Author Topic: The world braces for retirement crisis  (Read 21978 times)

toodleoo

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The world braces for retirement crisis
« on: December 29, 2013, 08:37:36 PM »
Interesting article on the looming retirement crisis around the world. It's very scary to think about the fact that most people will not be able to support themselves. A few quotes:

"Leslie Lynch, 52, of Glastonbury, Conn., had $30,000 in her 401(k) retirement account when she lost her $65,000-a-year job last year at an insurance company. She'd worked there 28 years. She has depleted her retirement savings trying to stay afloat. "I don't believe that I will ever retire now," she says. She also worries about her children, all in their 20s: "I don't think my three sons will ever retire" because pay raises have been so weak for so long."

"Olivia Mitchell, who studies retirement at the University of Pennsylvania's Wharton School, says her grown daughters rebuffed her when she urged them to save more for retirement. Stocks, they said, are too risky. And bonds don't yield enough interest to be worth the bother."

"My parents retired during the Golden Age of retirement," says Mercer consultant Dreger, 37. "My dad, who is 72, retired at 57. That's not going to happen to somebody in my generation."

http://www.philly.com/philly/business/20131229_ap_5dac9c9c036b4c6eb0373ba8178bc8d2.html?c=r

randymarsh

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Re: The world braces for retirement crisis
« Reply #1 on: December 30, 2013, 06:17:24 AM »
Stocks, they said, are too risky. And bonds don't yield enough interest to be worth the bother.

This is maddening.

Michread

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Re: The world braces for retirement crisis
« Reply #2 on: December 30, 2013, 06:39:47 AM »
I read that too in BG.  I'm sorry but some people are SO stupid!

toodleoo

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Re: The world braces for retirement crisis
« Reply #3 on: December 30, 2013, 06:55:51 AM »
Very scary indeed. Most people should probably not be in charge of their own retirement funds...

Insanity

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Re: The world braces for retirement crisis
« Reply #4 on: December 30, 2013, 07:20:56 AM »
Stocks, they said, are too risky. And bonds don't yield enough interest to be worth the bother.

This is maddening.

That's not entirely untrue.  A single stock is a very risky play.  :-)

Ayanka

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Re: The world braces for retirement crisis
« Reply #5 on: December 30, 2013, 07:24:42 AM »
Very scary indeed. Most people should probably not be in charge of their own retirement funds...

Sad, but you are probably right. Forcing them to make a contribution might be a good way to avoid retirement problems for the financial uneducated.
Stocks, they said, are too risky. And bonds don't yield enough interest to be worth the bother.

This is maddening.

A bond yields 3% inhere (at least the one I saw advertisements for) and stocks can be risky if you don't know anything about it. So I do understand the statement, trick is to find whatever gets you the most return for your money. Even if it is buying a house and just going crazy on the mortgage and your company regulated retirement savings.

Albert

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Re: The world braces for retirement crisis
« Reply #6 on: December 30, 2013, 02:58:49 PM »
I'm not familiar with Belgium system, but here in Switzerland mandatory contributions to the regular pension fund is likely to be sufficient for relatively comfortable retirement for most people.

MKinVA

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Re: The world braces for retirement crisis
« Reply #7 on: December 30, 2013, 06:45:19 PM »
At 52, with only $30,000 in her 401k, she was never going to retire anyway. Do you think these articles scare people into saving more, or do they justify not saving by making people think it can't be done?

Anatidae V

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Re: The world braces for retirement crisis
« Reply #8 on: December 30, 2013, 07:15:05 PM »
In Australia, we have 9.5% of our pay (going up to 12% over the next few years) put into mandatory untouchable-until-60+ accounts, normally managed funds but self-managed is becoming more popular.

Zamboni

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Re: The world braces for retirement crisis
« Reply #9 on: December 30, 2013, 07:18:39 PM »
At least my parents aren't alone.  Not that it makes me feel much better about it.

This must be why I keep seeing more and more elderly and fairly decrepit people working in retail.

Nancy

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Re: The world braces for retirement crisis
« Reply #10 on: December 30, 2013, 07:51:05 PM »
Quote
Retirement specialist Teresa Ghilarducci... says the voluntary plans "work for a robot with an Excel spreadsheet," not for people trying to pay bills and care for children who aren't thinking decades ahead to retirement

I prefer the term femputer.

