18 ms·

Every single pension system has the working population pay for the retirees. Where do you think the money comes from? Thin air? Any increase in the value of pen

Every single pension system has the working population pay for the retirees. Where do you think the money comes from? Thin air? Any increase in the value of pension funds (for example) is coming from the workers.

aetherson 4y ago
I think a lot of people assume that pension systems ought to or actually do work as savings/investment systems, like private 401(k)s do. So you pay into the system when you're working age, your money is saved, then it is paid out to you later.
- Izikiel43 4y ago
  After seeing the pensioners in my home country living in poverty because of economic crisis destroying their pensions, the government using pension money as if it was its own, and being actively hostile to pensioners by delaying trials to pay the pension money fairly waiting for them to die, I will take a 401(k) over that always, my money is mine and no one else's.
  - yazantapuz 4y ago
    Argentinian? The government theft of the private funds was outrageous. Although the AFJPs were far from being a 401(k) system.
    - Izikiel43 4y ago
      > Argentinian Takes one to know one
  - eniotna 4y ago
    Money is never truly yours if you are not the issuer. That's why we need more "hard" money (gold, bitcoin).
    - oblio 4y ago
      Bitcoin is hard money? If it is, so is silly putty :-)))
  - olddustytrail 4y ago
    I have some bad news for you then: many of the companies that provide 401(k) were on the verge of collapse in 2008. The only reason people didn't lose their pensions entirely was because the government bailed them out... You can always lose your money. Best to accept that and not worry too much.
    - jobs_throwaway 4y ago
      How does that work? The 401(k) providers are lending out the securities that their customers own?
      - lotsofpulp 4y ago
        No, 401k admins do not own the securities, the employees do. The comment is incorrect in implying the government bailed out the administrators, but the government did backstop the price the securities (the stock market) itself. Hence why I think an SP500 investment is risk free on a >3 year timeline.
        deleted 4y ago
        [deleted]
    - pkaye 4y ago
      The 401(k) money is held separately from the company funds.
    - Izikiel43 4y ago
      > many of the companies that provide 401(k) were on the verge of collapse in 2008. The stock market went to shit, not the providers. The 401k appeal is that it's an account you *own* and the government can't touch for money, it would be the same as expropriating a bank account, which to be fair, the Argentinian goverment kind of did in 2001, hence why since then, people there save money in usd cash or in a foreign account, not in the local financial system. If the US government has to expropriate or do weird stuff in general with 401k accounts, we are in a situation where shit hit the fan long ago.
- mywittyname 4y ago
  I'm not sure about every pension system, but there are many that invest in government bonds. The problem what that approach is the sustainability of the system depends entirely upon interest rates, which have been at all time lows for the past 15 years. Some private pensions invest in the broader market. All investment systems suffer from this exact problem: returns aren't guaranteed. Even people with 401ks might experience this same issue if investment returns fall below the conventional wisdom rate of ~7% (or 4% real). But even if that rate holds up over the long-term, there's still to risk of a "lost decade" of no-returns or losses for and extended period, followed by a sudden market pop. Pensions are hard.
  - datavirtue 4y ago
    They were working great until the looting started.
  - chmod600 4y ago
    "there are many that invest in government bonds" If a government "invests" in its own bonds, that's not an investment.
    - toast0 4y ago
      Many government pensions invest in other governments' bonds.
- yamtaddle 4y ago
  Whose labor is giving those investments value? Who's doing the labor that gives those IOUs (dollars) value even if you just stick them in a savings account and don't invest them? It's not retirees.
- globalreset 4y ago
  All financial savings are an illusion. They are just claims on productivity of other people in the future. Boomer generation globally accumulated a lot of claims and considered them their "wealth" but forgot to produce enough people that are going to be willing to put an effort to satisfy these claims. Now is the time when boomers will want to use their savings and discover their error.
- nonethewiser 4y ago
  > I think a lot of people assume that pension systems ought to or actually do work as savings/investment systems, like private 401(k)s do. It works more like a Ponzi scheme.
luckylion 4y ago
Isn't the UK using pension funds?
- rwmj 4y ago
  It is (so is the US). But ultimately productive value from workers must be transferred to retired people. How exactly that happens, whether through deferred spending power (ie savings/investments) or through direct payments, it has to happen. Although I admit that there being other countries in the world does change the calculus a bit; it would be possible (albeit weird and unsustainable) for everyone in France to be retired, so long as say the Philippines was young and working and French retirees owned all the shares in Philippine companies.
  - luckylion 4y ago
    The main difference is that in the pension fund model, you (at least in theory) don't need the next generation to pay: you save now so you get money later. In the more common model, you pay for the previous generation hoping that the next one will pay for you, and you need intergenerational agreement on what's a fair amount. You don't need that with the fund model, as you (usually) agree & know beforehand how much you'll pay and how much you'll get. I'm fortunate to not be part of it, but I'm pretty sure German employees are looking at France where rents are higher and retirement age is lower and think "hey, you can do that?". I guess we'll see whether you can (though, fair enough, Germany is a special case, the reunification cost a lot of money).
