Author Topic: how to survive the coming retirement crisis  (Read 7410 times)

freya

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how to survive the coming retirement crisis
« on: December 30, 2019, 09:01:12 AM »
Hey I bet you all didn't know they you qualify as "almost no one":

Quote
Here’s the scariest thing: even in the best-designed systems, almost no one today will earn enough money in their lifetime to not work for 20 or 30 years at the end of their life. This is true no matter who pays for retirement—the individual, their employer, or the government.

https://qz.com/1766478/how-to-survive-the-coming-retirement-crisis/

The answer for those not able to read the article due to falling off their chairs laughing, is to not retire.

It is true that relying on individuals to develop their own sources of retirement income voluntarily via the 401K system was pretty much guaranteed to fail, given that most people are incapable of planning far enough into the future to even avoid overspending their next paycheck.  The bloggers and speakers educating the public about the concept of FI, as far as I'm concerned, are performing a critical and much-needed public service.

joleran

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Re: how to survive the coming retirement crisis
« Reply #1 on: December 30, 2019, 09:29:38 AM »
A lot of this is hand wringing that social security doesn't pay for a 2 bedroom apartment in <HCOL> city with fancy meals out every night.  People who think moving to a LCOL area and cooking at home in a perfectly comfortable environment is an unimaginably cruel fate.  Social security exists so you don't end up on the street, and it is doing a fantastic job.

BECABECA

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Re: how to survive the coming retirement crisis
« Reply #2 on: December 30, 2019, 09:46:01 AM »
Haha, I saw that “almost no one” quote this morning and laughed. Glad to see you spotted it and posted it here!

roomtempmayo

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Re: how to survive the coming retirement crisis
« Reply #3 on: December 30, 2019, 10:22:07 AM »
It is true that relying on individuals to develop their own sources of retirement income voluntarily via the 401K system was pretty much guaranteed to fail

One way to look at the shift from mandatory to optional retirement contributions is that given that many people will opt out of contributing when given the choice, offering the choice borrows from the future economy to juice the present economy.  We've been doing it for a few decades now, and the consequences are just starting to set in.

I suspect the pressure to redistribute more from wage earners to retirees is going to be extremely intense over the next two or three decades.  The unfunded expectations are just too great for people to accept the system as it is.

ctuser1

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Re: how to survive the coming retirement crisis
« Reply #4 on: December 30, 2019, 10:35:31 AM »
I think the qz article is barking up the wrong tree.

There is a bigger potential issue/crisis, but the qz article misses it.

There are two types of commodities - Stock and Flow. https://en.wikipedia.org/wiki/Stock_and_flow. In theory, flow commodities can't really be stored for a long time (e.g. electricity), stock commodities can (e.g. Previous Metals, non-perishable food items).

In reality, very few of the really useful stock commodities can be practically stored for decades. Would you like to survive during retirement on food stored today? I doubt it. I doubt if it is even feasible.

The point is, majority of what you consume (irrespective of whether you are retired or working) is what is produced at that time, or very close to that time. All the storage of value business (401k/Gold/stocks/whatever) is simply a social contract of resource allocation that you expect your next generation of working sods will honor in hopes that they will get similarly financed retirement.

So you *do* need workers producing such stuff for (workers + retirees) to be able to consume it.

As there are more workers to retirees - there can come a flipping point where the younger workers start thinking "Hmmmm, those bloody old fogeys are living large on my back". All your savings/401k/gold etc are resource allocation mechanism that only work if the social contract stays intact. If there is enough of an imbalance then we could see social unrest that is bigger than the current wave of nationalism and upheaval in the western countries.

Or maybe automation will solve all such problems of lack of workers (compared to retirees). Who knows?

Kronsey

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Re: how to survive the coming retirement crisis
« Reply #5 on: December 30, 2019, 11:03:40 AM »
I think the qz article is barking up the wrong tree.

There is a bigger potential issue/crisis, but the qz article misses it.

There are two types of commodities - Stock and Flow. https://en.wikipedia.org/wiki/Stock_and_flow. In theory, flow commodities can't really be stored for a long time (e.g. electricity), stock commodities can (e.g. Previous Metals, non-perishable food items).

In reality, very few of the really useful stock commodities can be practically stored for decades. Would you like to survive during retirement on food stored today? I doubt it. I doubt if it is even feasible.

The point is, majority of what you consume (irrespective of whether you are retired or working) is what is produced at that time, or very close to that time. All the storage of value business (401k/Gold/stocks/whatever) is simply a social contract of resource allocation that you expect your next generation of working sods will honor in hopes that they will get similarly financed retirement.

So you *do* need workers producing such stuff for (workers + retirees) to be able to consume it.

