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I hear this argument quite often : "Smart people aren't having so many kids now because they don't have to." Depends on what you're counting on in the future.

I hear this argument quite often : "Smart people aren't having so many kids now because they don't have to." Depends on what you're counting on in the future. If you want to be taken care of when you're older, and almost no one has children, then your future is bleak no matter how much you earn now. Inflation will eat most of your savings that you'd want to spend on care. Of course there's immigration or you can move but you're going to be lonely nevertheless. It may sound controversial but it's a bit like not getting vaccinated and counting on herd immunity. Who would be writing all those HN comments now if our parents hadn't had children?

swolchok 8y ago
> Inflation will eat most of your savings What? This is why investment advice for retirement generally revolves around allocation into stocks and bonds while leaving only an emergency fund plus regular expenses in more liquid assets like savings accounts. Inflation will only eat your savings if you fail to invest. If you want to talk about risk, well, inflation is why a total failure to accept risk is extremely risky!
- sevensor 8y ago
  And you expect your investments to continue to increase in value with a shrinking population?
- watwut 8y ago
  I think that he is talking about average person and you have rich classes in mind. Most people dont have money to invest in bonds.
  - InitialLastName 8y ago
    "Most people" down into the middle classes (at least in the US) have money invested in the market already, through either an employer-related pension or a 401K-type plan.
- polskibus 8y ago
  Sure, this advice seems ok in current economic setting, where workforce size is replenished by newer generations. Now think about what would happen if there are a lot of old retired people but the number of people willing to work for them is 50% of what is required, in most branches of the economy. Money will start chasing the workers, and they pay will sky rocket. It's more like SV skyrocketing housing prices and total compensation, bit wider in scope.
  - swolchok 8y ago
    > pay will sky rocket Why do you think that this will entirely fail to incentivize prospective retirees to work for more total years of their lives in order to benefit from increased pay?
- iguy 8y ago
  Every service you buy with your savings has to be provided by people working at that time. More savings competing for fewer workers will cause inflation until your savings are reduced to match. To take the extreme example, if everyone tried to save up and then take a sabbatical year in 2025, they would all find that their money became almost worthless -- they could buy capital goods (made before) but nothing else. Before Paul Krugman metamorphozed into a political hack, he wrote some quite solid stuff about economics. His famous baby-sitting co-op [1] runs into this problem: Everyone wishes to earn tickets on weekdays / winter and spend them on weekends / summer, but this is impossible: [1] http://www.pkarchive.org/theory/baby.html http://www.pkarchive.org/theory/baby.html
lotsofpulp 8y ago
Another option is assisted suicide or suicide once you can't take care of yourself.
ryandrake 8y ago
From a purely economic standpoint, treating kids like a retirement investment seems absurdly risky compared to the alternative. According to this link [1] the average cost of raising a middle class child to age 18 is $233,610. Plus the average cost of a 4 year out of state university [2] $36,420 equals $270,030. That’s $12,274 a year for 22 years. Let’s say instead you put that into a pre tax IRA earning 6%. At the end of those 22 years your balance is $532,597. Let that grow for another 10 years and you’re at $852,155. Assume 15% effective tax rate at retirement you have $724,331 after tax. Is your (now 32 year old) kid going to have the means to provide you that much assistance in your retirement? 1: http://money.com/money/4629700/child-raising-cost-department-of-agriculture-report/ http://money.com/money/4629700/child-raising-cost-department... 2: https://www.collegeraptor.com/find-colleges/articles/affordability-college-cost/average-college-costs-2017-2018/ https://www.collegeraptor.com/find-colleges/articles/afforda...
- polskibus 8y ago
  This model may work when you don't have a kid but most people do (ie the size of the workforce is stable). It does not account for situations where workforce drops by large % and there are much more retirees than workers.
  - ryandrake 8y ago
    At what workforce % does compounding interest stop working? Or are you saying interest rates will become negative as the workforce drops? Society’s experience replacing workers with robotics and automation may suggest otherwise. Now may be the best time to stop having kids and instead invest what you’d otherwise spend. Chances are there will be few remaining un-automated jobs by the time they need employment. I say this as someone who has a kid—I fear for her future honestly.
    - polskibus 8y ago
      I'm saying that if today there is one caretaker for one retiree, but tomorrow there's one caretaker for 3 retirees then caretaker tomorrow can easily demand a lot higher pay than today - he'll work for the highest bidder. Compound interest gains can be offset by this inflation. Similar localized inflationary pressures can be seen in SV where there is limited supply of houses and there are many highly paid specialists who generate demand for those houses. Now translate demand for housing to demand for services, and low supply of houses into low supply of workers providing those services. Everyone around you is using compound interest, so relative to each other you have similar purchasing power to them. Now you compete with the same people for those services. It's the relative power that really decides whether you can afford the services or not. If the workers don't have to compete with each other then you'll spend all that nice compound interest chasing them.

