Author Topic: The world braces for retirement crisis  (Read 21980 times)

SwordGuy

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Re: The world braces for retirement crisis
« Reply #50 on: January 03, 2014, 07:45:27 PM »
You think governments won't cancel pensions if they are dead broke?

Ours will when it's dead broke, too.

http://blogs.wsj.com/emergingeurope/2013/10/03/russia-to-grab-pension-money-temporarily/

Oh, that's just the Russians.   It couldn't happen in a democracy.

http://greece.greekreporter.com/2013/09/14/ika-broke-borrows-to-pay-pensions/

Oh, that would be Greece, the cradle of Western Democracy...

But it can't happen here in the USA.  Or can it?

http://www.nytimes.com/2010/12/23/business/23prichard.html?pagewanted=all&_r=0

And here:

http://www.nytimes.com/2013/12/04/us/detroit-bankruptcy-ruling.html

There are other examples in the world.  Look them up for yourselves.

Social Security is funded from current tax revenues, not a mythical trust fund full of investments.  When government revenue isn't high enough to make the payments on its expenditures, it borrows money.  When it borrows too much money it goes broke.   

Our federal government is going broke.   Expect to see some state governments go broke in the next few decades.  Expect to see a lot of cities go broke.
As Lincoln once said, "There aren't enough tits on the pig" (for everyone to get some).

Eric

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Re: The world braces for retirement crisis
« Reply #51 on: January 03, 2014, 09:50:22 PM »
That's an extremely pessimistic view, Swordguy.  We're just starting to emerge from a prolonged recession after a great crash.  Of course government balance sheets are hurting.  But that doesn't mean it will continue that way forever.  Or more importantly that filing for bankruptcy somehow dissolves all liabilities.  In the broad view, I wouldn't count on 100% of my SS benefits upon reaching retirement age.  (25 years for me)  But it's pretty easy to imagine 70-80% being there, if only because the alternative of much deeper cuts is not politically viable.  There are many other areas for adjustment before this.  The first rule of politics is old people vote.

Jamesqf

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Re: The world braces for retirement crisis
« Reply #52 on: January 03, 2014, 10:45:23 PM »
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.

Sorry, but no.  His 'has to' is just a way of saying that he wants to enjoy the lifestyle advantages provided by his current income.  If he really wanted to, he could take his SS payments (which should, from what you've said, be fairly substantial) and go live in a van or something.

Then there's the other side: people like me who could afford to retire, but for various reasons just don't want to.

Albert

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Re: The world braces for retirement crisis
« Reply #53 on: January 04, 2014, 03:20:29 AM »
There is no realistic alternative to pensions/SS as the last resort for old age support. Maybe we won't need it, but it's crazy to think that everybody will earn good money, save/invest responsibly and there won't be any recessions at just the wrong time and no capital destroying personal events either. In the distant past life was different (and much less pleasant) because people didn't live as long as we do plus most could rely on their children.

Zamboni

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Re: The world braces for retirement crisis
« Reply #54 on: January 04, 2014, 06:12:30 AM »
I think that the current social security payouts are overly generous in many cases.  $2000 per month for a single worker with no dependents?  Some claim starvation on that, but I can live quite well on it, thank you.  I understand that some people get more or less than that based upon how much they "paid in." 

The problem is "pension marketing" which leads to people feeling entitled to being supported at whatever lifestyle they've been living at a certain age.  $2K a month sounds pretty good to me, so why should I save more money?  After all, I have bills to pay now, and my kids want new shoes.  I used to get an annual statement at my old company that said "Look how much money you can expect from us when you retire!"  On that statement they would also "estimate" what the govt is going to give me in my ripe old age.  It would tell me how "on track" I was for a comfortable and leisurely old age.  Isn't the company great?!  Of course, they were prone to laying friends and colleagues off as they reached their 50's, but that won't happen to me.  Right?  I get a similar social security statement in the mail every year.  "Here is how much we will give you when you retire . . . "  It leads to people perhaps not feeling like they even need to save their "own" money.  Unfortunately some people fall for this marketing because their company or govt seems solid.  They believe the money will indeed be there 20, 40, or even 60 years or more from now.  They trust management.  Just ask my friend the United Airlines pilot who saw his pension dramatically slashed after years of being told "look at this awesome pension we will give you later!"  He went from thinking he was all set to scraping to find ways to earn money again after he retired.  Don't fall for the marketing of the govt or your company.