As there are more workers to retirees - there can come a flipping point where the younger workers start thinking "Hmmmm, those bloody old fogeys are living large on my back". All your savings/401k/gold etc are resource allocation mechanism that only work if the social contract stays intact. If there is enough of an imbalance then we could see social unrest that is bigger than the current wave of nationalism and upheaval in the western countries.

Or maybe automation will solve all such problems of lack of workers (compared to retirees). Who knows?

In light of the above thoughts, are you changing your own savings and investment strategies or just hoping the social contract stays afloat until long after you are gone?

roomtempmayo

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Re: how to survive the coming retirement crisis
« Reply #6 on: December 30, 2019, 11:22:12 AM »
Well, for those of us with living parents, there's an incentive to see the social contract continue, even if we suspect we might personally and/or generationally get the short end of the stick.

ctuser1

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Re: how to survive the coming retirement crisis
« Reply #7 on: December 30, 2019, 12:12:35 PM »
In light of the above thoughts, are you changing your own savings and investment strategies or just hoping the social contract stays afloat until long after you are gone?

The later.

I have found I am happier the less "stuff" I have cluttering my house. So saving more seems seems to automatically correlate with more happiness for me NOW.

Collapse of the social contract is basically a very low probability and high impact event. We came within an earshot of that in 2008, but it held. I hope it will hold till long after I am gone.

If it does collapse within my lifetime, however, there is nothing much you can do financially to prepare for it.

Kronsey

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Re: how to survive the coming retirement crisis
« Reply #8 on: December 30, 2019, 12:28:08 PM »
In light of the above thoughts, are you changing your own savings and investment strategies or just hoping the social contract stays afloat until long after you are gone?

The later.

I have found I am happier the less "stuff" I have cluttering my house. So saving more seems seems to automatically correlate with more happiness for me NOW.

Collapse of the social contract is basically a very low probability and high impact event. We came within an earshot of that in 2008, but it held. I hope it will hold till long after I am gone.

If it does collapse within my lifetime, however, there is nothing much you can do financially to prepare for it.

I mostly agree with you. Very little if anything could be done in the passive sense that most of us have grown accustomed to.

I think an argument could be made for owning residential rental real estate as being a better hedge against collapse, but that to me is an active trade or business, not clicking a few buttons on the computer to buy VTI in your tax sheltered accounts. I'd have to be 100% convinced to completely change strategies, and I'm not there at the moment.

I believe the social safety net is much thinner than others do and you highlighted a good example with 2008. I'm not sure how it will all play out, but we're all along for the ride whether we like that or not.

ctuser1

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Re: how to survive the coming retirement crisis
« Reply #9 on: December 30, 2019, 01:10:44 PM »
I mostly agree with you. Very little if anything could be done in the passive sense that most of us have grown accustomed to.

I think an argument could be made for owning residential rental real estate as being a better hedge against collapse, but that to me is an active trade or business, not clicking a few buttons on the computer to buy VTI in your tax sheltered accounts. I'd have to be 100% convinced to completely change strategies, and I'm not there at the moment.

I believe the social safety net is much thinner than others do and you highlighted a good example with 2008. I'm not sure how it will all play out, but we're all along for the ride whether we like that or not.

I have somewhat of an expertise mathematically dealing with "low-probability high-impact" outcomes. I have coded VaR models in at least two different contexts.

I mention this because I have to actively think about such events, so I am hoping I don't have the typical biases inherent in a normal human brain un-accustomed to dealing with probability.

I wouldn't describe the social safety net as "thin". The probability of it breaking is miniscule in any given recession. In 2008, Fed came with some guns blazing and prevented a crash in people's trust in the social contract.

Don't forget, they did not quite exhaust  all their firepower. They *could*, in theory, have dealt with an even bigger crisis, or one made bigger by mis-handling, assuming congress/politics did not prevent them from doing so. European Central bank did handle the mis-handled case of Greece and PIIGS, US Fed has more firepower in it's arsenal.

That said, even very low probability events *can* happen. There is always a probability, just not a very large or significant one, or one you can do anything about.

Kronsey

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Re: how to survive the coming retirement crisis
« Reply #10 on: December 31, 2019, 03:59:59 PM »

I have somewhat of an expertise mathematically dealing with "low-probability high-impact" outcomes. I have coded VaR models in at least two different contexts.

I mention this because I have to actively think about such events, so I am hoping I don't have the typical biases inherent in a normal human brain un-accustomed to dealing with probability.

I wouldn't describe the social safety net as "thin". The probability of it breaking is miniscule in any given recession. In 2008, Fed came with some guns blazing and prevented a crash in people's trust in the social contract.

