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The irony of this approach is that the lower interest rates are, the more people need to save to reach their retirement goals. If this effect is stronger than t

by Hermel 11y ago

The irony of this approach is that the lower interest rates are, the more people need to save to reach their retirement goals. If this effect is stronger than the incentive to borrow and invest, low interest rates might actually curb consumption.

spyspy 11y ago
Saving for retirement using a savings account hasn't been a viable strategy in decades (at least in the US). People need to be encouraged to invest a significant portion of their money in other securities, and know that in the long term, they'll be much better off for it.
- toomuchtodo 11y ago
  > People need to be encouraged to invest a significant portion of their money in other securities, and know that in the long term, they'll be much better off for it. Until equities and other securities no longer provide the return needed for long term wealth accumulation.
- adevine 11y ago
  But that's only for the long term. If you are in retirement, where you need to spend your savings, you want to keep your money in low risk assets. Central banks are trying their hardest to minimize your spending income by giving you no return on these less risky assets.
  - spyspy 11y ago
    The comment I was replying to only mentioned people saving for retirement, not people already retired.
    - adevine 11y ago
      Not really. "The irony of this approach is that the lower interest rates are, the more people need to save to reach their retirement goals." That statement doesn't necessarily assume people are just socking their money away in a savings account while working. The goal of saving for retirement is that you need your money to outlast you. If your can expect much lower income during retirement, you'll need to have a bigger pot at the beginning of your retirement (i.e. you'll need to save more while working).
- 6stringmerc 11y ago
  As a general rule of financial planning, higher yield means higher risk, so being "much better off for it" is a highly subjective, if not naive statement with respect to saving. Sure, in the long term it is possible to gain more investment returns with certain securities, and in other instances, one can lose the entire principal and be completely worse off. Saving long-term is not a model that totally works during 'catastrophic financial events' but it sure insulates a person from the occasional Enron or other significant event beyond their control.
  - Pitarou 11y ago
    That's why people keep droning on about balanced portfolios (with cash being a part of that balance).
- ihsw 11y ago
  Younger people are saving more cash than ever -- and I'm not willing to chalk it up to financial illiteracy. Even well-off individuals are sticking to plain savings accounts that do nothing other than gather dust with their 1% annual rate of return. Why? Faith in the financial services industry has been utterly shattered. The only exception is for tax purposes, eg: Roth IRA/TFSA, 401k/RRSP, etc.

by Hermel 11y ago

spyspy 11y ago

Saving for retirement using a savings account hasn't been a viable strategy in decades (at least in the US). People need to be encouraged to invest a significant portion of their money in other securities, and know that in the long term, they'll be much better off for it.

toomuchtodo 11y ago
> People need to be encouraged to invest a significant portion of their money in other securities, and know that in the long term, they'll be much better off for it. Until equities and other securities no longer provide the return needed for long term wealth accumulation.
adevine 11y ago
But that's only for the long term. If you are in retirement, where you need to spend your savings, you want to keep your money in low risk assets. Central banks are trying their hardest to minimize your spending income by giving you no return on these less risky assets.
- spyspy 11y ago
  The comment I was replying to only mentioned people saving for retirement, not people already retired.
  - adevine 11y ago
    Not really. "The irony of this approach is that the lower interest rates are, the more people need to save to reach their retirement goals." That statement doesn't necessarily assume people are just socking their money away in a savings account while working. The goal of saving for retirement is that you need your money to outlast you. If your can expect much lower income during retirement, you'll need to have a bigger pot at the beginning of your retirement (i.e. you'll need to save more while working).
6stringmerc 11y ago
As a general rule of financial planning, higher yield means higher risk, so being "much better off for it" is a highly subjective, if not naive statement with respect to saving. Sure, in the long term it is possible to gain more investment returns with certain securities, and in other instances, one can lose the entire principal and be completely worse off. Saving long-term is not a model that totally works during 'catastrophic financial events' but it sure insulates a person from the occasional Enron or other significant event beyond their control.
- Pitarou 11y ago
  That's why people keep droning on about balanced portfolios (with cash being a part of that balance).
ihsw 11y ago
Younger people are saving more cash than ever -- and I'm not willing to chalk it up to financial illiteracy. Even well-off individuals are sticking to plain savings accounts that do nothing other than gather dust with their 1% annual rate of return. Why? Faith in the financial services industry has been utterly shattered. The only exception is for tax purposes, eg: Roth IRA/TFSA, 401k/RRSP, etc.