, but some interestingly wrong or irrelevant points too. Also some brutal misuse of averages. As usual, the comments are gold.

[chemistk]

Pure gold! (At least, that's what the author's company is investing more in...)

The worst part about articles like this that profess the gloom and doom of retirement is that the individual is never held accountable for how he/she plans and saves for retirement. The burden seems to fall largely on the government and the companies for whom the future retiree works. The assumption is always that you can keep spending like there's no tomorrow and when you're ready you "get" to retire.

It's almost as if retirement is treated as a fundamental right of every worker - you turn 65, you're done regardless of how ready; not a privilege which you have to earn.

[GrowingTheGreen]

All I heard was "blah blah blah, Americans don't save and it's not our fault. Blah blah blah."

[slugline]

While the "Americans aren't saving" lines are there in the opening paragraphs, if readers actually make it to the main part of the article they would see that this is an attempt at putting the 4% SWR assumption into doubt by claiming that investment returns will basically be zero. I'm not buying that argument either, of course, because I believe the profit motive is too strong in economic behavior, and so there will always be profits (and thus investment returns) to be made somewhere.

[Vanguards and Lentils]

The most popular comment on the article is literally gold - I never heard this historical explanation for the increase in inequality. TL;DR: The tax system of the mid 1900s, including its 80%+ top marginal tax rate, incentivized business owners to care for their employees.

Jerry Reiss
Actuary at EBC
The problem discussed is far more sinister and far less related to the math discussed. Benefits arose in the 40s when wages were frozen. Collective bargaining was at a standstill until they were able to bargain for benefits during this time. 

They didn't give benefits because they knew they didn't have to pay. Quite to the contrary: When benefits were negotiated the tax rate was so high the only conceivable way the rich could grow their wealth was to invest in their company. They couldn't pay themselves the huge bonuses because it all went to taxes. So they invested in their business and when they wanted to liquidate they liquidated at the capital gains rate. This was a long-term investment policy following WWII of the 50s 60s and 70s. When their only alternative was investment long-term in their company, their employees were the most important asset in that company. Recognizing that, employers were very paternalistic then. They want to take care of us giving us the best health insurance and great retirement programs so that we were healthy not worried about our futures. 

That all changed with the tax revolution that began ostensibly with the election of Ronald Reagan. They pitched old theories of the 20s of trickle down economics to convince people that the middle class and poor would be empowered economically if only they could lower the tax rate. After all they argue (as they did in the 20s) a rising tide raises all. Everyone sunk after that in the Great Depression but by the 80s no one was alive to fight that nonsense.  They greatly lowered individual taxes and that is when both dividends and outlandish bonuses went out of control because now they could pay themselves and keep most of that bonus, disproving the trickle down theory. First this competed with employee wages because now the employee was no longer an asset but interfered with short-term profit. That is when the GOP began to discuss all, the merits of lowering the minimum wage. Of course benefits were part of the cost they now no longer wanted to continue. The Greed is good philosophy empowered CEOs to increase their wealth even futher by maximizing profit by acquisition of smaller companies. This would improve profitability by firing staff after the acquisition was complete. And they used employee pension plans to pay for much of the purchase price (because of ERISA's requirement to prefund pensions.) When they could no longer create profits by firing people (after all TRA'86 and its amendments stopped those practices by imposing 50% excise taxes) that is when they looked to continue to increase profits by relocating Overseas where employees worked for a fraction of what Americans expected. 

This is when the separation of wealth began and every president other than the current one supported this trend, including Clinton. It has nothing to do with the math and everything to do with tax policy, exactly opposite to the story Trump tells. That is why Bernie is 100% right, but I support Hillary because Bernie only understands why it happened. He doesn't have a clue on how to deal with the problem that took 35 years to create.