Don't forget, they did not quite exhaust  all their firepower. They *could*, in theory, have dealt with an even bigger crisis, or one made bigger by mis-handling, assuming congress/politics did not prevent them from doing so. European Central bank did handle the mis-handled case of Greece and PIIGS, US Fed has more firepower in it's arsenal.

That said, even very low probability events *can* happen. There is always a probability, just not a very large or significant one, or one you can do anything about.

@ctuser1

I have no doubts about your acumen. I read and enjoy all of your posts about economics. A subject I wish I had more time to study!

I also agree that the fed and gov't in general have/had a lot more ammunition at their disposal to try to keep the basic social fabric of society in place.

I am not as concerned with viewing the problem from the angle of "here's what the gov't could do to help" but more through the lens of what your everyday American is starting to wake up and realize.

Not to derail the thread into a political discussion, but I believe Trump and his advisors expertly crafted his 2016 campaign to take advantage of the growing societal distrust of the current system. I personally think he will easily win in 2020 as well because these same people will fall for the same "Make America Great Again!" slogans that worked four years ago.

I believe the average American is starting to realize that the 20th century version of the American dream is all but dead. A good work ethic is no longer a ticket to the middle class without careful career moves and training along the way.

The student loan crisis is starting to rear it's ugly head and we have a few generations who will be forever indebted because their parents and guidance counselors told them it was always a wise move to go to college.

You have an ever widening gap of the wealthy and everyone else (I'd put most aggressive savers from MMM in the wealthy class). The media continues to highlight what the billionaire class does which does nothing but create class envy.

I'm not sure there are a lot of good answers to addressing these societal problems. IMHO this is the result of globalism/crony capitalism and I see no end in sight without some sort of civil unrest.

Having written all of the above, I fully concede this trend could continue for the next 200 years without societal upheaval. I just believe we are closer to unrest than many of us would like to believe and there would be little the gov't could do to stop it once the ball got rolling.

I do hope I'm wrong, and I concede that I haven't adjusted my life one bit to account for these beliefs 😆.


NaN

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Re: how to survive the coming retirement crisis
« Reply #11 on: January 11, 2020, 07:52:15 AM »
It is true that relying on individuals to develop their own sources of retirement income voluntarily via the 401K system was pretty much guaranteed to fail...

Did you even read the article? The 401k system didn't fail. It has actually increased savings "median retirement savings balance for workers in the US doubled between 1989 and 2016". Why? The article says. Only 38% of people had pension plans, with the rest solely relying on social security. Did you read the part when the quoted Andrew Biggs? Generally, Americans are better off now than they were before. The article explicitly states people have more retirement assets under the 401k like world than they did with the pension plan.

I have no clue where that last sentence came from. Seemed misplaced, and maybe inflammatory just to get people to share it.

SwordGuy

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Re: how to survive the coming retirement crisis
« Reply #12 on: January 11, 2020, 02:24:17 PM »

… but more through the lens of what your everyday American is starting to wake up and realize.

Not to derail the thread into a political discussion, but I believe Trump and his advisors expertly crafted his 2016 campaign to take advantage of the growing societal distrust of the current system. …

I believe the average American is starting to realize that the 20th century version of the American dream is all but dead. A good work ethic is no longer a ticket to the middle class without careful career moves and training along the way. ...

The student loan crisis is starting to rear it's ugly head and we have a few generations who will be forever indebted because their parents and guidance counselors told them it was always a wise move to go to college. ...

You have an ever widening gap of the wealthy and everyone else (I'd put most aggressive savers from MMM in the wealthy class). The media continues to highlight what the billionaire class does which does nothing but create class envy.


I find it ironic that in the same message you simultaneously declare the American Dream is dead AND point out the existence of gobs of MMM followers who follow TRULY SIMPLE processes to build significant wealth.

The existence of so many successful MMM types is not only proof the American Dream is not dead, it's proof that there is even more opportunity out there than before.

The problem for the middle class isn't that they don't have the financial means to build significant wealth (barring catastrophic medical or legal woes), it's that they don't (or won't) do so.

We have a real problem in that we are not forcing corporations to pay decent wages to many of their employees and we're letting employers pass on many things they should pay for onto the taxpaying public.   We have a real problem in that the social safety net for people who are just unlucky is too weak.    We have a real problem in that advanced training is expensive instead of inexpensive.

But we don't have a problem with the death of the American Dream.   It still works.

Cassie

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Re: how to survive the coming retirement crisis
« Reply #13 on: January 11, 2020, 02:42:00 PM »
When these types of articles say work longer they ignore the fact that many people wouldn’t be able to either physically or mentally. People often get laid off in their 50’s.