I wish they would knock it off with the marketing of benefits to people.  The system needs to change faster than it does given increases in lifespan, for example, but change can be slow in politics.  And I agree that the "old people vote" issue makes the change even slower than most change.

lentilman

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Re: The world braces for retirement crisis
« Reply #55 on: January 04, 2014, 07:35:05 AM »
  Plenty of old people around here do shit jobs, but make way more than the younger people.

That might be true where you work, but in my industry the opposite (Salary compression) is true.

Abe

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Re: The world braces for retirement crisis
« Reply #56 on: January 04, 2014, 09:02:01 AM »
"I wish they would knock it off with the marketing of benefits to people.  The system needs to change faster than it does given increases in lifespan, for example, but change can be slow in politics.  And I agree that the "old people vote" issue makes the change even slower than most change."
 
I agree, too many people think "5-10% of my salary goes to the pension fund, so I don't need to save!" Clearly that amount is insufficient savings if one did not have a pension. One should not depend on anyone else to give you money in the future, but instead treat the extra money (if it comes) as support for retirement. 

randymarsh

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Re: The world braces for retirement crisis
« Reply #57 on: January 04, 2014, 10:43:00 AM »
I just downloaded my SS statement and on the first page before any numbers are presented it says:

Quote
Social Security is the largest source of income for most elderly Americans today, but Social Security was never intended to be your only source of income when you retire. You also will need other savings, investments, pensions or retirement accounts to make sure you have enough money to live comfortably when you retire. Saving and investing wisely are important not only for you and your family, but for the entire country. If you want to learn more about how and why to save, you should visit www.mymoney.gov, a federal government website dedicated to teaching all Americans the basics of financial management.

Not sure I see much marketing there. You can lead a horse to water...

 

Zamboni

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Re: The world braces for retirement crisis
« Reply #58 on: January 04, 2014, 11:02:12 AM »
Sure, the last one I filed says that about half way down on a page with two columns of text.  I read it, and obviously you did too.  I would bet that most people don't read that and skip right to the section with the money listings.  It kind of reminds me of the "gambling addiction" helpline that they have written quite clearly on the back of lottery tickets and posted here and there in casinos. 

Because it starts with "Social Security is the largest source of income for most elderly Americans today. . . " (really? see, I'm not the only one saving!  sure, sure, I know I should save, but I feel okay now, because SS says they'll be my largest source of income.)  And much more readily laid out is the "benefits."  That's plain as day, nicely laid out, lots of white spaces around it.  This is marketing, plain and simple, and part of the money you and I put into social security goes towards this marketing expense.  Does someone who is in their 30's really need a mailed annual reminder of a govt benefit program that will likely change in some way before they retire?

Jamesqf

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Re: The world braces for retirement crisis
« Reply #59 on: January 04, 2014, 12:26:38 PM »
I think that the current social security payouts are overly generous in many cases.  $2000 per month for a single worker with no dependents?  Some claim starvation on that, but I can live quite well on it, thank you.

I DO live quite comfortably by spending about that much.  And over a third goes to mortgage (P&I), which should be pretty well paid off before I start collecting SS.

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Re: The world braces for retirement crisis
« Reply #60 on: January 04, 2014, 04:17:32 PM »


Werd.

SwordGuy

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Re: The world braces for retirement crisis
« Reply #61 on: January 16, 2014, 08:58:24 PM »
That's an extremely pessimistic view, Swordguy.  We're just starting to emerge from a prolonged recession after a great crash.  Of course government balance sheets are hurting.  But that doesn't mean it will continue that way forever.  Or more importantly that filing for bankruptcy somehow dissolves all liabilities.  In the broad view, I wouldn't count on 100% of my SS benefits upon reaching retirement age.  (25 years for me)  But it's pretty easy to imagine 70-80% being there, if only because the alternative of much deeper cuts is not politically viable.  There are many other areas for adjustment before this.  The first rule of politics is old people vote.