[Cassie]

It also ignores the fact that some people will not be able to work even p.t. due to illness, disability, etc.  If people have not saved much $ and have to live on SS there are plenty of safety nets to make that doable.  Also if some older people do have to work p.t. that is not necessarily bad as it will keep them from being isolated, etc.  I think that those who have lived large and beyond their means will face tough choices once they have to retire. I really don't understand people spending everything they have and constantly upgrading to the newest, etc.  I have known retirees without any kids buying big new homes that they won't be able to keep up with the cleaning, etc as they age. What's the point?

[fattest_foot]

While the "Americans aren't saving" lines are there in the opening paragraphs, if readers actually make it to the main part of the article they would see that this is an attempt at putting the 4% SWR assumption into doubt by claiming that investment returns will basically be zero. I'm not buying that argument either, of course, because I believe the profit motive is too strong in economic behavior, and so there will always be profits (and thus investment returns) to be made somewhere.

The part that bothered me was saying that 6.5% rates of return were unlikely, but 2% was; but didn't address that the 3.5% inflation rate that he brought up originally wouldn't be static. In fact, if the actual rate of return was 2%, we'd likely be in a deflationary period.

[Curbside Prophet]

The onus is on the individual but the government is also at fault.  There is simply no denying that an extended zero interest rate policy (as we have now) punishes savers and rewards spenders.  If the government cannot manage it's own finances properly, one should not be surprised that it's individuals cannot either.

Again, I'm not absolving individual responsibility but at the same time the gov't isn't doing anyone any favors.

[ncornilsen]

The most popular comment on the article is literally gold - I never heard this historical explanation for the increase in inequality. TL;DR: The tax system of the mid 1900s, including its 80%+ top marginal tax rate, incentivized business owners to care for their employees.

Jerry Reiss
Actuary at EBC
The problem discussed is far more sinister and far less related to the math discussed. Benefits arose in the 40s when wages were frozen. Collective bargaining was at a standstill until they were able to bargain for benefits during this time. 

They didn't give benefits because they knew they didn't have to pay. Quite to the contrary: When benefits were negotiated the tax rate was so high the only conceivable way the rich could grow their wealth was to invest in their company. They couldn't pay themselves the huge bonuses because it all went to taxes. So they invested in their business and when they wanted to liquidate they liquidated at the capital gains rate. This was a long-term investment policy following WWII of the 50s 60s and 70s. When their only alternative was investment long-term in their company, their employees were the most important asset in that company. Recognizing that, employers were very paternalistic then. They want to take care of us giving us the best health insurance and great retirement programs so that we were healthy not worried about our futures. 

That all changed with the tax revolution that began ostensibly with the election of Ronald Reagan. They pitched old theories of the 20s of trickle down economics to convince people that the middle class and poor would be empowered economically if only they could lower the tax rate. After all they argue (as they did in the 20s) a rising tide raises all. Everyone sunk after that in the Great Depression but by the 80s no one was alive to fight that nonsense.  They greatly lowered individual taxes and that is when both dividends and outlandish bonuses went out of control because now they could pay themselves and keep most of that bonus, disproving the trickle down theory. First this competed with employee wages because now the employee was no longer an asset but interfered with short-term profit. That is when the GOP began to discuss all, the merits of lowering the minimum wage. Of course benefits were part of the cost they now no longer wanted to continue. The Greed is good philosophy empowered CEOs to increase their wealth even futher by maximizing profit by acquisition of smaller companies. This would improve profitability by firing staff after the acquisition was complete. And they used employee pension plans to pay for much of the purchase price (because of ERISA's requirement to prefund pensions.) When they could no longer create profits by firing people (after all TRA'86 and its amendments stopped those practices by imposing 50% excise taxes) that is when they looked to continue to increase profits by relocating Overseas where employees worked for a fraction of what Americans expected. 

This is when the separation of wealth began and every president other than the current one supported this trend, including Clinton. It has nothing to do with the math and everything to do with tax policy, exactly opposite to the story Trump tells. That is why Bernie is 100% right, but I support Hillary because Bernie only understands why it happened. He doesn't have a clue on how to deal with the problem that took 35 years to create.

Lol, that's a good one. Makes a lot of sense until you apply reality to it.