The_Big_H

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Re: how to survive the coming retirement crisis
« Reply #14 on: January 11, 2020, 08:41:43 PM »
When these types of articles say work longer they ignore the fact that many people wouldn’t be able to either physically or mentally. People often get laid off in their 50’s.

So many retirements are "involuntary". 
Its been my observation a lot of white collar six figure types seem to think they will be "on the money train" forever "I'll just work till I'm 70".  I just want to tell them "look around you, where are all the 60-70 year old engineers (my field), here?  Maybe a few in management... but don't you remember who got laid off last slow down???"

No disrespect intended towards older engineers, I'm sure many are quite capable of doing the job, plus experience and wisdom really do matter for proper engineer work.  Its a damn shame but this is how many companies seem to behave.  They calculate "well I can lay off off this 30+ year guy making $140,000 and replace him with a 5 year making 1/2 - 2/3".  Age discrimination is illegal, but salary discrimination  is very much legal.

Kronsey

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Re: how to survive the coming retirement crisis
« Reply #15 on: January 11, 2020, 09:36:16 PM »

… but more through the lens of what your everyday American is starting to wake up and realize.

Not to derail the thread into a political discussion, but I believe Trump and his advisors expertly crafted his 2016 campaign to take advantage of the growing societal distrust of the current system. …

I believe the average American is starting to realize that the 20th century version of the American dream is all but dead. A good work ethic is no longer a ticket to the middle class without careful career moves and training along the way. ...

The student loan crisis is starting to rear it's ugly head and we have a few generations who will be forever indebted because their parents and guidance counselors told them it was always a wise move to go to college. ...

You have an ever widening gap of the wealthy and everyone else (I'd put most aggressive savers from MMM in the wealthy class). The media continues to highlight what the billionaire class does which does nothing but create class envy.


I find it ironic that in the same message you simultaneously declare the American Dream is dead AND point out the existence of gobs of MMM followers who follow TRULY SIMPLE processes to build significant wealth.

The existence of so many successful MMM types is not only proof the American Dream is not dead, it's proof that there is even more opportunity out there than before.

The problem for the middle class isn't that they don't have the financial means to build significant wealth (barring catastrophic medical or legal woes), it's that they don't (or won't) do so.

We have a real problem in that we are not forcing corporations to pay decent wages to many of their employees and we're letting employers pass on many things they should pay for onto the taxpaying public.   We have a real problem in that the social safety net for people who are just unlucky is too weak.    We have a real problem in that advanced training is expensive instead of inexpensive.

But we don't have a problem with the death of the American Dream.   It still works.

I disagree with all but your 4th paragraph though I think we would agree on more than it seems from our two posts.

I'm not arguing that the American Dream is dead for everyone. I'm arguing that it is dead for MOST. And because it is dead for most, we are systematically losing the middle class which is what made this last 100+ year run so unique.

There are not gobs of MMMers when looking at it from a percentage of the entire population. Those who would qualify as Mustachian (relatively frugal with a healthy savings rate) is so laughably small that we wouldn't show up as a blip on a statistical chart.

And even though all of this seems simple to us (the steps to FI), for your average Joe, it might as well be nuclear physics.

I'm guessing you either have a very high achieving while frugal set of friends/family, or you spend a lot of time on these forums and therefore believe that Mustachianism is the norm (or at least a much larger percentage than what actually exists).

Maybe the best way I could make my point would be with a personal example. My grandfather was born in 1926. After serving in the Navy during WWII, he moved his family (wife and young son) to Kansas City in search of better employment opportunities. He had a high school diploma and very few if any job skills.

Within a few weeks, he was hired as an aircraft engine mechanic apprentice (a union position). He and my grandmother had two more kids. He made enough for my grandma to stay home with the kids, to put his kids thru college, and to buy a new car every 5-6 years. They were somewhat frugal, but were financially illiterate by MMM standards and by no means penny pinchers.

He retired at 58 with a full pension, fully paid healthcare until he and my grandma got to Medicare age, a paid off home, some decent savings, and a decent SS benefit waiting for him.

His example was just normal, par for the course for those who were willing to work coming home from the war. Now compare that outcome to the options a 24 year old in the same position would have today. If you think they are even remotely close, then we will just have to agree to disagree.

SwordGuy

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Re: how to survive the coming retirement crisis
« Reply #16 on: January 11, 2020, 11:16:27 PM »
No, I do NOT believe that most Americans are MMM types.   That would be foolishness to the extreme.

Most American families make at or above the median household income.  (That would be -- ahem -- by definition.)   Maintaining somewhat near a median family income or better, barring catastrophic health or legal woes, provides sufficient financial resources to build real wealth.