    - konschubert 4y ago
      I think you missed the finer point that GP made: At the end of the day, somebody has to change that bedsheet. Consider this extreme edge case: If everybody is retired and no is is working, inflation goes to infinity and all those savings and stocks become worthless.
      - luckylion 4y ago
        For sure, but there's a difference between a promise that someone will do it for you, and you having currency to exchange for doing so. In the "having money" case, you have more options, but if you're given options, you also have more opportunity to make terrible decisions. And if it's a lump sum (or private investment of some kind), you can pass it on to your children - you can't do that with pensions in the other type.
UncleOxidant 4y ago
And it wasn't a problem when the working age population was always increasing... but when it no longer is (as is the case in much of Europe) it becomes problematic.
- aaplok 4y ago
  > when it no longer is (as is the case in much of Europe) it becomes problematic. Not necessarily. What matters here is whether production matches demand. If the proportion of people in the workforce declines, but their productivity increases by the same amount (which isn't far from being the case in Europe) you don't have a problem. And even that is too simple. As the population ages, demand changes. It increases im certain domains (health) so productivity increase might not suffice. ...but then of course the productivity of older people declines too, together with their health (higher unemployment, more sick leaves), so there is a lower and lower ROI as you put these people in the workforce. And then making people work longer accelerates the health decline, and so increases the demand. Except those people die younger on average, lowering the demand. So it's a supply and demand issue, but not quite a supply and demand of workers. It's a complicated economic problem. All of this is talked about in the French debate, which is a lot more subtle than the loud vociferations reported in the news make it out to be.
  - amadvance 4y ago
    Europe can also benefit from immigration. One advantage of immigration is that immigrants do not have to grow up to be productive.
lotsofpulp 4y ago
The money is just an entry in the accounting ledger allocating society's labor. The pension fund can increase to trillions and quadrillions, and it will not make a difference if there is not enough people willing to change bedpans for as low of a price as was originally expected.
- hartator 4y ago
  Yes, they can play with inflation and debt, but at the end of the day, it's just a question of people resource and time allocation. Money is just a proxy.
- toomuchtodo 4y ago
  There will be a market clearing price for that work, and these accounting mechanizations are simply sussing out what that price is (in comparison to other broad societal work to be done). If caring for the elderly is made more valuable than say, slinging JavaScript, that’s where some of the labor will go.
  - PeterisP 4y ago
    Sure, but the fact that your savings or pension plan contributions "should have" been enough for a certain amount of care can't guarantee that it will be enough for all or even half of it when the time comes; it's perfectly plausible (and with certain worker/retiree ratios even inevitable) that the market clearing prices will have to be higher than what would be enough for most people. And the key factor is that if everyone (or their government) saved twice as much, that wouldn't help because if the worker/retiree ratios are the same, then twice as much retirement savings should simply lead to a twice higher market clearing price for that work due to "these accounting mechanizations".
    - omegaworks 4y ago
      >then twice as much retirement savings should simply lead to a twice higher market clearing price for that work due to "these accounting mechanizations". You assume: * The labor market isn't flexible, that higher pay won't attract new workers * There isn't a wage at which workers would be satisfied meeting their basic needs. And this makes your conclusion that the labor would simply absorb additional funding too rigid.
nyokodo 4y ago
> Every single pension system has the working population pay for the retirees. Which is just a socialized form of the previous social security system which had children or grandchildren look after their parents. Of course, the glaring difference is that social security schemes have motivated many millions, who otherwise might have, to not have children at all or an inadequate number and so contribute very little to nothing towards the future maintenance of the system while still cashing the checks once they retire. Of course this system does help the minority who can't have children for whatever reason but it does look like we've swapped looking after that cohort for a few decades for effectively no social security system for anyone once this ponzi scheme collapses.
- nemothekid 4y ago
  >Of course, the glaring difference is that social security schemes have motivated many millions, who otherwise might have, to not have children at all or an inadequate number This implied link between public pensions and demographic collapse paints a picture that social security was destined to fail because people wouldn't have children for the purpose of taking care of them in old age. The millennial generation, the largest American generational cohort, were born almost 50 years after the founding of social security. How does it make sense that public pensions motivated millennials to not have children, but not their parents? Across all developed countries where you have demographic collapse you have societies where it becomes more and more expensive to raise children. The public pension system requires that the economy grows year after year and that becomes hard when your population shrinks. As to why the population is shrinking you have to look at why people aren't having children. And when you ask that question you get way more "I can't even afford to buy a house" and not "the government is going to take care of me when I'm old".
  - 988747 4y ago
    [dead]