HappierAtHome

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Re: The world braces for retirement crisis
« Reply #11 on: December 30, 2013, 09:25:10 PM »
In Australia, we have 9.5% of our pay (going up to 12% over the next few years) put into mandatory untouchable-until-60+ accounts, normally managed funds but self-managed is becoming more popular.

I think that the rise to 12% was put off indefinitely by the new government as a cost-saving measure...

But yeah, mandatory and untouchable saving is the way to go if you don't want the welfare systems overloaded. It works okay in Aus.

marty998

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Re: The world braces for retirement crisis
« Reply #12 on: December 30, 2013, 09:44:32 PM »
In Australia, we have 9.5% of our pay (going up to 12% over the next few years) put into mandatory untouchable-until-60+ accounts, normally managed funds but self-managed is becoming more popular.

I think that the rise to 12% was put off indefinitely by the new government as a cost-saving measure...

But yeah, mandatory and untouchable saving is the way to go if you don't want the welfare systems overloaded. It works okay in Aus.

it's been delayed for 2 years. And you can access your super at 55 through a TRAP if you are prepared to wear 15% tax on the pension.

It's amazing how many people blow their super in one hit at age 60 and then go on the government age pension because they think they are entitled to it because they "paid tax all their life". Never mind that you would have a much better standard of living keeping your super and not being on the age pension.

HappierAtHome

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Re: The world braces for retirement crisis
« Reply #13 on: December 30, 2013, 10:25:19 PM »
It's amazing how many people blow their super in one hit at age 60 and then go on the government age pension because they think they are entitled to it because they "paid tax all their life". Never mind that you would have a much better standard of living keeping your super and not being on the age pension.

Is that seriously something people do? I've never heard of it before! That would be insanely dumb. Most of the retirement aged people I know through the misfortune of being related to them were on welfare all their lives anyway (by choice) so they wouldn't have super anyway, and my retirement aged colleagues I know are dumbasses and will blow their super straight away because they're idiots and can't work out that $500k minus $500K equals $0, not because they would deliberately clear it to qualify for the pension. I obviously don't know the right kind of losers.

Ayanka

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Re: The world braces for retirement crisis
« Reply #14 on: December 31, 2013, 10:41:54 AM »
@ Albert: theoretically yes. The problem is inflation. As it was high in the 80s and 90s, the people who have been collecting old age pension throughout have not always enough to live on. Plus it is linked to what kind of schedule you have worked in, so it can vary from barely livable to quite luxurious. To give you an idea, my grandparents who were farmers got an amount of money they could stay afloat on, but this included no travelling (not even to the sea), no health insurance (not available for that age group), no luxeries...
My other grandma had a pension that was high enough that my family took measures to avoid it would grow troublesome high, even after she had been in the locked down departement of an institution for 7 years...
I, being a millenial, don't count on the system for old age. I don't think it will have desappeared by then, but I don't want to have to survive on 500€ a month, combined with increased health care and not being able to incassate as I can now.

JessieImproved

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Re: The world braces for retirement crisis
« Reply #15 on: December 31, 2013, 11:47:42 AM »
I don't think it will have desappeared by then, but I don't want to have to survive on 500€ a month, combined with increased health care and not being able to incassate as I can now.

incassare (transitive)

    To take or receive cash; to cash
    To take or stand up to punishment etc <-- This?
    To set or mount a jewel
    To build in furniture

Sorry, this American had to look that one up. :-)

Ayanka

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Re: The world braces for retirement crisis
« Reply #16 on: December 31, 2013, 12:41:29 PM »
I don't think it will have desappeared by then, but I don't want to have to survive on 500€ a month, combined with increased health care and not being able to incassate as I can now.

incassare (transitive)

    To take or receive cash; to cash
    To take or stand up to punishment etc <-- This?
    To set or mount a jewel
    To build in furniture

Sorry, this American had to look that one up. :-)


yes, right choice. Sorry, it is more commonly used in Dutch :p.

SwordGuy

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Re: The world braces for retirement crisis
« Reply #17 on: December 31, 2013, 12:52:28 PM »
"Leslie Lynch, 52, of Glastonbury, Conn., had $30,000 in her 401(k) retirement account when she lost her $65,000-a-year job last year at an insurance company. She'd worked there 28 years. She has depleted her retirement savings trying to stay afloat. "I don't believe that I will ever retire now," she says. She also worries about her children, all in their 20s: "I don't think my three sons will ever retire" because pay raises have been so weak for so long."
"

28 years of work, $65,000 a year job, $30,000 in the 401k.