So, well over half the population has the financial resources necessary to build real wealth.   That's not the death of the American dream, that's better than we've ever done as a nation.  And we're doing that with a material standard of living that is way better than it's ever been.  Houses are hugely bigger than they were after WWII.   More and fancier cars per family.    More TVs per family.   Etc.

For those families near or above median family income, we don't have a failure of America problem, we have a failure of Americans problem.   They are failing to learn what they need to learn and refusing to act on what they do learn.   Saving and living below one's means are not newfangled concepts.

Now, as for the ignorant men who could wander into a good paying job without ever bothering to prepare themselves in school for a career, it was particularly easy to do that in the 25 years after WWII.  Why?  Because most of the industrialized world other than the US and Canada had been ravaged by war for years!    It's not hard to compete when everyone else's factories and transportation networks are piles of rubble!     Those folks were just lucky stiffs, just like folks going into the job market during the Great Depression were unlucky stiffs.

We got fat, dumb and lazy because of that.    Too many Americans forgot we have to compete.

Not only that, but manufacturing technology has really improved.  It takes far fewer low-skilled people to build products now.    That's why so many of the manufacturing jobs are gone -- they literally don't exist anymore.    Plus the rest of the world is competing nowadays.   

Not only that, but this kind of change in labor in different industries is the historical norm.    An industry may require large amounts of unskilled labor but as time goes by fewer people with better tools and more skill are needed instead.   

Historically Americans competed against the world even though they paid better wages than the rest of the world did -- that's because they produced superior products more efficiently.   We need to do so again.  And we won't make that happen with slack-jawed, lackadaisical individuals who don't bother to learn the material they are taught in school.

freya

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Re: how to survive the coming retirement crisis
« Reply #17 on: January 12, 2020, 09:29:37 AM »
Yes Virginia, retirement savings is possible at low levels of income.  It might be worth reading this post on the MMM blog:

https://www.mrmoneymustache.com/2012/11/07/reader-case-study-yeah-but-how-about-a-difficult-life/

That's why I love his case studies...they put things in clear, concrete terms that I am capable of understanding even B.C. (before coffee).  Anyway, point being that it isn't impossible for middle class Americans to save for retirement.  It's just that they have to DECIDE to save for retirement, then apply some serious effort to making it happen.  It is unfortunate that they get virtually zero messages in favor of that approach, compared to near-constant messages urging them to buy more, bigger, and flashier stuff.  I think that, more than lack of options, is the real problem.

roomtempmayo

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Re: how to survive the coming retirement crisis
« Reply #18 on: January 12, 2020, 10:16:03 AM »
Now, as for the ignorant men who could wander into a good paying job without ever bothering to prepare themselves in school for a career, it was particularly easy to do that in the 25 years after WWII.  Why?  Because most of the industrialized world other than the US and Canada had been ravaged by war for years!    It's not hard to compete when everyone else's factories and transportation networks are piles of rubble!     Those folks were just lucky stiffs, just like folks going into the job market during the Great Depression were unlucky stiffs.

Saying they got historically lucky (true) doesn't really change the fact that the absence of that possibility today is a giant political problem.  I'm sitting here next to a copy of the Sunday NYT with ample evidence of the major issues created by deindustrialization in the US.

I don't think telling people to do better is going to solve the issue.  Every society has a significant portion of low skill, and low functioning people.  Most other developed societies have put a welfare state in place to support them.  In the US, we've thus far had industrial jobs that not only paid well, but were also reasonably high status.  Now the jobs and the status that went with them are largely gone, and we don't have a fallback.  Creating a welfare state isn't a welcome alternative, because it doesn't carry the status previously provided by those old industrial jobs.

Telling people to do better is an inadequate solution to the status-entitlement crisis we face.

SwordGuy

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Re: how to survive the coming retirement crisis
« Reply #19 on: January 12, 2020, 03:37:06 PM »
Now, as for the ignorant men who could wander into a good paying job without ever bothering to prepare themselves in school for a career, it was particularly easy to do that in the 25 years after WWII.  Why?  Because most of the industrialized world other than the US and Canada had been ravaged by war for years!    It's not hard to compete when everyone else's factories and transportation networks are piles of rubble!     Those folks were just lucky stiffs, just like folks going into the job market during the Great Depression were unlucky stiffs.

Saying they got historically lucky (true) doesn't really change the fact that the absence of that possibility today is a giant political problem.  I'm sitting here next to a copy of the Sunday NYT with ample evidence of the major issues created by deindustrialization in the US.

I don't think telling people to do better is going to solve the issue.  Every society has a significant portion of low skill, and low functioning people.  Most other developed societies have put a welfare state in place to support them.  In the US, we've thus far had industrial jobs that not only paid well, but were also reasonably high status.  Now the jobs and the status that went with them are largely gone, and we don't have a fallback.  Creating a welfare state isn't a welcome alternative, because it doesn't carry the status previously provided by those old industrial jobs.

