6 ms·

I realize this probably won't be the most popular of opinions around places like this one, but the more I think about it, the more I conclude that leaving every

by jarek 16y ago

I realize this probably won't be the most popular of opinions around places like this one, but the more I think about it, the more I conclude that leaving everyone to individually save for their own retirement is not the best of ideas. There are far too many variables in the system for most people to navigate successfully for 40 years straight, even if they are earnestly trying. You could have an extemely well diversified portfolio and still lose money when The Market as a whole tanks as a result of bad decisions of other people. You could have money saved up in multiple savings accounts or bonds and be out of luck when a government you didn't vote for fucks up and causes a period of hyperinflation. I'm not even mentioning things utterly out of individual control like a war resulting from an invasion by an aggressive, more powerful neighbour. Implementation details such as retirement age are very important, of course, but a from mile-high view, providing a decent if not extraordinary living standard to millions of people seems exactly like the type of infrastructure and public good projects governments are normally the best option for. /jarek, who nevertheless has more private savings right now than "a quarter of those surveyed"

mattmcknight 16y ago
But many of those same factors affect public pensions. The existence of defined benefit schemes, as opposed to defined contribution schemes, itself causes economic problems, including the bankruptcy of large firms. While there is risk in any investment, defined benefit simply imagines that it doesn't exist. Even traditional Ponzi scheme style public pensions are susceptible to drops in population growth.
- thrill 16y ago
  Any plan that is not fully funded, in cash, is not a pension - it's a bet - a bet that someone (else), somewhere, sometime, will assume the risk if it goes south. Those who offer "public" pensions are the worst offenders - everyone knows the taxpayer will be on the hook for it - it's easy to promise the world to a public employee when it's not coming out of a bottom line.
  - jarek 16y ago
    Then again, a plan fully funded in cash is a bet that you have enough money, skill, and/or luck to keep its real value, after any inflatiatory and investment influences, equal to or above what you will need when you retire.
BigZaphod 16y ago
I'm curious why you'd be eager to trust the government with this big responsibility when you used a government-caused period of hyperinflation as an example of why this is hard for people to succeed at on their own.
- lsd5you 16y ago
  Government provision does not have to be based upon savings. In its simplest form it is just an obligation (of the current working generation towards the elderly), and if this is not tied to monetary figures then it is much less vulnerable to financial turmoil and trickery.
  - nostrademons 16y ago
    What happens when there are many more elderly than current working people? The article suggested planning for 30 years in retirement. If that follows a working life of 40 years which follows a childhood of 25 years, then each working person is supporting 1.5 dependents. Assuming a steady-state population; if you have a baby boom followed by a baby bust followed by another baby boom, it gets worse. That's a big obligation.
    - skybrian 16y ago
      I find it useful to remember that finance can only solve problems to the extent that it changes what people do in the real world. What is retirement savings, but a way for older people to convince younger people to do work for them? Money is a persuasive way of doing that, but regardless it's older people depending on younger people to take care of them. Compare these scenarios: - people save for retirement, so many old people are have money to spend. Lots of young people go into occupations that help old people because that's where the money is. - the government provides pensions, so many old people have money to spend. Lots of young people go into occupations that help old people because that's where the money is. Either way, the real-world effect is the work that young people do. There are always risks and they can't be wished away. The government could change the pension plan. (But note that in the U.S, social security is very well defended in Congress, and more older voters makes it more secure.) Or the price of services that old people need could go up because there are fewer workers or because they dislike the work. As an individual, having above-average savings helps, but by definition everyone can't be above-average. If all retirees double their savings and supply is fixed then inflation is inevitable. To a first approximation the only real-world solutions are to increase the number of workers (immigration or increased birth rate) or to to increase productivity so fewer younger workers are needed.
dublinclontarf 16y ago