That's the problem.  It's not the pay raises being weak, it's her financial acumen being weak.

6% of an average wage of $50,000 would put $84,000 in the account over 28 years, and that's ignoring all market earnings.

The problem is that she just didn't save for retirement.  And that would be her fault, barring some catastrophic illness, etc.  Since that wasn't mentioned, I'll assume it doesn't apply, as the interviewers never pass up a chance to point out its someone else's fault.


SwordGuy

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Re: The world braces for retirement crisis
« Reply #18 on: December 31, 2013, 12:59:07 PM »
I guess one of the reasons this whole topic pisses me off is that it's been so blindingly obvious for decades.  I figured it out in 7th grade back in the 1960's.

Social Security is funded like a Ponzi Scheme is funded.

Baby boomers are a huge population bubble that will all retire at pretty much the same time.

Social Security, like any Ponzi Scheme that runs out of new suckers to invest in it, will be unable to fulfill its obligations.

I was able to figure that out using 7th grade math! 

Ok, I was actually able to do 7th grade math, unlike many of those I graduated high school with 5 years later, or college with 9 years later, but still...

I was born at the back end of the baby boom.   If I get 50% of the projected benefits I'll be amazed.  It's more likely to be 25%.

Albert

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Re: The world braces for retirement crisis
« Reply #19 on: December 31, 2013, 01:11:20 PM »
@ Albert: theoretically yes. The problem is inflation. As it was high in the 80s and 90s, the people who have been collecting old age pension throughout have not always enough to live on. Plus it is linked to what kind of schedule you have worked in, so it can vary from barely livable to quite luxurious. To give you an idea, my grandparents who were farmers got an amount of money they could stay afloat on, but this included no travelling (not even to the sea), no health insurance (not available for that age group), no luxeries...
My other grandma had a pension that was high enough that my family took measures to avoid it would grow troublesome high, even after she had been in the locked down departement of an institution for 7 years...
I, being a millenial, don't count on the system for old age. I don't think it will have desappeared by then, but I don't want to have to survive on 500€ a month, combined with increased health care and not being able to incassate as I can now.

I'm not relying on that either particularly since I don't want to have to work full time till 63-65. However right now I'm promised about 45,000 CHF/year (2013 francs) which would be more than enough for a decent living. Luxurious even if I move to a lower cost of living area.

I should also add that my expected pension is not that great since I got my first job here at 31 and it's only partially compensated by above average income. Most Swiss citizens have it better than me.
« Last Edit: December 31, 2013, 01:13:49 PM by Albert »

lentilman

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Re: The world braces for retirement crisis
« Reply #20 on: January 01, 2014, 07:45:09 AM »

I was born at the back end of the baby boom.   If I get 50% of the projected benefits I'll be amazed.  It's more likely to be 25%.

Far too pessimistic IMO.  Even after the trust fund runs out current policy (without any fixes) would have the payout at ~ 75% of current levels.  I'm in the same age range as you and will be amazed if our benefits are not 100% - cutting them will require political fortitude that I just don't see in the current government. 

fodder69

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Re: The world braces for retirement crisis
« Reply #21 on: January 01, 2014, 10:33:22 AM »
Swordguy, if I do my path correctly-ish you are around 60, right? So you think that within 10 years social security benefits will be cut by 75%?

From the latest trust fund report:
Quote
After 2020, Treasury will redeem trust fund asset reserves to the extent that program cost exceeds tax revenue and interest earnings until depletion of total trust fund reserves in 2033, the same year projected in last year’s Trustees Report. Thereafter, tax income would be sufficient to pay about three-quarters of scheduled benefits through 2087.

So the projections are that the surplus will be depleted 20 years from now, and tax revenues (at CURRENT levels of taxation) will cover 75% of benefits for at least the next 54 years.

Also, I am not sure I would agree with this:
Quote
Social Security, like any Ponzi Scheme that runs out of new suckers to invest in it, will be unable to fulfill its obligations.

The difference between SS and a ponzi scheme is that the pool of 'suckers' is the entire work force of the United States so unless everyone stops working, we will be okay.

