6 ms·

This editorial is unfortunately about 95% dramatic story and 5% meaningful numbers. What it doesn't talk about in detail is the savings rate for the baby boome

This editorial is unfortunately about 95% dramatic story and 5% meaningful numbers. What it doesn't talk about in detail is the savings rate for the baby boomers pre-retirement age, which is the largest factor in the current "we can't retire" saga. Pre-2008, most boomers were basically saving nothing [1] and somehow expecting things to just work out when they got older. As a result, I'm not nearly as sympathetic as this article wants me to be. Another issue it leaves unaddressed is what the proliferation of older Americans remaining in the job market is doing to job availability for younger Americans. Tech is obviously insulated, but in many other industries it is becoming very difficult to advance into the executive ranks because the current executives are staying in well past their retirement age. [1] http://www.bloomberg.com/bw/articles/2014-11-20/millennials-are-lousy-savers-but-baby-boomers-were-worse http://www.bloomberg.com/bw/articles/2014-11-20/millennials-...

ThomPete 11y ago
Thats true in a strictly logical sense of course. But perhaps we need to dig one step deeper and ask why they didn't do that. My guess is that it's not entirely as simple as it might sound.
- mdorazio 11y ago
  I'm all for digging deeper, but I'm not convinced you're going to find a satisfying answer. I try not to hop on the boomer hate train too much, but it's hard to look at what they were handed and not be angry. In the 60s and 70s, a college degree in anything from a decent school was enough to land you meaningful employment. That degree cost less than a third of what it does today. A decent size house in a metropolitan area could be had in your late 20s with a single income. Upward mobility in the workforce was basically unlimited, and thanks to the population bulge, boomers also were able to enact pretty much whatever political policies they wanted as an aggregate group. Yes, Vietnam really sucked, and the S&L crash wasn't fun, either, but how hard would it really have been to set aside 5% of income every year instead of plowing it into ever bigger houses, more cars, vacations, etc.? I'll give you one thing - financial planning education in the US is absolutely awful and continues to fail millions of people every year. Without that, all you see is mass commercialization encouraging people to spend more money, and an ever increasing need to keep up with the Joneses.
  - VLM 11y ago
    "set aside 5% of income every year" At a 1 in 20 rate, if you have a 20 year career like your grandparents (although 20 year careers at the same employer disappeared generations ago, so you absolutely will not..) and with basically zero to negative investment return after deflation and taxation, one year after downsizing and offshoring you'll be down to the same $0 that the folks who didn't save at 5%, or were unlucky enough to get the economic death penalty a year before you. Meanwhile this happened 0 to 25 years ago and they have maybe 0 to 25 more years to live. Saving would have been a suckers game. You're not going to make it, you'll just be poorer along the way till you reach inevitable utter poverty. Any medical condition affecting you, your spouse, or your child is a financial death penalty. All you need is you, your spouse, and kids, to avoid getting seriously ill or disabled for 40+ years. If anyone gets sick, all saving means in the long run is the hospital execs get your saved money before you go on the charity plan. You're not going to be spending money on around the world cruises or even a quiet middle class life; all that capital will be vacuumed up by the medical, real estate, legal/criminal, or educational sectors. Why should I save today to make some vampire fatter tomorrow? If I scrimp and save for my entire life, some hospital exec can buy a new Ferrari using my savings... whats in it for me? Surely I will not be permitted to actually keep or spend what I save. Another way to put it is everyone in your cohort will get the economic death penalty and get the downward class mobility thing... but at different times. Many are banking on the idea that if they're happy, well fed, possibly educated, and entertained, they'll somehow get the economic death penalty more than a year after someone who has a bad attitude such that they'll run a net lifetime profit by not saving. They're probably correct... the guy who golfs and shares pro sports tickets with his boss is always the last downsized, the person who smiles the most seems the last fired, etc. Saving money does not necessarily correlate with maximized net lifetime income.
  - ThomPete 11y ago
