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I also live in europe. My retirement is based on paying ~25% of my gross income into a retirement fund, which is then spent on current retirees, and hoping tha

I also live in europe. My retirement is based on paying ~25% of my gross income into a retirement fund, which is then spent on current retirees, and hoping that in many years, there will be enough people working to be able to pay my retirement. If you gave europeans those 25% as an extra net pay, there would be a lot more new cars on the road, a bit more savings/investments, and a lot more problems when people get old. "Smart" people would save and invest, and have better "pensions" than they'd have in the current system, and "stupid" people would work until 85yo, and die of hunger.

kazen44 5y ago
people who are poor are usually not stupid. being poor is also a direct result of onces environment and the social and economic status of their parents. should we just accept that capitalism punishes the poor for something they have no control over?
- ajsnigrutin 5y ago
  I didn't say poor, I said stupid. Some people earning good wages now, would also buy new cars, and be fscked when they get old, and some people earning low wages now, would still invest the 'extra' 25% into something, that'll last until they need it to retire. ...but we do live in a system, that rewards such behaviour, so yeah...
  - tapland 5y ago
    The poor people's 25% isn't seldom a small small small small fraction of a more wealthy person's 25%. Low wage workers here (also Europe) can barely save any money (if at all), and have something like at least a 10x increase in disposable income after living expenses from moving in with someone, or getting a well paying senior dev job. It's not always an individual's actions having this effect, and if you decide to punish or reward based on it you are not rewarding based on morally reasonable metrics.
  - pkdpic_y9k 5y ago
    I live across the street from a homeless camp in California in a house I dont deserve, my parents are amazing people and had no retirement plan and I have no idea whats going on or what Im going to do when Im too old to work and get fired from whatever bs tech company Im working for when Im 35 and Im just realizing it. Its 1:30 in the morning and my babys gonna wake me up in four hours. America is insane.
piva00 5y ago
> If you gave europeans those 25% as an extra net pay, there would be a lot more new cars on the road, a bit more savings/investments, and a lot more problems when people get old. "Smart" people would save and invest, and have better "pensions" than they'd have in the current system, and "stupid" people would work until 85yo, and die of hunger. Exactly, there is an ideology of pushing this kind of issue completely into "personal responsibility" territory which, for me, is frankly a total lack of empathy. The way it works here in Sweden seems pretty decent to me so far: you get a public pension that you and your employer have paid into the system (of course, it pays the current pensioners) and another part of my pension is put into a pension investment account, that I can operate/manage however I want. So you get both, a minimum pension sustained by the system paid by current working people and an investment account that I can manage and grow as a portfolio to use during my retirement.
- ajsnigrutin 5y ago
  The problem (atleast in slovenia) is, that you don't get back the amount that you paid in. Eg. you work 40 years, and expect 20 years on pensions (made up numbers, just an example). If you get an average paycheck, pay 25% of it into the pension for 40 years, you expect to get approximately 50% of the average paycheck at the time of retirement. Well.. you don't (atleast not here). This also presumes, that there are 2x as many workers that pay into the fund, as there are retirees taking out of the fund... which sadly is not the case anymore, and the situation will get worse and worse. Also, due to many laws and changes, every few years, you get average-paid people retired in eg. 1991 that receive more than the average paycheck in retirement, and newly retired people getting 400eur of retirement (=not enough to survive).
  - furyg3 5y ago
    I know nothing about Slovenia, but my hypothesis is that this is (kind of) by design. Those with good incomes subsidize those with low incomes, and everyone subsidizes those with no income. The only way to 'earn more' is through a positive return on investment, but pension schemes necessarily must err on the 'safe side'. And currently 'safe' interest rates are negative.
papito 5y ago
Giving people more money is not going to increase investments, as the experience here in the United States shows. People just increase their quality of life and live from paycheck to [bigger] paycheck. Even in the field of software engineering where, one assumes, the employees are of above average intelligence, many are completely oblivious to what is happening in their 401Ks or even if they have one.
- ajsnigrutin 5y ago
  Well of course, but if you want a pension system, you have to take (in our case) 25% of their money now, to be able to give them something back later (or in our case, to give the current pensioners money now, and hope that you'll have someone to take money from, when the current workers retire). A lot of people want the retirement money 'later', but don't want to pay 'now'.
- webinvest 5y ago
  Every spare dollar I get goes to investments. But I am atypical in that regard.
  - wing-_-nuts 5y ago
    Username checks out; but seriously, don't over do it. Someday you'll hit financial independence, and you're going to need to have the non-financial aspects of your life (friends, romantic partners, health, hobbies, etc) squared away before you retire. If you've been neglecting them all your life, it's harder than you'd imagine to repair them.
- bumby 5y ago
  A year and a half ago, I would have believed you but I think the data from the stimulus payments in the U.S. shows that a substantial portion of that money went to pay down debt and into savings. I think credit card debt went down something like 14.5% over 2020. Maybe some of this is attributable to the fact there was less availability for experiential spending, but people certainly had availability for buying consumer goods online. And some are expecting the debt to incur faster once the pandemic is fully in the rearview, but it's enough for me to question the strength of my previous conviction that giving people money automatically means they spend it on consumerism.
the_gipsy 5y ago
> there would be a lot more new cars on the road The current pensionists wouldn't be spending their pension then, so there would be roughly the same "new cars on the road". The real problem seems to be that poor people's real job in this economy is to be spending their money, and the actual work is just a meaningless trap. "Smart" and "stupid" poor people generalization is also a disheartening protofascist sentiment.
- KptMarchewa 5y ago
  Pensioners don't buy new cars in Europe. It's an American perspective that elderly are wealthy.
  - the_gipsy 5y ago
    My grampa in Germany was getting his Golf renewed every few years up until he couldn't drive anymore.
rorykoehler 5y ago
I have zero faith the European pension schemes will exist by the time I’m 65 (~30 years). I basically don’t count it towards my retirement planning.
- bluGill 5y ago