All that said, I would personally don't absolutely count on SS benefits for retirement income. I would plan for them to be zero and factor them as a bonus. Not because I think they will go away, but I think not factoring them in gives a really nice cushion if your other investments have problems.

sol

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Re: The world braces for retirement crisis
« Reply #22 on: January 01, 2014, 03:51:49 PM »
I guess one of the reasons this whole topic pisses me off is that it's been so blindingly obvious for decades.  I figured it out in 7th grade back in the 1960's.

I'm assuming this person worked this problem in the 1960s without accounting for any of the subsequent SS tax increases that hadn't yet happened.  After SS was created in 1937, taxes were increased in 1951, 1967, 1968, 1972, 1974, 1977, and have been indexed since then.  It was apparently the 1972 law that codified the current system in which benefits would grow faster than revenue, and we haven't changed it since then.

I have no reason to doubt that Congress will eventually change the tax laws governing SS at some point in the future, and like other posters here I think the program is too politically popular for that change to be a benefit reduction instead of a tax increase.  Gutting SS would be political suicide for any politician running while the baby boomers still have political capital.

Details from the SSA:  http://www.socialsecurity.gov/policy/docs/policybriefs/pb2011-02.html

SwordGuy

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Re: The world braces for retirement crisis
« Reply #23 on: January 01, 2014, 04:21:04 PM »

I was born at the back end of the baby boom.   If I get 50% of the projected benefits I'll be amazed.  It's more likely to be 25%.

Far too pessimistic IMO.  Even after the trust fund runs out current policy (without any fixes) would have the payout at ~ 75% of current levels.  I'm in the same age range as you and will be amazed if our benefits are not 100% - cutting them will require political fortitude that I just don't see in the current government.

Don't you understand that there is NO social security trust fund.  It does not exist.  There is no money stashed away to fund this.  There are no investments stashed away to pay for this.   There are a bunch of IOUs from the Federal Government to itself.  That is all.

I'll make it simple.  You give me a bunch of money and put it in my right pocket.  I write an IOU to myself and put the IOU in my right pocket, then spend all the cash you gave me.   Some of it goes to people who already retired but the rest just disappears in my torrent of spending.

You ask how much I have in my right pocket trust fund for you.  I add up all the IOUs I wrote to myself and tell you.  You go away happy because I just bamboozled you.

At some point you will ask for the money back.  Now, my scam has been working great because there have been lots more people paying into my right pocket than I've had to pay out.  I can cash flow the payments to my "investors" out of current receipts.

But it won't continue to work when the baby boomers start retiring because there will be so many of them that there won't be enough people working to pay for it out of current social security receipts.  Those IOUs will have to be called in.

You might have noticed that the Federal Government is 16 to 17 TRILLION dollars in debt and that debt amount is rising.   The only reason we aren't in deeper doo-doo is that the interest rates are so very low.  If the interest rates rise our debt will skyrocket and all kinds of things won't get paid for. 

The ability of "all the workers in the US" to pay for all that debt plus the social security debt likely doesn't exist without dramatic defunding of a host of governmental activities.

The only way the government can pay for it all without formally defaulting on the debt is to either go MMM on expenditures or to inflate the hell out of the currency.  If they go the latter, they'll pretend to pay out what's owed but they will monkey with the numbers to factor out inflation protection.  If you've been following the news, they've already started weakening the inflation protections.

Anybody actually believe the feds will voluntarily embrace MMM style spending?  I don't.

Albert

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Re: The world braces for retirement crisis
« Reply #24 on: January 01, 2014, 05:39:54 PM »
Me winning Nobel prize is more likely than Western democracies completely gutting pension systems and leaving old people (some of them anyway) homeless and dependent on private charity. About 99% sure it won't happen where I live and only a bit less confident about your place. If you want to retire early or have enough money to jet around the world in your retirement then you are on your own, though.

Ian

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Re: The world braces for retirement crisis
« Reply #25 on: January 01, 2014, 05:53:58 PM »
The article didn't address my biggest question, so I'm asking here since many of you seem more familiar with the topic: how many retirees will be physically capable of working to the end of their lives? Whenever I see quotes about people saying they'll keep working forever, I always wonder what percentage of the elderly acquire conditions that prevent them from continuing work (or cause them to be fired). It feels to me like this is a common pattern, so I wonder what will happen to these people and what kind of effect it would have on overall systems.