swolchok 8y ago

> Inflation will eat most of your savings What? This is why investment advice for retirement generally revolves around allocation into stocks and bonds while leaving only an emergency fund plus regular expenses in more liquid assets like savings accounts. Inflation will only eat your savings if you fail to invest. If you want to talk about risk, well, inflation is why a total failure to accept risk is extremely risky!

sevensor 8y ago
And you expect your investments to continue to increase in value with a shrinking population?
watwut 8y ago
I think that he is talking about average person and you have rich classes in mind. Most people dont have money to invest in bonds.
- InitialLastName 8y ago
  "Most people" down into the middle classes (at least in the US) have money invested in the market already, through either an employer-related pension or a 401K-type plan.
polskibus 8y ago
Sure, this advice seems ok in current economic setting, where workforce size is replenished by newer generations. Now think about what would happen if there are a lot of old retired people but the number of people willing to work for them is 50% of what is required, in most branches of the economy. Money will start chasing the workers, and they pay will sky rocket. It's more like SV skyrocketing housing prices and total compensation, bit wider in scope.
- swolchok 8y ago
  > pay will sky rocket Why do you think that this will entirely fail to incentivize prospective retirees to work for more total years of their lives in order to benefit from increased pay?
iguy 8y ago
Every service you buy with your savings has to be provided by people working at that time. More savings competing for fewer workers will cause inflation until your savings are reduced to match. To take the extreme example, if everyone tried to save up and then take a sabbatical year in 2025, they would all find that their money became almost worthless -- they could buy capital goods (made before) but nothing else. Before Paul Krugman metamorphozed into a political hack, he wrote some quite solid stuff about economics. His famous baby-sitting co-op [1] runs into this problem: Everyone wishes to earn tickets on weekdays / winter and spend them on weekends / summer, but this is impossible: [1] http://www.pkarchive.org/theory/baby.html http://www.pkarchive.org/theory/baby.html

lotsofpulp 8y ago

Another option is assisted suicide or suicide once you can't take care of yourself.

ryandrake 8y ago

From a purely economic standpoint, treating kids like a retirement investment seems absurdly risky compared to the alternative. According to this link [1] the average cost of raising a middle class child to age 18 is $233,610. Plus the average cost of a 4 year out of state university [2] $36,420 equals $270,030. That’s $12,274 a year for 22 years. Let’s say instead you put that into a pre tax IRA earning 6%. At the end of those 22 years your balance is $532,597. Let that grow for another 10 years and you’re at $852,155. Assume 15% effective tax rate at retirement you have $724,331 after tax. Is your (now 32 year old) kid going to have the means to provide you that much assistance in your retirement? 1: http://money.com/money/4629700/child-raising-cost-department-of-agriculture-report/ http://money.com/money/4629700/child-raising-cost-department... 2: https://www.collegeraptor.com/find-colleges/articles/affordability-college-cost/average-college-costs-2017-2018/ https://www.collegeraptor.com/find-colleges/articles/afforda...

polskibus 8y ago
This model may work when you don't have a kid but most people do (ie the size of the workforce is stable). It does not account for situations where workforce drops by large % and there are much more retirees than workers.
- ryandrake 8y ago
  At what workforce % does compounding interest stop working? Or are you saying interest rates will become negative as the workforce drops? Society’s experience replacing workers with robotics and automation may suggest otherwise. Now may be the best time to stop having kids and instead invest what you’d otherwise spend. Chances are there will be few remaining un-automated jobs by the time they need employment. I say this as someone who has a kid—I fear for her future honestly.
  - polskibus 8y ago
    I'm saying that if today there is one caretaker for one retiree, but tomorrow there's one caretaker for 3 retirees then caretaker tomorrow can easily demand a lot higher pay than today - he'll work for the highest bidder. Compound interest gains can be offset by this inflation. Similar localized inflationary pressures can be seen in SV where there is limited supply of houses and there are many highly paid specialists who generate demand for those houses. Now translate demand for housing to demand for services, and low supply of houses into low supply of workers providing those services. Everyone around you is using compound interest, so relative to each other you have similar purchasing power to them. Now you compete with the same people for those services. It's the relative power that really decides whether you can afford the services or not. If the workers don't have to compete with each other then you'll spend all that nice compound interest chasing them.