  Nobody should have any faith in anything in life that far in advance. You hedge your bets and save anyway even though you can't know if you will live that long, nor if the political reality will allow what currently looks like the best choice will work out that way. Today in the US the Roth IRA looks like a great investment. I remember when they first came out my dad transfering everything to one even thoguh as he said then "I have to believe they will change the laws and so by the time I retire the tax savings won't happen". So far the laws still make it a good deal, but there is always the risk that the promise gets broken.
  - rorykoehler 5y ago
    It's simple maths. The pension fund works similar to a ponzi scheme in that it can only sustain itself if there are enough new workers paying in. We have an aging population with massively declining birthrates (inverted population pyramid [1]). Unless the next gen are unbelievably high earning there is no way it can continue. [1] https://www.worldlifeexpectancy.com/germany-population-pyramid https://www.worldlifeexpectancy.com/germany-population-pyram...
    - bluGill 5y ago
      The simple math is wrong because it doesn't account for the future which might or might not have some other consideration that you don't even know of.
      - rorykoehler 5y ago
        Well yes I kind of eluded to that. It's basically gambling either way but looking at the political situation in Europe I fear any response to changing environments will be reactionary and too little too late.
2ion 5y ago
They take ~19% of my total comp to pay into a ponzi government pension scheme in Germany that will crash in predictable amounts of time, and they have written it into law that existing pensions must never decrease in real terms (!), meaning that every year pension benefits increase, just to make the voting senior population feel secured. It's all at the expense of my generation which gets their salary taken away with nothing tangible in return. The consequence is that I put 75% of my remaining net into investing accounts (completely unprotected and without any tax benefits, just additional capital gains taxes...) and don't spend it on anything else. And then they keep wondering why purchasing power continues to reach all-time lows, and why Germans are unable to accomulate any assest... The promise of government pension is worthless in Germany (which is different from the pension system of civil servants, btw). The old generation exploits the young and will continue to do so until the system crashes. The sane thing to do is exit the mandatory contributions schemes.
simonh 5y ago
You're on a retirement scheme where current contributions directly pay for current pensions? Wow, I thought those were all dead by now, in favour of retirement funds that are invested. Of course state pensions are funded from current taxes, so there's always an element of pension payments that come from current tax, but at this point all contribution based pensions should really be investment based. That works much better because the money is pumped directly back into the economy, as investment rather than consumption.
brnt 5y ago
> My retirement is based on paying ~25% of my gross income into a retirement fund, which is then spent on current retirees, and hoping that in many years, there will be enough people working to be able to pay my retirement. This is how most state pensions work, but most supplementary pensions do not (I at least have never heard of them, and I have some experience in different EU countries). They invest your money and grow the amount, and pay you out based on your personal 'investment' or that of your cohort. Where in Europe do you live if I may ask?
kingsuper20 5y ago
>hoping that in many years, there will be enough people working to be able to pay my retirement. No problem. You just import more and more people. Who supports them? Why...simply import more and more people. A lot (most?) of the problem is that there are a lot more old people than there used to be and EOL medical problems are more of a thing. Solution? I have no clue.
moshmosh 5y ago
> If you gave europeans those 25% as an extra net pay, there would be a lot more new cars on the road, a bit more savings/investments, and a lot more problems when people get old. "Smart" people would save and invest, and have better "pensions" than they'd have in the current system, and "stupid" people would work until 85yo, and die of hunger. Part of the problem with giving everyone more money and expecting them to invest it is that it frees up that money for competition for things like better schools (housing in better school districts, private school tuition). You can sacrifice your retirement to give your kids a serious advantage. Tons of people do this, in part because once some start doing it, everyone has to a little or their lives actually get worse than if the money were taken out for retirement before they ever saw it. Then there's the "keeping up with the Joneses" effect which is very hard to entirely resist when the spending-norms for your income-peers are set by people who aren't putting away enough for retirement.
- biomcgary 5y ago
  I'm curious about the net societal effect of a large fraction of successful people investing in their children's education. From an evolutionary perspective, it makes sense that previous selection would lead to this type of psychology (i.e., selection favors parental investment when it increases fitness, which is particularly true when humans are near carrying capacity, see K-selection). However, this pattern leads to increasing inequity and, historically, societal instability (which would favor R-selection).
froh 5y ago
if there are no future people working to pay your retirement, then there is no more economy and no more people to sustain whichever alternative "secure investment" you've made. a down economy completely devalues any alternative securities for any "pension funds" or investments, be it rented buildings or stock or other company shares. not doing a redistributing pension only serves the investment companies selling the illusion of a better private pension. Switzerland has understood this 20 years ago.
jnxx 5y ago
> "Smart" people would save and invest, and have better "pensions" than they'd have in the current system Well, if, and only if, their investments have positive gains. Also you can (depending on the country) pay today extra money into retirements and pension funds which are a kind of financial investments. But good luck figuring out how much of the money goes actually into administering the funds and is deducted from your payment before any investment is made. If these funds were usually an advantageous deal, their conditions would be a lot more transparent. My take is more or less: Pension is a kind of insurance (you do not know how long you are going to live), so it should be low-risk. If you have extra money, you can invest that - but there is no investment without real risks, so it has to be money which you can really afford to lose.
croes 5y ago
It's not so simple. The money for the retirees is the income of others and if all invest the interest rates go down and you get less money from your investment. And the current system is safer against a financial crisis. For some few it's worse than keeping the money and invest themselves but for the society it's much better.
thescriptkiddie 5y ago
More likely what would happen is that employers would take that 25% for themselves, lowering gross pay so that net pay stays the same. Then every working person would be worse off.