  - mbar84 4y ago
    To prepare for retirement, you have two options: 1. Have children and treat them well. 2. Save and invest, so capital is available for the few children of the next generation to work with. As long as millennials are doing option 2. there isn't a problem. If they rely on the pension system, then that would be a problem.
ur-whale 4y ago
> Every single pension system has the working population pay for the retirees. Where do you think the money comes from? Disagree. Counter-examples: 401k in the US Second pillar in Switzerland. The money comes from the people saving and investing their own money for their old age. Shocker, I know.
- justeleblanc 4y ago
  You utterly missed my point. You say people invest money. Aren't they expecting a return? Where does that return come from? If there is no return on investment, are we really talking about a pension, or just saving up for late age unemployment?
- lazyasciiart 4y ago
  Those are not pensions. The 401k system is explicitly an alternative to the older pension systems. Words mean things.
  - jbn 4y ago
    but these are pensions, more specifically they are supplemental pensions on top of the basic one like US social security, or France's basic pension from SS (which is supplemented by "complementary pension" from other regimes like AGIRC/ARRCO).
- cdavid 4y ago
  it is a common misconception that how the retirement is funded makes a huge difference in how much you need to save. In most situations, it does not matter nearly as much as people believe. Dependency ratio will determine in large part how much people will need to save to get a given level of retirement income. For example, your 401k ability to pay for your retirement will depend on productivity gains , growth, saving, investments happen in the future. Those will look very different if you have 4 working age people for one non working person, vs 2 working age people for one non working one. In the extreme case, if nobody is working anymore when you retire, your 401k will likely worth almost nothing. The problem in France is not how it s funded, but the fact that retirement incomes are way above the funding level. France, with Italy, are the only two OECD countries where retirees have a higher income that working people, which is insane. However, since retirees vote much more than other demographics, their too large income will not be touched.
throw0101c 4y ago
> Every single pension system has the working population pay for the retirees. Nope. At least not completely. Canada switched away from a pure pay-as-you-go (PAYG) system in the 1990s: > Move towards a hybrid structure to take advantage of investment earnings on accumulated assets. Instead of a "pay-as-you-go" structure, the CPP is expected to be 20 per cent funded by 2014, such funding ratio to constantly increase thereafter towards 30 per cent by 2075 (that is, the CPP Reserve Fund will equal 30 per cent of the "liabilities" - or accrued pension obligations). * https://en.wikipedia.org/wiki/Canada_Pension_Plan#1996_reforms https://en.wikipedia.org/wiki/Canada_Pension_Plan#1996_refor... Asset returns are used to help fund benefits. A number of pension funds in Canada have moved away from a (pure) PAYG model: * https://en.wikipedia.org/wiki/Pensions_in_Canada#Canada_Model https://en.wikipedia.org/wiki/Pensions_in_Canada#Canada_Mode...
- bjourne 4y ago
  On a macroeconomic scale it is still the workers paying for the retirees. Doesn't matter how many millions you have in the bank if there aren't working people you can trade your money for goods and services with.
- akavi 4y ago
  PAYGO vs investment earnings is purely a financial construct. The central issue is that physical goods and services need to be produced around the time that they're consumed, and at a given point in time, an economy has a fixed capacity to generate these goods and services. If you have a non-producing population, and a producing population, then the only way for the non-producing population to consume a given quantity of goods and services is for the producing population to not consume those goods and services. Whether you call the reduction in consumption ability of the working population "taxes" or "investments" doesn't change this fundamental fact, except insofar as it alters certain behavioral incentives around deferring consumption and legal frameworks around property rights. (This isn't 100% of the story, since you can "lay claim" to production of working people overseas via international investment, but is accurate in broad strokes.)
  - nimbleplum40 4y ago
coryrc 4y ago
China's building massive amounts of underused housing. US boomers could have built long-lived buildings and infrastructure (high-speed trains) which provide usefulness to people later in exchange for them paying some money for retirees. Instead, they built ever-decaying roads and rotting ticky-tacky boxes and left nothing durable for future generations. Hell, they even ripped out trains in cities across the country. (Seattle interurban among so many examples).
- nradov 4y ago
  Construction quality in China is generally bad, especially in lower tier cities. Those buildings and infrastructure aren't going to last.
- joelwilliamson 4y ago
  Wasn't the Seattle interurban torn up in the early 1940s? I don't think you can blame that on the boomers.
  - coryrc 4y ago
    That's probably correct. Burke Gilman trail ripped out tracks in the 70s though.
- kaushikc 4y ago
  China is what the US used to be. Even Charlie Munger said that they are displaying more mercantile behaviour whereas the US is being protectionist and enforcing non-trade based policies across the globe.
JenrHywy 4y ago
In Australia, it is a mix. Most people should have a self-funded retirement as a result of mandatory superannuation during their working life. Those who haven't accrued enough can fall back on the aged pension, but this should become less and less common (mandatory super was only introduced in the 90s).
- nonethewiser 4y ago
  As they should. Everyone needs skin in the game.
roflyear 4y ago
Corporations extract value from countries in the form of labor and resources. It's in their best interest to pay for pensions to sustain the populace.