    Every generation become a product of the previous one. Just because you as young often revolt against the older generations, doesn't mean you can see through all the hazy clouds that surrounds you. Historically there have been a lot of money poured into finding ways to convince people to long term thinking with short term gains. There are a reason why advertising quick loans and and credit cards have become popular. There is a reason why the US creditscore system forces you to take on debt to build you credit score (just think about how absurd that notion is) and there is a reason why people growing up in an environment where this is the norm become bad at saving up. It's systemic and it's done by the previous generations and not simply because the young generations are stupider or more careless. You seem to believe that people in general rationalize far mor than they actually do. We are humans not rational machines.
- yummyfajitas 11y ago
  Indians and Chinese save 20-30% of income. They do it by consuming vastly less than Americans. Americans simply view cutting consumption as unthinkable.
  - ThomPete 11y ago
    And so will the Indians and the Chinese once they get used to consumption. Ask anyone who in India og China got used to a ar or a dishwasher whether they want to go back and I am pretty sure what the answer might be. You are actually just proving my point.
    - yummyfajitas 11y ago
      I'm sure everyone likes to consume rather than save. The fact is that Indians and Chinese consume an order of magnitude less than Americans, and still manage to save. Americans could do the same if they were willing. Can you state clearly what your point actually is?
      - ThomPete 11y ago
        You are comparing a culture thats been in this game for almost a century with two countries who only experienced this kind of growth for a couple of decades. I think it's pretty obvious what my point is and I think you know it to. But in case you don't. The Indians and the Chinese will change this behavior over time. In fact I wouldn't even be surprised if you could already see this change in those who benefitted most from Chinese and Indian growth vs. those who aren't already benefitting. They are after all humans.
        yummyfajitas 11y ago
        They might change their behavior. If they do, their retirement woes will be their own fault too. However, I see no evidence that wealthy nations having a low savings rate is a universal behavior. Singapore (as wealthy as the US) has a 50% savings rate, while Hong Kong, Japan and Korea have a 20-30% savings rate. http://data.worldbank.org/indicator/NY.GNS.ICTR.ZS http://data.worldbank.org/indicator/NY.GNS.ICTR.ZS
- tomohawk 11y ago
  One reason could be that social security takes 14% off the top. If the person invested the 14% instead of having it taken, they would have a much better retirement.
  - YokoZar 11y ago
    Boomers will at least get social security payouts. The next generation almost surely won't. In terms of policy, it seems like the Boomer's main investment strategy was to take it from their children via payroll taxes.
- a3n 11y ago
  Rather than just digging a deeper hole, we should maybe also figure out how to deal with the people who are where they are now, regardless of how they got there.
  - AnthonyMouse 11y ago
    Part of how to deal with them is how they got there. You make your own bed and you're the one who has to sleep in it.
    - ThomPete 11y ago
      no your bed is prepared for you by the previous generations.
      - AnthonyMouse 11y ago
        Bullocks. The generation comprising the largest voting bloc in the last half century is responsible for what they voted for. Student loans instead of student grants, and loans from banks instead of loans from the government. Subsidized mortgage interest instead of subsidized new housing construction. Encouraging banks to lend to so many uncreditworthy borrowers that it tanked the world economy and devalued their retirement savings. They voted to let the banks take their money. They now own the consequences of that.
        ThomPete 11y ago
        Not sure what you mean. There are more or less 15 years where they don't get to vote or decide anything. It's like blaming someone for being evangelical when his or her parents is. It's true they can "just" decide to not be evangelical christians but it's not that simple. But sure if you believe that then everything I am saying is going to sound like bullocks.
        AnthonyMouse 11y ago
        > There are more or less 15 years where they don't get to vote or decide anything. Those were the same years that they weren't generating income, paying taxes or borrowing money. And what about the other 40 years?
GabrielF00 11y ago
I think a big chunk of the low savings rate comes from skyrocketing college and healthcare costs combined with stagnant salaries for a long time.