Telling people to do better is an inadequate solution to the status-entitlement crisis we face.

We had low skill and low functioning people when you think the American Dream was in full flower.   They lived in boarding houses or shacks.    Now many of them live way better than that.

Houses are way bigger and way fancier now.   Cars are way bigger and way fancier now.   People buy lots more luxury goods than they used to.   The middle class is trying to live like the upper class instead of building wealth to actually join the upper class.   They need to be taught better and left alone in their luxury if they choose not to.

We have a real problem with piss-poor low wages on the lower ends of the scale -- and we always have.   Read the old stories where a couple has to delay getting married for some years because the fellow can't yet afford a family.   

We should most definitely require a living wage from employers.  Period.   Can't run your business without keeping your workers in poverty?   Too damn bad for you.   Figure it out or go out of business and leave the market to those who can and will.   
I'm completely for that.


Ditto for inexpensive, affordable health care.   The US system is horrible for consumers.


Boofinator

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Re: how to survive the coming retirement crisis
« Reply #20 on: January 12, 2020, 06:23:09 PM »
I think the qz article is barking up the wrong tree.

There is a bigger potential issue/crisis, but the qz article misses it.

There are two types of commodities - Stock and Flow. https://en.wikipedia.org/wiki/Stock_and_flow. In theory, flow commodities can't really be stored for a long time (e.g. electricity), stock commodities can (e.g. Previous Metals, non-perishable food items).

In reality, very few of the really useful stock commodities can be practically stored for decades. Would you like to survive during retirement on food stored today? I doubt it. I doubt if it is even feasible.

The point is, majority of what you consume (irrespective of whether you are retired or working) is what is produced at that time, or very close to that time. All the storage of value business (401k/Gold/stocks/whatever) is simply a social contract of resource allocation that you expect your next generation of working sods will honor in hopes that they will get similarly financed retirement.

So you *do* need workers producing such stuff for (workers + retirees) to be able to consume it.

As there are more workers to retirees - there can come a flipping point where the younger workers start thinking "Hmmmm, those bloody old fogeys are living large on my back". All your savings/401k/gold etc are resource allocation mechanism that only work if the social contract stays intact. If there is enough of an imbalance then we could see social unrest that is bigger than the current wave of nationalism and upheaval in the western countries.

Or maybe automation will solve all such problems of lack of workers (compared to retirees). Who knows?

I like this comment and agree this is a potential issue. On a similar social contract note, what do you think are the chances of hyperinflation, which I fear is a greater threat given that it only requires mismanagement of the currency by a small group of individuals? For the retiree, I imagine that hyperinflation would be devastating (at least workers would still have physical labor to fall back on).

Kronsey

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Re: how to survive the coming retirement crisis
« Reply #21 on: January 12, 2020, 06:29:37 PM »
@SwordGuy it seems your solution is a combo of "pull yourself up by the bootstraps and stop living above your means" as well as "make those damn corporations pay better wages and provide better benefits!"

That is an interesting mix of politcal philosophies.

I think you've acknowledged that it is harder to build wealth/financial independence for the 24 yr old today than it was for the 24 yr old in 1950. That was really my only point in responding to you.

I'd also just add that any of you who think this FIRE movement (or whatever you want to call it) is going to be able to stop the corporate advertising machine and that people will magically wake up and stop spending 100+% of their paychecks are living in fantasy land.

Either mandatory govt (like SS) or corporate (like pensions) retirement contributions are the only answer to the retirement crisis. Humans just aren't very good, as a whole, at saving for a rainy day especially when adding in the constant advertisements that we can't escape from.

Bloop Bloop

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Re: how to survive the coming retirement crisis
« Reply #22 on: January 12, 2020, 07:09:42 PM »
I don't know about the people aren't very good in general bit. East Asian cultures have far greater savings rates - as do migrants. Perhaps Americans, fattened up after decades of prosperity, aren't very good in general at very many things. But you can't generalise to the whole world.

Anyway, people adjust to their surroundings. People survived through the strictures of the Great Depression and the Wars. The social contract survived. It will continue to survive.

SwordGuy

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Re: how to survive the coming retirement crisis
« Reply #23 on: January 12, 2020, 08:38:16 PM »
@SwordGuy it seems your solution is a combo of "pull yourself up by the bootstraps and stop living above your means" as well as "make those damn corporations pay better wages and provide better benefits!"

That is an interesting mix of politcal philosophies.

I think you've acknowledged that it is harder to build wealth/financial independence for the 24 yr old today than it was for the 24 yr old in 1950. That was really my only point in responding to you.