aetherson 4y ago

I think a lot of people assume that pension systems ought to or actually do work as savings/investment systems, like private 401(k)s do. So you pay into the system when you're working age, your money is saved, then it is paid out to you later.

Izikiel43 4y ago
After seeing the pensioners in my home country living in poverty because of economic crisis destroying their pensions, the government using pension money as if it was its own, and being actively hostile to pensioners by delaying trials to pay the pension money fairly waiting for them to die, I will take a 401(k) over that always, my money is mine and no one else's.
- yazantapuz 4y ago
  Argentinian? The government theft of the private funds was outrageous. Although the AFJPs were far from being a 401(k) system.
  - Izikiel43 4y ago
    > Argentinian Takes one to know one
- eniotna 4y ago
  Money is never truly yours if you are not the issuer. That's why we need more "hard" money (gold, bitcoin).
  - oblio 4y ago
    Bitcoin is hard money? If it is, so is silly putty :-)))
- olddustytrail 4y ago
  I have some bad news for you then: many of the companies that provide 401(k) were on the verge of collapse in 2008. The only reason people didn't lose their pensions entirely was because the government bailed them out... You can always lose your money. Best to accept that and not worry too much.
  - jobs_throwaway 4y ago
    How does that work? The 401(k) providers are lending out the securities that their customers own?
    - lotsofpulp 4y ago
      No, 401k admins do not own the securities, the employees do. The comment is incorrect in implying the government bailed out the administrators, but the government did backstop the price the securities (the stock market) itself. Hence why I think an SP500 investment is risk free on a >3 year timeline.
      - deleted 4y ago
        [deleted]
  - pkaye 4y ago
    The 401(k) money is held separately from the company funds.
  - Izikiel43 4y ago
    > many of the companies that provide 401(k) were on the verge of collapse in 2008. The stock market went to shit, not the providers. The 401k appeal is that it's an account you *own* and the government can't touch for money, it would be the same as expropriating a bank account, which to be fair, the Argentinian goverment kind of did in 2001, hence why since then, people there save money in usd cash or in a foreign account, not in the local financial system. If the US government has to expropriate or do weird stuff in general with 401k accounts, we are in a situation where shit hit the fan long ago.
mywittyname 4y ago
I'm not sure about every pension system, but there are many that invest in government bonds. The problem what that approach is the sustainability of the system depends entirely upon interest rates, which have been at all time lows for the past 15 years. Some private pensions invest in the broader market. All investment systems suffer from this exact problem: returns aren't guaranteed. Even people with 401ks might experience this same issue if investment returns fall below the conventional wisdom rate of ~7% (or 4% real). But even if that rate holds up over the long-term, there's still to risk of a "lost decade" of no-returns or losses for and extended period, followed by a sudden market pop. Pensions are hard.
- datavirtue 4y ago
  They were working great until the looting started.
- chmod600 4y ago
  "there are many that invest in government bonds" If a government "invests" in its own bonds, that's not an investment.
  - toast0 4y ago
    Many government pensions invest in other governments' bonds.
yamtaddle 4y ago
Whose labor is giving those investments value? Who's doing the labor that gives those IOUs (dollars) value even if you just stick them in a savings account and don't invest them? It's not retirees.
globalreset 4y ago
All financial savings are an illusion. They are just claims on productivity of other people in the future. Boomer generation globally accumulated a lot of claims and considered them their "wealth" but forgot to produce enough people that are going to be willing to put an effort to satisfy these claims. Now is the time when boomers will want to use their savings and discover their error.
nonethewiser 4y ago
> I think a lot of people assume that pension systems ought to or actually do work as savings/investment systems, like private 401(k)s do. It works more like a Ponzi scheme.