We'll the alternative to personal responsibility (that is, being personally responsible for your own retirement funds) is a massive ponzi scheme. There is no chance that people could be "forced to save" as that has always turned into another tax in every place it's been implemented. And who wants to retire? I'll retire when I'm dead, until then I'm gonna be busy doing stuff(work or otherwise). And I'm saying this as someone who's got no money. And governments are not good at this sort of thing. Take the Irish government for example(my home country), ran a massive surplus for years during the boom, saved a nice little nest egg. It was supposed to be for public pensions(actually not supposed to, it WAS). Then in 2008 they gave it to the banks. THEY GAVE IT TO THE BANKS!!!!! edit: I concede that not everyone wants to work until they're in the grave.
- viraptor 16y ago
  > I'll retire when I'm dead Unless you die prematurely, no... You'll retire when you're too tired to do stuff, or when your health doesn't allow you to, or when you become unable to care for yourself in many other ways. Mostly it's not up to you when you stop "doing stuff" - even less if it's about earning money (who would hire an able and willing to work 60-70-yo these days? - realistically).
  - dublinclontarf 16y ago
    I accept that not everyone else has the same outlook as me, but I plan to do the sustainable thing. What old people who can't do anything anymore have done for millenia before social security and "retirement". Have my children take care of me. Well that's plan B, plan A is to become very wealthy from the things I create and live off that. And who said someone has to hire me? There are plenty of people here who work for themselves (or at least their customers). With webapps they don't even know what you look like, you could be a 90 year old dressed as Gandalf and it wouldn't matter as long as the sites good.
    - viraptor 16y ago
      You're assuming that your children will be able to, will be wealthy enough to, will be willing to, will be alive long enough to do that. Also you're assuming that you will be mentally capable of working in your 60's. That's a lot of assumptions which I wouldn't be comfortable with in my life. Not trying to say everything bad will happen, but that's a lot of assumptions... at some points you might be left with no support from yourself or family - and a lot of people find themselves in situations like that.
_delirium 16y ago
That's basically why Social Security was first introduced, and I think it still makes some sense. Looking at it in the other direction, it's more or less a fact that a large proportion of people won't save for retirement. Therefore, you have three choices: 1) a bunch of destitute and possibly homeless old people; 2) some sort of after-the-fact spending to provide emergency services/shelter/care for destitute elderly; or 3) some sort of mandatory pension system to make sure elderly don't become destitute in the first place. People generally find #1 unpalatable, so the practical choices are #2 versus #3: do we set up some sort of general pension system to make sure elderly make at least a bare minimum income to stay off the streets (currently $20k/yr or so), or do we instead set aside money to spend on housing and caring for destitute elderly, e.g. through government-run nursing homes?
- Retric 16y ago
  We also have government run nursing homes and plenty of destitute old people live in them. But, even for a selfish person SS is not exactly a terrible idea. Consider, pensions and SS have a huge benefit over traditional forms of investing. Imagine setting one up a pension for a group of savvy investors. As you near retirement you pool your money with 10,000 other people and all split the dividend each month (based on what % you put in). As people start to die off there is a smaller pool of receptions who keep getting a larger monthly check. Granted you lose the ability to give money to your spouse/children when you die, but you don't need to worry about outliving your savings. (Assuming the fund is not mismanaged etc.) PS: There are many problems with SS, but when you consider it's inflation adjusted it represents a vary large and vary safe investment. (Run a Monte Carlo Analysis assuming you are only willing to accept a 1% risk of running out of money at 100 and a safe retirement takes a huge nest egg.)
  - byrneseyeview 16y ago
    That structure is often called a Tontine. It's illegal, because after a while it's basically a massive monetary reward for offing your fellow investors.
    - 16y ago
TGJ 16y ago
While it may not be the best of ideas, you have to balance it with freedom and the value of self-reliance. Social Security as it is only helps further the growth of the nanny state while also limiting our freedom to do with our own money as we see fit. As a side note, Government should never be in the business of "Public Good" projects. Time and time again, government has shown that it cannot be trusted.
- jarek 16y ago
  Do you consider mass vaccinations of mid 20th century a public good project? Do you consider them a failure?
  - TGJ 16y ago
    Public safety.
byrneseyeview 16y ago
The problem with having the government do it is that they can be collectively less responsible. Think about it: instead of having a system you trust, you need to have a system that 51% of the voting public trusts. When that voting public consists disproportionately of old people, that means a system that pays out more than it can afford to, and redistributes income from young to old. In other words, you get what we've got, which doesn't even work.