kazen44 5y ago

people who are poor are usually not stupid. being poor is also a direct result of onces environment and the social and economic status of their parents. should we just accept that capitalism punishes the poor for something they have no control over?

ajsnigrutin 5y ago
I didn't say poor, I said stupid. Some people earning good wages now, would also buy new cars, and be fscked when they get old, and some people earning low wages now, would still invest the 'extra' 25% into something, that'll last until they need it to retire. ...but we do live in a system, that rewards such behaviour, so yeah...
- tapland 5y ago
  The poor people's 25% isn't seldom a small small small small fraction of a more wealthy person's 25%. Low wage workers here (also Europe) can barely save any money (if at all), and have something like at least a 10x increase in disposable income after living expenses from moving in with someone, or getting a well paying senior dev job. It's not always an individual's actions having this effect, and if you decide to punish or reward based on it you are not rewarding based on morally reasonable metrics.
- pkdpic_y9k 5y ago
  I live across the street from a homeless camp in California in a house I dont deserve, my parents are amazing people and had no retirement plan and I have no idea whats going on or what Im going to do when Im too old to work and get fired from whatever bs tech company Im working for when Im 35 and Im just realizing it. Its 1:30 in the morning and my babys gonna wake me up in four hours. America is insane.

piva00 5y ago

> If you gave europeans those 25% as an extra net pay, there would be a lot more new cars on the road, a bit more savings/investments, and a lot more problems when people get old. "Smart" people would save and invest, and have better "pensions" than they'd have in the current system, and "stupid" people would work until 85yo, and die of hunger. Exactly, there is an ideology of pushing this kind of issue completely into "personal responsibility" territory which, for me, is frankly a total lack of empathy. The way it works here in Sweden seems pretty decent to me so far: you get a public pension that you and your employer have paid into the system (of course, it pays the current pensioners) and another part of my pension is put into a pension investment account, that I can operate/manage however I want. So you get both, a minimum pension sustained by the system paid by current working people and an investment account that I can manage and grow as a portfolio to use during my retirement.