No, the first rule of American politics is that the voters will forget the latest scandal once football, basketball or baseball season starts, or there's a good sale on at the mall.

Inflation is one way the government can get out of reducing the cost of the SS benefit payout without reducing the dollars they hand out.  That way they'll be able to say "See, we promised you $2000 a month and you're getting $2100 a month.  Aren't we great?!"   Of course, that $2000 a month will only be worth $1000 to $1500 after you factor out inflation.

That is, of course, if they only get the inflation they want, and not more than they want.  Here's what hyperinflation looks like:

http://www.youtube.com/watch?v=QmZ36uABULY

Anyone think the rubes in Congress can come up with a finely nuanced monetary and budgetary policy that won't run amok in one direction or another?

beltim

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Re: The world braces for retirement crisis
« Reply #62 on: January 16, 2014, 11:45:27 PM »
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.  That is all.
Quote
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. 
These statements are irreconcilable. If there's no Social Security Trust Fund, then that $2.7 trillion liability can't be part of the national debt. Which means that the debt would be more like $14 trillion. So, which is it? Do we have $17 trillion in debt and a Social Security Trust Fund, or just $14 trillion in national debt?

fodder69

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Re: The world braces for retirement crisis
« Reply #63 on: January 17, 2014, 05:26:24 AM »
Quote
Anyone think the rubes in Congress can come up with a finely nuanced monetary and budgetary policy that won't run amok in one direction or another?

Nope. But I also think that investors and big money guys would scream bloody murder at inflation and they are the ones that own the government, not us!

SwordGuy

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Re: The world braces for retirement crisis
« Reply #64 on: January 17, 2014, 05:51:57 AM »
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.  That is all.
Quote
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. 
These statements are irreconcilable. If there's no Social Security Trust Fund, then that $2.7 trillion liability can't be part of the national debt. Which means that the debt would be more like $14 trillion. So, which is it? Do we have $17 trillion in debt and a Social Security Trust Fund, or just $14 trillion in national debt?

The trust fund is composed of IOUs written from the US Government to itself.
The US Government owes one hell of a lot of money to other parties.

How are those irreconcilable?

beltim

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Re: The world braces for retirement crisis
« Reply #65 on: January 17, 2014, 09:33:52 AM »
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.  That is all.
Quote
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. 
These statements are irreconcilable. If there's no Social Security Trust Fund, then that $2.7 trillion liability can't be part of the national debt. Which means that the debt would be more like $14 trillion. So, which is it? Do we have $17 trillion in debt and a Social Security Trust Fund, or just $14 trillion in national debt?

The trust fund is composed of IOUs written from the US Government to itself.
The US Government owes one hell of a lot of money to other parties.

How are those irreconcilable?

Because those "IOUs" are debt instruments just like the ones you can buy. If the trust fund is bunk, then the debt back those trust funds won't ever need to be repaid. So, which is it?

SwordGuy

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Re: The world braces for retirement crisis
« Reply #66 on: January 19, 2014, 08:32:32 PM »
The debt to the "trust fund" that the government general fund owes SS is SUPPOSED to be paid back.

I maintain that with the huge influx of retirees entering the SS payment pipeline, the reduced numbers of taxpaying workers funding SS on the pay as you go basis, and the huge national debt, the government is highly unlikely to be able to pay back those debts.

You seem to think that since the government owes the money it just has to pay.

That's clearly not the case in the real world.  There are plenty of examples of governments defaulting on their debts.  Our own almost did so very recently just out of pure pigheadedness.

dragoncar

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Re: The world braces for retirement crisis
« Reply #67 on: January 19, 2014, 08:41:44 PM »
The debt to the "trust fund" that the government general fund owes SS is SUPPOSED to be paid back.