by jarek 16y ago

mattmcknight 16y ago

But many of those same factors affect public pensions. The existence of defined benefit schemes, as opposed to defined contribution schemes, itself causes economic problems, including the bankruptcy of large firms. While there is risk in any investment, defined benefit simply imagines that it doesn't exist. Even traditional Ponzi scheme style public pensions are susceptible to drops in population growth.

thrill 16y ago
Any plan that is not fully funded, in cash, is not a pension - it's a bet - a bet that someone (else), somewhere, sometime, will assume the risk if it goes south. Those who offer "public" pensions are the worst offenders - everyone knows the taxpayer will be on the hook for it - it's easy to promise the world to a public employee when it's not coming out of a bottom line.
- jarek 16y ago
  Then again, a plan fully funded in cash is a bet that you have enough money, skill, and/or luck to keep its real value, after any inflatiatory and investment influences, equal to or above what you will need when you retire.

BigZaphod 16y ago

I'm curious why you'd be eager to trust the government with this big responsibility when you used a government-caused period of hyperinflation as an example of why this is hard for people to succeed at on their own.

lsd5you 16y ago
Government provision does not have to be based upon savings. In its simplest form it is just an obligation (of the current working generation towards the elderly), and if this is not tied to monetary figures then it is much less vulnerable to financial turmoil and trickery.
- nostrademons 16y ago
  What happens when there are many more elderly than current working people? The article suggested planning for 30 years in retirement. If that follows a working life of 40 years which follows a childhood of 25 years, then each working person is supporting 1.5 dependents. Assuming a steady-state population; if you have a baby boom followed by a baby bust followed by another baby boom, it gets worse. That's a big obligation.
  - skybrian 16y ago
    I find it useful to remember that finance can only solve problems to the extent that it changes what people do in the real world. What is retirement savings, but a way for older people to convince younger people to do work for them? Money is a persuasive way of doing that, but regardless it's older people depending on younger people to take care of them. Compare these scenarios: - people save for retirement, so many old people are have money to spend. Lots of young people go into occupations that help old people because that's where the money is. - the government provides pensions, so many old people have money to spend. Lots of young people go into occupations that help old people because that's where the money is. Either way, the real-world effect is the work that young people do. There are always risks and they can't be wished away. The government could change the pension plan. (But note that in the U.S, social security is very well defended in Congress, and more older voters makes it more secure.) Or the price of services that old people need could go up because there are fewer workers or because they dislike the work. As an individual, having above-average savings helps, but by definition everyone can't be above-average. If all retirees double their savings and supply is fixed then inflation is inevitable. To a first approximation the only real-world solutions are to increase the number of workers (immigration or increased birth rate) or to to increase productivity so fewer younger workers are needed.

dublinclontarf 16y ago

We'll the alternative to personal responsibility (that is, being personally responsible for your own retirement funds) is a massive ponzi scheme. There is no chance that people could be "forced to save" as that has always turned into another tax in every place it's been implemented. And who wants to retire? I'll retire when I'm dead, until then I'm gonna be busy doing stuff(work or otherwise). And I'm saying this as someone who's got no money. And governments are not good at this sort of thing. Take the Irish government for example(my home country), ran a massive surplus for years during the boom, saved a nice little nest egg. It was supposed to be for public pensions(actually not supposed to, it WAS). Then in 2008 they gave it to the banks. THEY GAVE IT TO THE BANKS!!!!! edit: I concede that not everyone wants to work until they're in the grave.