ajsnigrutin 5y ago
The problem (atleast in slovenia) is, that you don't get back the amount that you paid in. Eg. you work 40 years, and expect 20 years on pensions (made up numbers, just an example). If you get an average paycheck, pay 25% of it into the pension for 40 years, you expect to get approximately 50% of the average paycheck at the time of retirement. Well.. you don't (atleast not here). This also presumes, that there are 2x as many workers that pay into the fund, as there are retirees taking out of the fund... which sadly is not the case anymore, and the situation will get worse and worse. Also, due to many laws and changes, every few years, you get average-paid people retired in eg. 1991 that receive more than the average paycheck in retirement, and newly retired people getting 400eur of retirement (=not enough to survive).
- furyg3 5y ago
  I know nothing about Slovenia, but my hypothesis is that this is (kind of) by design. Those with good incomes subsidize those with low incomes, and everyone subsidizes those with no income. The only way to 'earn more' is through a positive return on investment, but pension schemes necessarily must err on the 'safe side'. And currently 'safe' interest rates are negative.

papito 5y ago

Giving people more money is not going to increase investments, as the experience here in the United States shows. People just increase their quality of life and live from paycheck to [bigger] paycheck. Even in the field of software engineering where, one assumes, the employees are of above average intelligence, many are completely oblivious to what is happening in their 401Ks or even if they have one.

ajsnigrutin 5y ago
Well of course, but if you want a pension system, you have to take (in our case) 25% of their money now, to be able to give them something back later (or in our case, to give the current pensioners money now, and hope that you'll have someone to take money from, when the current workers retire). A lot of people want the retirement money 'later', but don't want to pay 'now'.
webinvest 5y ago
Every spare dollar I get goes to investments. But I am atypical in that regard.
- wing-_-nuts 5y ago
  Username checks out; but seriously, don't over do it. Someday you'll hit financial independence, and you're going to need to have the non-financial aspects of your life (friends, romantic partners, health, hobbies, etc) squared away before you retire. If you've been neglecting them all your life, it's harder than you'd imagine to repair them.
bumby 5y ago
A year and a half ago, I would have believed you but I think the data from the stimulus payments in the U.S. shows that a substantial portion of that money went to pay down debt and into savings. I think credit card debt went down something like 14.5% over 2020. Maybe some of this is attributable to the fact there was less availability for experiential spending, but people certainly had availability for buying consumer goods online. And some are expecting the debt to incur faster once the pandemic is fully in the rearview, but it's enough for me to question the strength of my previous conviction that giving people money automatically means they spend it on consumerism.

the_gipsy 5y ago

> there would be a lot more new cars on the road The current pensionists wouldn't be spending their pension then, so there would be roughly the same "new cars on the road". The real problem seems to be that poor people's real job in this economy is to be spending their money, and the actual work is just a meaningless trap. "Smart" and "stupid" poor people generalization is also a disheartening protofascist sentiment.

KptMarchewa 5y ago
Pensioners don't buy new cars in Europe. It's an American perspective that elderly are wealthy.
- the_gipsy 5y ago
  My grampa in Germany was getting his Golf renewed every few years up until he couldn't drive anymore.

rorykoehler 5y ago

I have zero faith the European pension schemes will exist by the time I’m 65 (~30 years). I basically don’t count it towards my retirement planning.

bluGill 5y ago
Nobody should have any faith in anything in life that far in advance. You hedge your bets and save anyway even though you can't know if you will live that long, nor if the political reality will allow what currently looks like the best choice will work out that way. Today in the US the Roth IRA looks like a great investment. I remember when they first came out my dad transfering everything to one even thoguh as he said then "I have to believe they will change the laws and so by the time I retire the tax savings won't happen". So far the laws still make it a good deal, but there is always the risk that the promise gets broken.
- rorykoehler 5y ago
  It's simple maths. The pension fund works similar to a ponzi scheme in that it can only sustain itself if there are enough new workers paying in. We have an aging population with massively declining birthrates (inverted population pyramid [1]). Unless the next gen are unbelievably high earning there is no way it can continue. [1] https://www.worldlifeexpectancy.com/germany-population-pyramid https://www.worldlifeexpectancy.com/germany-population-pyram...
  - bluGill 5y ago
    The simple math is wrong because it doesn't account for the future which might or might not have some other consideration that you don't even know of.
    - rorykoehler 5y ago
      Well yes I kind of eluded to that. It's basically gambling either way but looking at the political situation in Europe I fear any response to changing environments will be reactionary and too little too late.