LalsConstant

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Re: The world braces for retirement crisis
« Reply #26 on: January 02, 2014, 02:04:01 AM »
<snip>

Anybody actually believe the feds will voluntarily embrace MMM style spending?  I don't.

SwordGuy, we really are on the same page as far as Social Security goes.  Really it probably worked pretty good when there were fifty or thirty workers per recipient, but now with it approaching less than two, there's just no way it's going to sustain itself.  Putting aside for a moment my ideological/philosophical problems with the idea of Social Security, on the practical level it just does not wash.  Even if one believes the funny "accounting" that says there is a "trust fund", there's an inevitable collapse ahead.

But I see it working out a little differently, and I'm usually wrong about this kind of thing but even a broken clock is right twice a day.  I don't think you'll see a massive across the board cut, I think what you'll see is legislation that will exclude larger and larger groups of people from receiving the benefit.    If you do continue to receive the benefit it will be less of course but I bet it's still relatively comparable.

But my prediction is, they'll first do it like unemployment, where the calculus of how you're not eligible despite paying into it all your life is never explainable but you're not getting any or at least not very much money regardless.  Once that is in place, it will come down to whether you fall into a politically powerful group, or failing that, one that gets lip service.

But I'm cynical about these kinds of things!


fodder69

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Re: The world braces for retirement crisis
« Reply #27 on: January 02, 2014, 06:33:17 AM »
We're getting  a little off track for sure here, but as to this:

Quote
Don't you understand that there is NO social security trust fund.  It does not exist.  There is no money stashed away to fund this.  There are no investments stashed away to pay for this.   There are a bunch of IOUs from the Federal Government to itself.

The problem is if the government doesn't pay these bonds, it would be a default and would cause a global panic. When the US government decides to pick and choose what bills to pay, SS will be your last concern as every other investment tanks.

Quote
The only way the government can pay for it all without formally defaulting on the debt is to either go MMM on expenditures or to inflate the hell out of the currency.

Actually, they could also increase taxes which would be a heck of a lot more effective and less disruptive than inflating the currency. Which investors would highly discourage and they have a lot of influence.

Quote
The article didn't address my biggest question, so I'm asking here since many of you seem more familiar with the topic: how many retirees will be physically capable of working to the end of their lives? Whenever I see quotes about people saying they'll keep working forever, I always wonder what percentage of the elderly acquire conditions that prevent them from continuing work (or cause them to be fired). It feels to me like this is a common pattern, so I wonder what will happen to these people and what kind of effect it would have on overall systems.

^^ This is the question and why SS exists. So that when all the people who were unwilling or unable to save money for retirement (not us here, right?) become unable to work (since that WILL happen to most everyone), they have some base level of support.

I have no good answer to the question of percentages, but I would say most. The people you hear saying they will have no problem working until they are 70, 80, etc. are people with white collar jobs. You don't hear bricklayers, carpenters, fireman, etc. wanting to or being able to work that late into life.

ichangedmyname

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Re: The world braces for retirement crisis
« Reply #28 on: January 02, 2014, 11:09:51 AM »
This is why I refuse to believe that my "social security" will be good enough to live on when I retire. I haven't worked here long enough to make it count. My MIL has worked since she was 18 and her SS would be a little over 1k a month. She has no 401k and is only starting now.

randymarsh

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Re: The world braces for retirement crisis
« Reply #29 on: January 02, 2014, 12:12:35 PM »
But my prediction is, they'll first do it like unemployment, where the calculus of how you're not eligible despite paying into it all your life is never explainable but you're not getting any or at least not very much money regardless.  Once that is in place, it will come down to whether you fall into a politically powerful group, or failing that, one that gets lip service.

This is a common misconception, but employees don't pay anything for unemployment insurance. The cost is paid by employers.

Insanity

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Re: The world braces for retirement crisis
« Reply #30 on: January 02, 2014, 12:14:51 PM »
But my prediction is, they'll first do it like unemployment, where the calculus of how you're not eligible despite paying into it all your life is never explainable but you're not getting any or at least not very much money regardless.  Once that is in place, it will come down to whether you fall into a politically powerful group, or failing that, one that gets lip service.