I maintain that with the huge influx of retirees entering the SS payment pipeline, the reduced numbers of taxpaying workers funding SS on the pay as you go basis, and the huge national debt, the government is highly unlikely to be able to pay back those debts.

You seem to think that since the government owes the money it just has to pay.

That's clearly not the case in the real world.  There are plenty of examples of governments defaulting on their debts.  Our own almost did so very recently just out of pure pigheadedness.

That's nonsensical.  The US government can print however much money it decides to.  "Paying back the trust fund" is a matter of creating ones and zeroes out of thin air, and moving those ones and zeroes from one column to another.

beltim

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Re: The world braces for retirement crisis
« Reply #68 on: January 20, 2014, 01:29:33 AM »
The debt to the "trust fund" that the government general fund owes SS is SUPPOSED to be paid back.

I maintain that with the huge influx of retirees entering the SS payment pipeline, the reduced numbers of taxpaying workers funding SS on the pay as you go basis, and the huge national debt, the government is highly unlikely to be able to pay back those debts.

You seem to think that since the government owes the money it just has to pay.

That's clearly not the case in the real world.  There are plenty of examples of governments defaulting on their debts.  Our own almost did so very recently just out of pure pigheadedness.

You're putting words in my mouth.

All I'm saying is that is makes no sense to count an intragovernmental debt as only a debt. Let me try to explain by analogy:

Mr. A owes $17,000.  Of this, $3,000 is owed to his wife, Mrs. A. Let's pretend these are the only items on the A household balance sheet. Logically, the household assets are a $3,000 debt that Mr. A owes Mrs. A. And there is $17,000 in liabilities. The total net worth of the household is negative $14,000.

What you're trying to do is say that Mrs. A's $3,000 bond isn't real, because Mr. A is in debt. But you're also counting the $3,000 as a real debt of Mr. A. So, for the same household, this debt is both real and nonexistent. This position makes no logical or financial sense.

SwordGuy

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Re: The world braces for retirement crisis
« Reply #69 on: January 20, 2014, 07:29:58 AM »
Ok, I'll try again, too.  Then I'll drop it.

I invested in two companies.
They owe me money.  I have the paperwork to prove it.
Those two companies are bankrupt and out of business.
I will never see that money again.


Yes, the US Government can print all the money it wants.  Or the Fed Reserve can just invent it without the expense of printing it.  I've already said that one of the ways the Govt will try to get out of this debt mess is to inflate the currency out the wazoo.  Legally they'll pay it off, and functionally it will be worth one hell of a lot less than it should be.  Hopefully we won't have to take a wheelbarrow full of cash to buy a loaf of bread, and workers won't have to be paid twice a day so their wages might still be worth enough to buy something with before bedtime.  That's how it was in Germany.

 
So I guess we're in agreement.

iwasjustwondering

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Re: The world braces for retirement crisis
« Reply #70 on: January 20, 2014, 08:40:22 AM »
<<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.>>

Very good point.  Infant mortality rates dramatically skewed the life expectancy at that time.  Your average working Joe or Jane was actually quite likely to make it to old age. 

pom

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Re: The world braces for retirement crisis
« Reply #71 on: January 20, 2014, 10:09:20 AM »
Lets look at actual numbers from the 1893 mortality study in the UK.

Average remaining life expectancy at age 10: 52 (usually used to strip infant mortality)
Average remaining life expectancy at a ge 30: 33
Average remaining life expectancy at age 50: 16
Average remaining life expectancy at age 60: 9

You can find the table on the US society of actuaries website: http://mort.soa.org/

So lets say you entered the workforce at age 16, probably the norm then, your chances of reaching 70 were 42%, your chances of reaching 83 like Bismarck were 10%.

So I was wrong to say that a lot of people didn't reach 70. However you have to admit that, those that did, usually didn't last long so the cost was quite low.

beltim

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Re: The world braces for retirement crisis
« Reply #72 on: January 20, 2014, 11:28:23 AM »
Ok, I'll try again, too.  Then I'll drop it.

I invested in two companies.
They owe me money.  I have the paperwork to prove it.
Those two companies are bankrupt and out of business.
I will never see that money again.