2ion 5y ago

They take ~19% of my total comp to pay into a ponzi government pension scheme in Germany that will crash in predictable amounts of time, and they have written it into law that existing pensions must never decrease in real terms (!), meaning that every year pension benefits increase, just to make the voting senior population feel secured. It's all at the expense of my generation which gets their salary taken away with nothing tangible in return. The consequence is that I put 75% of my remaining net into investing accounts (completely unprotected and without any tax benefits, just additional capital gains taxes...) and don't spend it on anything else. And then they keep wondering why purchasing power continues to reach all-time lows, and why Germans are unable to accomulate any assest... The promise of government pension is worthless in Germany (which is different from the pension system of civil servants, btw). The old generation exploits the young and will continue to do so until the system crashes. The sane thing to do is exit the mandatory contributions schemes.

simonh 5y ago

You're on a retirement scheme where current contributions directly pay for current pensions? Wow, I thought those were all dead by now, in favour of retirement funds that are invested. Of course state pensions are funded from current taxes, so there's always an element of pension payments that come from current tax, but at this point all contribution based pensions should really be investment based. That works much better because the money is pumped directly back into the economy, as investment rather than consumption.

brnt 5y ago

> My retirement is based on paying ~25% of my gross income into a retirement fund, which is then spent on current retirees, and hoping that in many years, there will be enough people working to be able to pay my retirement. This is how most state pensions work, but most supplementary pensions do not (I at least have never heard of them, and I have some experience in different EU countries). They invest your money and grow the amount, and pay you out based on your personal 'investment' or that of your cohort. Where in Europe do you live if I may ask?

kingsuper20 5y ago

>hoping that in many years, there will be enough people working to be able to pay my retirement. No problem. You just import more and more people. Who supports them? Why...simply import more and more people. A lot (most?) of the problem is that there are a lot more old people than there used to be and EOL medical problems are more of a thing. Solution? I have no clue.

moshmosh 5y ago

> If you gave europeans those 25% as an extra net pay, there would be a lot more new cars on the road, a bit more savings/investments, and a lot more problems when people get old. "Smart" people would save and invest, and have better "pensions" than they'd have in the current system, and "stupid" people would work until 85yo, and die of hunger. Part of the problem with giving everyone more money and expecting them to invest it is that it frees up that money for competition for things like better schools (housing in better school districts, private school tuition). You can sacrifice your retirement to give your kids a serious advantage. Tons of people do this, in part because once some start doing it, everyone has to a little or their lives actually get worse than if the money were taken out for retirement before they ever saw it. Then there's the "keeping up with the Joneses" effect which is very hard to entirely resist when the spending-norms for your income-peers are set by people who aren't putting away enough for retirement.

biomcgary 5y ago
I'm curious about the net societal effect of a large fraction of successful people investing in their children's education. From an evolutionary perspective, it makes sense that previous selection would lead to this type of psychology (i.e., selection favors parental investment when it increases fitness, which is particularly true when humans are near carrying capacity, see K-selection). However, this pattern leads to increasing inequity and, historically, societal instability (which would favor R-selection).

froh 5y ago

if there are no future people working to pay your retirement, then there is no more economy and no more people to sustain whichever alternative "secure investment" you've made. a down economy completely devalues any alternative securities for any "pension funds" or investments, be it rented buildings or stock or other company shares. not doing a redistributing pension only serves the investment companies selling the illusion of a better private pension. Switzerland has understood this 20 years ago.

jnxx 5y ago

> "Smart" people would save and invest, and have better "pensions" than they'd have in the current system Well, if, and only if, their investments have positive gains. Also you can (depending on the country) pay today extra money into retirements and pension funds which are a kind of financial investments. But good luck figuring out how much of the money goes actually into administering the funds and is deducted from your payment before any investment is made. If these funds were usually an advantageous deal, their conditions would be a lot more transparent. My take is more or less: Pension is a kind of insurance (you do not know how long you are going to live), so it should be low-risk. If you have extra money, you can invest that - but there is no investment without real risks, so it has to be money which you can really afford to lose.

croes 5y ago

It's not so simple. The money for the retirees is the income of others and if all invest the interest rates go down and you get less money from your investment. And the current system is safer against a financial crisis. For some few it's worse than keeping the money and invest themselves but for the society it's much better.

thescriptkiddie 5y ago

More likely what would happen is that employers would take that 25% for themselves, lowering gross pay so that net pay stays the same. Then every working person would be worse off.