ThomPete 11y ago

Thats true in a strictly logical sense of course. But perhaps we need to dig one step deeper and ask why they didn't do that. My guess is that it's not entirely as simple as it might sound.

mdorazio 11y ago
I'm all for digging deeper, but I'm not convinced you're going to find a satisfying answer. I try not to hop on the boomer hate train too much, but it's hard to look at what they were handed and not be angry. In the 60s and 70s, a college degree in anything from a decent school was enough to land you meaningful employment. That degree cost less than a third of what it does today. A decent size house in a metropolitan area could be had in your late 20s with a single income. Upward mobility in the workforce was basically unlimited, and thanks to the population bulge, boomers also were able to enact pretty much whatever political policies they wanted as an aggregate group. Yes, Vietnam really sucked, and the S&L crash wasn't fun, either, but how hard would it really have been to set aside 5% of income every year instead of plowing it into ever bigger houses, more cars, vacations, etc.? I'll give you one thing - financial planning education in the US is absolutely awful and continues to fail millions of people every year. Without that, all you see is mass commercialization encouraging people to spend more money, and an ever increasing need to keep up with the Joneses.
- VLM 11y ago
  "set aside 5% of income every year" At a 1 in 20 rate, if you have a 20 year career like your grandparents (although 20 year careers at the same employer disappeared generations ago, so you absolutely will not..) and with basically zero to negative investment return after deflation and taxation, one year after downsizing and offshoring you'll be down to the same $0 that the folks who didn't save at 5%, or were unlucky enough to get the economic death penalty a year before you. Meanwhile this happened 0 to 25 years ago and they have maybe 0 to 25 more years to live. Saving would have been a suckers game. You're not going to make it, you'll just be poorer along the way till you reach inevitable utter poverty. Any medical condition affecting you, your spouse, or your child is a financial death penalty. All you need is you, your spouse, and kids, to avoid getting seriously ill or disabled for 40+ years. If anyone gets sick, all saving means in the long run is the hospital execs get your saved money before you go on the charity plan. You're not going to be spending money on around the world cruises or even a quiet middle class life; all that capital will be vacuumed up by the medical, real estate, legal/criminal, or educational sectors. Why should I save today to make some vampire fatter tomorrow? If I scrimp and save for my entire life, some hospital exec can buy a new Ferrari using my savings... whats in it for me? Surely I will not be permitted to actually keep or spend what I save. Another way to put it is everyone in your cohort will get the economic death penalty and get the downward class mobility thing... but at different times. Many are banking on the idea that if they're happy, well fed, possibly educated, and entertained, they'll somehow get the economic death penalty more than a year after someone who has a bad attitude such that they'll run a net lifetime profit by not saving. They're probably correct... the guy who golfs and shares pro sports tickets with his boss is always the last downsized, the person who smiles the most seems the last fired, etc. Saving money does not necessarily correlate with maximized net lifetime income.
- ThomPete 11y ago
  Every generation become a product of the previous one. Just because you as young often revolt against the older generations, doesn't mean you can see through all the hazy clouds that surrounds you. Historically there have been a lot of money poured into finding ways to convince people to long term thinking with short term gains. There are a reason why advertising quick loans and and credit cards have become popular. There is a reason why the US creditscore system forces you to take on debt to build you credit score (just think about how absurd that notion is) and there is a reason why people growing up in an environment where this is the norm become bad at saving up. It's systemic and it's done by the previous generations and not simply because the young generations are stupider or more careless. You seem to believe that people in general rationalize far mor than they actually do. We are humans not rational machines.
yummyfajitas 11y ago
Indians and Chinese save 20-30% of income. They do it by consuming vastly less than Americans. Americans simply view cutting consumption as unthinkable.
- ThomPete 11y ago
  And so will the Indians and the Chinese once they get used to consumption. Ask anyone who in India og China got used to a ar or a dishwasher whether they want to go back and I am pretty sure what the answer might be. You are actually just proving my point.
  - yummyfajitas 11y ago
    I'm sure everyone likes to consume rather than save. The fact is that Indians and Chinese consume an order of magnitude less than Americans, and still manage to save. Americans could do the same if they were willing. Can you state clearly what your point actually is?
    - ThomPete 11y ago
      You are comparing a culture thats been in this game for almost a century with two countries who only experienced this kind of growth for a couple of decades. I think it's pretty obvious what my point is and I think you know it to. But in case you don't. The Indians and the Chinese will change this behavior over time. In fact I wouldn't even be surprised if you could already see this change in those who benefitted most from Chinese and Indian growth vs. those who aren't already benefitting. They are after all humans.
      - yummyfajitas 11y ago
        They might change their behavior. If they do, their retirement woes will be their own fault too. However, I see no evidence that wealthy nations having a low savings rate is a universal behavior. Singapore (as wealthy as the US) has a 50% savings rate, while Hong Kong, Japan and Korea have a 20-30% savings rate. http://data.worldbank.org/indicator/NY.GNS.ICTR.ZS http://data.worldbank.org/indicator/NY.GNS.ICTR.ZS
tomohawk 11y ago
One reason could be that social security takes 14% off the top. If the person invested the 14% instead of having it taken, they would have a much better retirement.
- YokoZar 11y ago
  Boomers will at least get social security payouts. The next generation almost surely won't. In terms of policy, it seems like the Boomer's main investment strategy was to take it from their children via payroll taxes.
a3n 11y ago
Rather than just digging a deeper hole, we should maybe also figure out how to deal with the people who are where they are now, regardless of how they got there.
- AnthonyMouse 11y ago
  Part of how to deal with them is how they got there. You make your own bed and you're the one who has to sleep in it.
  - ThomPete 11y ago
    no your bed is prepared for you by the previous generations.
    - AnthonyMouse 11y ago
      Bullocks. The generation comprising the largest voting bloc in the last half century is responsible for what they voted for. Student loans instead of student grants, and loans from banks instead of loans from the government. Subsidized mortgage interest instead of subsidized new housing construction. Encouraging banks to lend to so many uncreditworthy borrowers that it tanked the world economy and devalued their retirement savings. They voted to let the banks take their money. They now own the consequences of that.
      - ThomPete 11y ago
        Not sure what you mean. There are more or less 15 years where they don't get to vote or decide anything. It's like blaming someone for being evangelical when his or her parents is. It's true they can "just" decide to not be evangelical christians but it's not that simple. But sure if you believe that then everything I am saying is going to sound like bullocks.
        AnthonyMouse 11y ago
        > There are more or less 15 years where they don't get to vote or decide anything. Those were the same years that they weren't generating income, paying taxes or borrowing money. And what about the other 40 years?

GabrielF00 11y ago

I think a big chunk of the low savings rate comes from skyrocketing college and healthcare costs combined with stagnant salaries for a long time.