Yes, the US Government can print all the money it wants.  Or the Fed Reserve can just invent it without the expense of printing it.  I've already said that one of the ways the Govt will try to get out of this debt mess is to inflate the currency out the wazoo.  Legally they'll pay it off, and functionally it will be worth one hell of a lot less than it should be.  Hopefully we won't have to take a wheelbarrow full of cash to buy a loaf of bread, and workers won't have to be paid twice a day so their wages might still be worth enough to buy something with before bedtime.  That's how it was in Germany.

 
So I guess we're in agreement.

We must be talking past each other or something, because I have no idea how this is supposed to relate to what I said.  Unless you're trying to say that the US government is totally bankrupt and will never repay any of its debt, which I very strongly disagree with.

Luck better Skill

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Re: The world braces for retirement crisis
« Reply #73 on: January 21, 2014, 10:30:30 AM »

That's nonsensical.  The US government can print however much money it decides to.  "Paying back the trust fund" is a matter of creating ones and zeroes out of thin air, and moving those ones and zeroes from one column to another.

Just printing money creates a new problem, or dragon depending on your view.  When currency was backed by metals you could mine and mint more with less side effects.  The effect of printing money today could be minor, to disruptive, to catastrophic.  Strong leadership could see us through this, however Congress has proven it has none.  Why many feel this will end on the ugly side of the scale.

Jamesqf

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Re: The world braces for retirement crisis
« Reply #74 on: January 21, 2014, 12:35:45 PM »
It'd seem much less disruptive just to raise the retirement age, with incentives to work past that.  In fact, the US is doing that.  Full SS used to be at 65, now (or soon) will be 66.  And you get increased benefits for working beyond that, up to 70.

poxpower

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Re: The world braces for retirement crisis
« Reply #75 on: January 21, 2014, 01:53:32 PM »
Very scary indeed. Most people should probably not be in charge of their own retirement funds...

That's why taxes exist: To provide social nets for the financially inept.

Luck better Skill

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Re: The world braces for retirement crisis
« Reply #76 on: January 21, 2014, 06:31:33 PM »
Very scary indeed. Most people should probably not be in charge of their own retirement funds...

That's why taxes exist: To provide social nets for the financially inept.

  Considering the wealth of western society I wonder if middle class saves less because it feels there is a safety net? 

poxpower

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Re: The world braces for retirement crisis
« Reply #77 on: January 21, 2014, 07:23:33 PM »

  Considering the wealth of western society I wonder if middle class saves less because it feels there is a safety net?

My guess is that humans don't have a particularly good sense of the future and as such, whatever amount of resources you will give to them, they will use up shortly. I think that's evidenced in each person's progressively larger use of energy or by comparing energy usage from one country to the next.
Whatever amount of stuff is easy enough to get, people will waste if they know they can get more within a reasonable time frame.
I bet you could do this experiment: Make a person live in a small-ish house and make another live in a big house. You'd probably find that the person living in the big house will accumulate stuff up until the point the large house is at a certain saturation point of fullness.

That's why you have people making 500k a year still bankrupt: They adjust their lifestyle to use up all of what they get immediately. You see this happen with lottery winners, pro athletes, stars etc. Since they get rich without knowing anything about money managment or discipline, their follow their natural instinct to scale their lives up in accordance to their perceived wealth, without making any calculations as to how sustainable it is long-term.

It might be sad but I believe that a society with no safety nets would make little difference and would just push more people to do desperate work once they inevitably fail to save up. Just watch documentaries on African countries and the likes and you quickly see that despite being dirt poor they still find many hours in the week to sing, dance, drink, smoke etc. instead of bettering their situation.
They have no safety net to speak of and are starving to death yet they have ample time to waste apparently. That's humans, we don't think years or months down the line, we think, like, DAYS ahead at best...

In a sense I think the middle class is middle class because they DON'T think about safety nets and don't want to end up depending on them, otherwise they wouldn't work so hard. It's just that after that day of work is over, they want to spend their money right away and let their future selves deal with the problems.