This is a common misconception, but employees don't pay anything for unemployment insurance. The cost is paid by employers.

Really?  I was always under the impression that was the UI that was taken out of my paycheck.

Jamesqf

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Re: The world braces for retirement crisis
« Reply #31 on: January 02, 2014, 12:15:57 PM »
The people you hear saying they will have no problem working until they are 70, 80, etc. are people with white collar jobs. You don't hear bricklayers, carpenters, fireman, etc. wanting to or being able to work that late into life.

You will hear some of them say that, if you listen.  You also need to realize that people can and do change careers.

JR

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Re: The world braces for retirement crisis
« Reply #32 on: January 02, 2014, 01:35:40 PM »
But my prediction is, they'll first do it like unemployment, where the calculus of how you're not eligible despite paying into it all your life is never explainable but you're not getting any or at least not very much money regardless.  Once that is in place, it will come down to whether you fall into a politically powerful group, or failing that, one that gets lip service.

This is a common misconception, but employees don't pay anything for unemployment insurance. The cost is paid by employers.

Employees pay UI tax in Pennsylvania. It isn't much but we do pay.

Capsu78

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Re: The world braces for retirement crisis
« Reply #33 on: January 02, 2014, 02:07:01 PM »

Far too pessimistic IMO.  Even after the trust fund runs out current policy (without any fixes) would have the payout at ~ 75% of current levels.  I'm in the same age range as you and will be amazed if our benefits are not 100% - cutting them will require political fortitude that I just don't see in the current government.
[/quote]

I agree with this.  We will "see" what is projected.  However, tax code on what you can realize on your untaxed retirement accounts will be chisseled at. 
Too politically impossible to cut the SS checks to the boomers- The boomer women would begin to protest just like they did in the 60's and start burning their bra's ... Who could watch that?

MKinVA

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Re: The world braces for retirement crisis
« Reply #34 on: January 02, 2014, 03:47:33 PM »
I too think SS is here to stay in some form or another. There are a lot of changes Congress could make that would impact the monthly benefit, such as, ratchet down the COLA on a sliding scale so that those born XX or later get no COLA, income barriers such as those who make over a certain amount or those who have saved a certain amount will see reduced benefits (down to zero in some cases), they may increase the salary cap on paying into SS (currently somewhere around $112,000)...There are a whole bunch of things they could do which could be good or bad depending on what side of the line you end up on.

Swordguy, I can't believe you didn't reference Al Gore's lock box!!

randymarsh

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Re: The world braces for retirement crisis
« Reply #35 on: January 02, 2014, 05:03:25 PM »
Really?  I was always under the impression that was the UI that was taken out of my paycheck.

It appears that some states may tax employees, but federal unemployment is not paid by employees.

http://www.irs.gov/Individuals/International-Taxpayers/Federal-Unemployment-Tax

mpbaker22

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Re: The world braces for retirement crisis
« Reply #36 on: January 02, 2014, 10:08:08 PM »
In Australia, we have 9.5% of our pay (going up to 12% over the next few years) put into mandatory untouchable-until-60+ accounts, normally managed funds but self-managed is becoming more popular.

I think that the rise to 12% was put off indefinitely by the new government as a cost-saving measure...

But yeah, mandatory and untouchable saving is the way to go if you don't want the welfare systems overloaded. It works okay in Aus.

In the US it's 12.4%.  The problem is that the government takes it and essentially doesn't invest.  You get back what you pay in adjusted for inflation, with maybe .5-1% in additional investment income each year.

Leisured

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Re: The world braces for retirement crisis
« Reply #37 on: January 03, 2014, 05:02:32 AM »
SwordGuy and Fodder69, whether there is a pension fund or not does not have to matter much. When age pensions first appeared, in Bismarck's Germany, the idea was that younger workers would pay taxes to provide pensions for older worker, and in time, those younger workers will reach retirement age and have their pensions paid by taxes from the next batch of younger workers. Transfer payments, or 'I will scratch your back now, so long as someone else scratches my back when I retire.

The effect of the baby boomer bubble, which is taking effect now, and the increase in life expectancy since Bismarck's day, has made the age pension much more expensive, but in principle the policy of 'scratch your back someone else scratches my back in the future' still holds. Taxes are raised for many reasons, but in this case taxes are raised for the purpose of funding age pensions for those who funded other people's age pension in the past.