I'd also just add that any of you who think this FIRE movement (or whatever you want to call it) is going to be able to stop the corporate advertising machine and that people will magically wake up and stop spending 100+% of their paychecks are living in fantasy land.

Either mandatory govt (like SS) or corporate (like pensions) retirement contributions are the only answer to the retirement crisis. Humans just aren't very good, as a whole, at saving for a rainy day especially when adding in the constant advertisements that we can't escape from.

I really don't want corporations involved in health care at all -- other than to possibly send an insurance payment on the employee's behalf.    The employees would be better off choosing their own policy.

I believe in the bootstraps method but I'm not stupid enough to think people can do it if they can't afford a pair of boots first.    Capitalism will naturally pay piss-poor wages to anyone it can so it takes collective action to make them pay a decent wage.  (Ditto on preventing pollution and requiring worker and product safety.)  My feeling is that if someone is working for a living they should actually be paid a living, not poverty wages.   A fair day's wage for a fair day's work is a far cry from "Tear down capitalism, it doesn't work!"

I've acknowledged that it was easier after WWII for Americans to get in and stay in the middle class.   

That's quite different from it being easier for Americans to earn real wealth.   I would say that it's easier than ever for people in the middle class and above to build real wealth because the information on how to do it is so much more widespread than ever before.   In addition, the middle class today has way more luxuries than the middle class after WWII did -- so they have more ability to do without those luxuries and turn them into wealth instead.

catprog

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Re: how to survive the coming retirement crisis
« Reply #24 on: January 13, 2020, 01:19:22 AM »


We had low skill and low functioning people when you think the American Dream was in full flower.   They lived in boarding houses or shacks.    Now many of them live way better than that.

The problem is these options are not available now. If you want yo live near most jobs the only homes are expensive and high quality. Their is no cheap low quality house unless you are so far away that you are spending a large portion of the day commuting.

SwordGuy

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Re: how to survive the coming retirement crisis
« Reply #25 on: January 13, 2020, 06:46:25 AM »


We had low skill and low functioning people when you think the American Dream was in full flower.   They lived in boarding houses or shacks.    Now many of them live way better than that.

The problem is these options are not available now. If you want yo live near most jobs the only homes are expensive and high quality. Their is no cheap low quality house unless you are so far away that you are spending a large portion of the day commuting.

You make that statement as if it's as immutably true as the Law of Gravity.

It's not true everywhere in this country.  It's not even true in all high cost of living cities either.   My mid-sized city has lots of affordable housing and many of them are very nicely situated to get to work in a reasonable timeframe.   

I personally lived in downtown DC in an inexpensive apartment.   I didn't even try hard to find it.  Just walked into the apartment renting business and asked for something really cheap.   Rented it the same day.

freya

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Re: how to survive the coming retirement crisis
« Reply #26 on: January 13, 2020, 07:27:29 AM »
We should most definitely require a living wage from employers.  Period.   Can't run your business without keeping your workers in poverty?   Too damn bad for you.   Figure it out or go out of business and leave the market to those who can and will.   
I'm completely for that.

Might I point out a teensy problem with this statement?

In the example above, you advocate driving out of business anyone who can't afford to pay workers whatever it is you deem to be an appropriate living wage.  What's going to happen to those workers who are now out of a job and getting NO pay?

I suppose you could argue that increasing the minimum wage will reduce the cost of the welfare assistance that minimum wage workers often qualify for, and thus decrease the tax burden on the Rest of Us, effectively shifting it to businesses.  At the same time, though, increased wages are likely to jack up prices of goods and services.  I bet it ends up being zero sum in the end, and that there will be winners and losers in all segments of the wage scale.

roomtempmayo

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Re: how to survive the coming retirement crisis
« Reply #27 on: January 13, 2020, 08:29:17 AM »
We had low skill and low functioning people when you think the American Dream was in full flower.   They lived in boarding houses or shacks.    Now many of them live way better than that.

Houses are way bigger and way fancier now.   Cars are way bigger and way fancier now.   People buy lots more luxury goods than they used to.   The middle class is trying to live like the upper class instead of building wealth to actually join the upper class.   They need to be taught better and left alone in their luxury if they choose not to.

We have a real problem with piss-poor low wages on the lower ends of the scale -- and we always have.   Read the old stories where a couple has to delay getting married for some years because the fellow can't yet afford a family.   

We should most definitely require a living wage from employers.  Period.   Can't run your business without keeping your workers in poverty?   Too damn bad for you.   Figure it out or go out of business and leave the market to those who can and will.   
I'm completely for that.


Ditto for inexpensive, affordable health care.   The US system is horrible for consumers.

I think we're talking past each other. 