viraptor 16y ago
> I'll retire when I'm dead Unless you die prematurely, no... You'll retire when you're too tired to do stuff, or when your health doesn't allow you to, or when you become unable to care for yourself in many other ways. Mostly it's not up to you when you stop "doing stuff" - even less if it's about earning money (who would hire an able and willing to work 60-70-yo these days? - realistically).
- dublinclontarf 16y ago
  I accept that not everyone else has the same outlook as me, but I plan to do the sustainable thing. What old people who can't do anything anymore have done for millenia before social security and "retirement". Have my children take care of me. Well that's plan B, plan A is to become very wealthy from the things I create and live off that. And who said someone has to hire me? There are plenty of people here who work for themselves (or at least their customers). With webapps they don't even know what you look like, you could be a 90 year old dressed as Gandalf and it wouldn't matter as long as the sites good.
  - viraptor 16y ago
    You're assuming that your children will be able to, will be wealthy enough to, will be willing to, will be alive long enough to do that. Also you're assuming that you will be mentally capable of working in your 60's. That's a lot of assumptions which I wouldn't be comfortable with in my life. Not trying to say everything bad will happen, but that's a lot of assumptions... at some points you might be left with no support from yourself or family - and a lot of people find themselves in situations like that.

_delirium 16y ago

That's basically why Social Security was first introduced, and I think it still makes some sense. Looking at it in the other direction, it's more or less a fact that a large proportion of people won't save for retirement. Therefore, you have three choices: 1) a bunch of destitute and possibly homeless old people; 2) some sort of after-the-fact spending to provide emergency services/shelter/care for destitute elderly; or 3) some sort of mandatory pension system to make sure elderly don't become destitute in the first place. People generally find #1 unpalatable, so the practical choices are #2 versus #3: do we set up some sort of general pension system to make sure elderly make at least a bare minimum income to stay off the streets (currently $20k/yr or so), or do we instead set aside money to spend on housing and caring for destitute elderly, e.g. through government-run nursing homes?

Retric 16y ago
We also have government run nursing homes and plenty of destitute old people live in them. But, even for a selfish person SS is not exactly a terrible idea. Consider, pensions and SS have a huge benefit over traditional forms of investing. Imagine setting one up a pension for a group of savvy investors. As you near retirement you pool your money with 10,000 other people and all split the dividend each month (based on what % you put in). As people start to die off there is a smaller pool of receptions who keep getting a larger monthly check. Granted you lose the ability to give money to your spouse/children when you die, but you don't need to worry about outliving your savings. (Assuming the fund is not mismanaged etc.) PS: There are many problems with SS, but when you consider it's inflation adjusted it represents a vary large and vary safe investment. (Run a Monte Carlo Analysis assuming you are only willing to accept a 1% risk of running out of money at 100 and a safe retirement takes a huge nest egg.)
- byrneseyeview 16y ago
  That structure is often called a Tontine. It's illegal, because after a while it's basically a massive monetary reward for offing your fellow investors.
  - 16y ago

TGJ 16y ago

While it may not be the best of ideas, you have to balance it with freedom and the value of self-reliance. Social Security as it is only helps further the growth of the nanny state while also limiting our freedom to do with our own money as we see fit. As a side note, Government should never be in the business of "Public Good" projects. Time and time again, government has shown that it cannot be trusted.

jarek 16y ago
Do you consider mass vaccinations of mid 20th century a public good project? Do you consider them a failure?
- TGJ 16y ago
  Public safety.

byrneseyeview 16y ago

The problem with having the government do it is that they can be collectively less responsible. Think about it: instead of having a system you trust, you need to have a system that 51% of the voting public trusts. When that voting public consists disproportionately of old people, that means a system that pays out more than it can afford to, and redistributes income from young to old. In other words, you get what we've got, which doesn't even work.