We have had superannuation funds in Australia for decades now, and while it is an elaborate scheme, compared to transfer payments, it is still a good idea, because it provides capital for investment.


pom

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Re: The world braces for retirement crisis
« Reply #38 on: January 03, 2014, 06:33:10 AM »
Two interesting points to make about Bismarck's pension scheme

1. It was fully funded, it was not the younger paying for the older, that came in the 1950s (really from the 30s since the plan was invested in government bonds at the time making it a hidden pay-as-you-go system)

2. If I remember correctly, the pensionable age in Bismarck's day was 70 while the life expectancy was 45. So it is the equivalent of having a pension from age 90 or so right now. It really was longevity insurance for the few that became so old that they could not be expected to work. Of course the cost was appropriately very low.



jba302

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Re: The world braces for retirement crisis
« Reply #39 on: January 03, 2014, 07:11:46 AM »
"Many people will be forced to work well past the traditional retirement age of 65 - to 70 or even longer."

I've been noticing a slightly annoying downstream issue because of this. I have been casually applying to some higher level jobs and one that was perfect for me ending up getting given to a guy in his early 60's, who I knew and was only working because he couldn't retire yet (confirmed I was second in line and his words that he can't retire yet). As selfish as that sounds, I would really like to see some of this aging workforce get on with their retirement so there's headrom for some of us can move up! :)

Albert

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Re: The world braces for retirement crisis
« Reply #40 on: January 03, 2014, 07:54:14 AM »
2. If I remember correctly, the pensionable age in Bismarck's day was 70 while the life expectancy was 45. So it is the equivalent of having a pension from age 90 or so right now. It really was longevity insurance for the few that became so old that they could not be expected to work. Of course the cost was appropriately very low.

Life expectancy was already up to ca 60 at his time if I remember correctly, but whatever the exact number you are making a serious mistake by using a life expectancy at birth which at the time was severely depressed by high childhood mortality. Life expectancy at 50 or 60 would be more appropriate. Bismarck himself died at 83.

Jamesqf

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Re: The world braces for retirement crisis
« Reply #41 on: January 03, 2014, 11:58:51 AM »
As selfish as that sounds, I would really like to see some of this aging workforce get on with their retirement so there's headrom for some of us can move up! :)

How about actually being better than the guy that got the job?  Or are you wanting to add some age-based affirmative action?

Personally, I'd make illegal for employers (or anyone else) to look at a job candidate's age.

mpbaker22

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Re: The world braces for retirement crisis
« Reply #42 on: January 03, 2014, 01:12:15 PM »
As selfish as that sounds, I would really like to see some of this aging workforce get on with their retirement so there's headrom for some of us can move up! :)

How about actually being better than the guy that got the job?  Or are you wanting to add some age-based affirmative action?

Personally, I'd make illegal for employers (or anyone else) to look at a job candidate's age.

Let's face it, lot's of times the perceived job performance is a function of the candidate's age or years of experience.  I mean performance evaluations at many companies aren't actually indicative of performance.  Rather, they are based on years with company.  Plenty of old people around here do shit jobs, but make way more than the younger people.

Jamesqf

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Re: The world braces for retirement crisis
« Reply #43 on: January 03, 2014, 01:20:25 PM »
Plenty of old people around here do shit jobs, but make way more than the younger people.

And plenty of younger folks do shit jobs, but get hired in preference to older people.  Here's a link to a small example I posted a while back: http://www.mrmoneymustache.com/forum/off-topic/i-feel-better-about-not-upgrading/msg177854/#msg177854

jba302

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Re: The world braces for retirement crisis
« Reply #44 on: January 03, 2014, 01:48:31 PM »
How about actually being better than the guy that got the job?  Or are you wanting to add some age-based affirmative action?

I didn't mean to get into any details beyond "this dude should have been retired years ago, why is he still in the pool!" The fact that I made it through 3 rounds of interviews means I was qualified though, and the older one with more years of experience (a lot more...25 years more) got the job. That's truly fine as I'll find something else. I was more taking a jab at the fact that I have no intention on working at his age and he's still applying for new positions, which happened to handicap my even-earlier planned retirement.

mpbaker22

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Re: The world braces for retirement crisis
« Reply #45 on: January 03, 2014, 02:03:19 PM »
Plenty of old people around here do shit jobs, but make way more than the younger people.