The current unrest from economic transition in the United States is not about wages alone or even mainly.  It's about relative social standing.

"The American Dream" was not and is not strictly about material goods or any other stable, objective measure.

The American Dream was and is a term used to refer to a system in which able bodied white makes were guaranteed an elevated social position above women and racial minorities, and this guarantee was enabled and justified by even the lowest functioning able bodied white male being able to easily get a job that paid more than others - women, minorities - could usually get.  It was an economic logic, but it justified a social hierarchy.

As we've outsourced the jobs at the bottom, the guarantee has broken down, which means that the hierarchy has broken down, even for those who are still well employed. 

The issue we face isn't, at base, about jobs and money.  It's about power relationships and social position.  It is a zero sum game.

Most of us, myself included, would say that changing toward a distribution of resources/power based on merit is more just and reasonable than a distribution based on ascriptive identity characteristics like race or sex.  However, that doesn't mean that those who benefited from the old order are going to go quietly.  Americans are extremely bad at downward mobility, even if only relative to their neighbors.
« Last Edit: January 13, 2020, 08:48:28 AM by caleb »

ctuser1

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Re: how to survive the coming retirement crisis
« Reply #28 on: January 13, 2020, 08:42:10 AM »
We should most definitely require a living wage from employers.  Period.   Can't run your business without keeping your workers in poverty?   Too damn bad for you.   Figure it out or go out of business and leave the market to those who can and will.   
I'm completely for that.

Might I point out a teensy problem with this statement?

In the example above, you advocate driving out of business anyone who can't afford to pay workers whatever it is you deem to be an appropriate living wage.  What's going to happen to those workers who are now out of a job and getting NO pay?

I suppose you could argue that increasing the minimum wage will reduce the cost of the welfare assistance that minimum wage workers often qualify for, and thus decrease the tax burden on the Rest of Us, effectively shifting it to businesses.  At the same time, though, increased wages are likely to jack up prices of goods and services.  I bet it ends up being zero sum in the end, and that there will be winners and losers in all segments of the wage scale.

It won't be zero sum if it is done as per the basic principles of economics.

https://en.wikipedia.org/wiki/Deadweight_loss

Deaweight loss occurs when "free market equilibrium" is not reached. In free market equilibrium of the labor market, the information available to everyone (employer and employee) would be same or similar, and nobody would be on the same footing as far as negotiations go. If you think of the job market - businesses (i.e. Capital) have more advantage than labor. So they *will* use that extra monopsonistic advantage (https://en.wikipedia.org/wiki/Monopsony) to create inefficiencies for everyone.

If there is an external actor, in this case the government, that puts it's foot on the negotiating scale to restore negotiating power balance (by minimum wage, living wage, whatever) then it should be possible to recover the deadweight loss.

It's of course a very simplistic model and the reality is far more complicated, with multiple markets interacting. It's not in my range of competence to talk about that with any level of authority. However, I just wanted to point out that increasing market efficiency is decidedly not a zero-sum game as you suspected.

Kronsey

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Re: how to survive the coming retirement crisis
« Reply #29 on: January 13, 2020, 09:40:33 AM »
I don't know about the people aren't very good in general bit. East Asian cultures have far greater savings rates - as do migrants. Perhaps Americans, fattened up after decades of prosperity, aren't very good in general at very many things. But you can't generalise to the whole world.

Anyway, people adjust to their surroundings. People survived through the strictures of the Great Depression and the Wars. The social contract survived. It will continue to survive.

Completely agree. I should have put "Americans" instead of "Humans". Thanks for pointing that out.

DadJokes

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Re: how to survive the coming retirement crisis
« Reply #30 on: January 13, 2020, 11:06:15 AM »
Interesting conversation.

For those that say the social contract was close to breaking down in 2008, what do you think would have happened once it did break down?

ctuser1

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Re: how to survive the coming retirement crisis
« Reply #31 on: January 13, 2020, 01:17:38 PM »
I like this comment and agree this is a potential issue. On a similar social contract note, what do you think are the chances of hyperinflation, which I fear is a greater threat given that it only requires mismanagement of the currency by a small group of individuals? For the retiree, I imagine that hyperinflation would be devastating (at least workers would still have physical labor to fall back on).

If your question was directed at me - then I don't think I am very qualified to comment on possibilities of hyperinflation. I am not an expert on this topic.

My "interested amateur" guess is that I don't see why there would be hyperinflation without the social contract coming apart at the seams. Most cases of hyperinflation *are* the doomsday scenario where society is breaking apart.

Weimar Germany is probably an exception where hyperinflation was driven by external factors.

In the case of US, I think it's a toss-up whether any such social collapse, if it were to happen (god forbid), will happen with deflation or with hyperinflation. Both are brutal!