And plenty of younger folks do shit jobs, but get hired in preference to older people.  Here's a link to a small example I posted a while back: http://www.mrmoneymustache.com/forum/off-topic/i-feel-better-about-not-upgrading/msg177854/#msg177854

But that's irrelevant.  The first poster said he wished the old people are in the way of promotions.  Being in a similar situation, I was pointing out that he might work at a company where being old is an advantage unrelated to job performance.

MrsPete

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Re: The world braces for retirement crisis
« Reply #46 on: January 03, 2014, 02:12:09 PM »
Very scary indeed. Most people should probably not be in charge of their own retirement funds...

Sad, but you are probably right. Forcing them to make a contribution might be a good way to avoid retirement problems for the financial uneducated.
I'm not sure which is worse:  The people who have chosen not to become educated on personal finance, even though the information is readily available . . . well, everywhere.  Or the people who know what they should do but lack the willpower to follow through with what they know is the right thing.

28 years of work, $65,000 a year job, $30,000 in the 401k.

That's the problem.  It's not the pay raises being weak, it's her financial acumen being weak.

6% of an average wage of $50,000 would put $84,000 in the account over 28 years, and that's ignoring all market earnings.

The problem is that she just didn't save for retirement.  And that would be her fault, barring some catastrophic illness, etc.  Since that wasn't mentioned, I'll assume it doesn't apply, as the interviewers never pass up a chance to point out its someone else's fault.
Yeah, I was going to say something similar.  It's unlikely that she's earned 65,000 for the entire 28 years -- I'd bet she started at $20-25,000 and worked her way up -- but the point is still valid:  She's not a low wage earner.  She just didn't save.

At a glance, I wonder if people in that very-comfortable-but-not-rich pay range might be the worst about saving.  I mean, 65,000 is a lot of money, and a person could definitely think to herself, "Hey, I work hard.  I deserve a nice house, good vacations, etc."  But it's not really enough money to run with what the media portrays as "the good life" -- it's probably enough for the really nice house OR a new car every two years OR big-bucks travel OR designer handbags and suits, but it's not enough for ALL those things.  And if she was throwing away a part of every paycheck towards interest, she'd never have had a chance.  Eh, I dunno.  I'm rambling. 

I also agree that she likely doesn't have a child with big medical bills (or similar) because the media would've definitely pointed out how she never had a chance. 

Jamesqf

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Re: The world braces for retirement crisis
« Reply #47 on: January 03, 2014, 03:28:30 PM »
I didn't mean to get into any details beyond "this dude should have been retired years ago, why is he still in the pool!"

Because he wants to be.  Why should age disqualify you for a job, any more than your sex or skin color?  And why should anyone have to retire, any more than they should be forbidden to retire until they hit 65 or whatever the magic age happens to be?

jba302

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Re: The world braces for retirement crisis
« Reply #48 on: January 03, 2014, 04:35:32 PM »
I didn't mean to get into any details beyond "this dude should have been retired years ago, why is he still in the pool!"

Because he wants to be.  Why should age disqualify you for a job, any more than your sex or skin color?  And why should anyone have to retire, any more than they should be forbidden to retire until they hit 65 or whatever the magic age happens to be?

Except from my first post, he doesn't want to be. From his own admission, he has to be. As I had already stated. Which also, almost ironically, is in line with the whole god damn thread.

cats

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Re: The world braces for retirement crisis
« Reply #49 on: January 03, 2014, 05:57:58 PM »
I didn't mean to get into any details beyond "this dude should have been retired years ago, why is he still in the pool!"

Because he wants to be.  Why should age disqualify you for a job, any more than your sex or skin color?  And why should anyone have to retire, any more than they should be forbidden to retire until they hit 65 or whatever the magic age happens to be?

Except from my first post, he doesn't want to be. From his own admission, he has to be. As I had already stated. Which also, almost ironically, is in line with the whole god damn thread.

My company has quite a few older workers, and for every 65+ person who is still totally sharp and into their job and enjoying coming into work (and they definitely exist), there is at least one other 65+ person who is coming in because they need the money or they just haven't figured out what they'd do without a job to define them.  Because they've been there 25+ years, they have an advantage of simply understanding how things work better than younger workers, but they definitely aren't all superior (or in some cases even particularly good) employees.