luckylion 4y ago

Isn't the UK using pension funds?

rwmj 4y ago
It is (so is the US). But ultimately productive value from workers must be transferred to retired people. How exactly that happens, whether through deferred spending power (ie savings/investments) or through direct payments, it has to happen. Although I admit that there being other countries in the world does change the calculus a bit; it would be possible (albeit weird and unsustainable) for everyone in France to be retired, so long as say the Philippines was young and working and French retirees owned all the shares in Philippine companies.
- luckylion 4y ago
  The main difference is that in the pension fund model, you (at least in theory) don't need the next generation to pay: you save now so you get money later. In the more common model, you pay for the previous generation hoping that the next one will pay for you, and you need intergenerational agreement on what's a fair amount. You don't need that with the fund model, as you (usually) agree & know beforehand how much you'll pay and how much you'll get. I'm fortunate to not be part of it, but I'm pretty sure German employees are looking at France where rents are higher and retirement age is lower and think "hey, you can do that?". I guess we'll see whether you can (though, fair enough, Germany is a special case, the reunification cost a lot of money).
  - konschubert 4y ago
    I think you missed the finer point that GP made: At the end of the day, somebody has to change that bedsheet. Consider this extreme edge case: If everybody is retired and no is is working, inflation goes to infinity and all those savings and stocks become worthless.
    - luckylion 4y ago
      For sure, but there's a difference between a promise that someone will do it for you, and you having currency to exchange for doing so. In the "having money" case, you have more options, but if you're given options, you also have more opportunity to make terrible decisions. And if it's a lump sum (or private investment of some kind), you can pass it on to your children - you can't do that with pensions in the other type.

UncleOxidant 4y ago

And it wasn't a problem when the working age population was always increasing... but when it no longer is (as is the case in much of Europe) it becomes problematic.

aaplok 4y ago
> when it no longer is (as is the case in much of Europe) it becomes problematic. Not necessarily. What matters here is whether production matches demand. If the proportion of people in the workforce declines, but their productivity increases by the same amount (which isn't far from being the case in Europe) you don't have a problem. And even that is too simple. As the population ages, demand changes. It increases im certain domains (health) so productivity increase might not suffice. ...but then of course the productivity of older people declines too, together with their health (higher unemployment, more sick leaves), so there is a lower and lower ROI as you put these people in the workforce. And then making people work longer accelerates the health decline, and so increases the demand. Except those people die younger on average, lowering the demand. So it's a supply and demand issue, but not quite a supply and demand of workers. It's a complicated economic problem. All of this is talked about in the French debate, which is a lot more subtle than the loud vociferations reported in the news make it out to be.
- amadvance 4y ago
  Europe can also benefit from immigration. One advantage of immigration is that immigrants do not have to grow up to be productive.

lotsofpulp 4y ago

The money is just an entry in the accounting ledger allocating society's labor. The pension fund can increase to trillions and quadrillions, and it will not make a difference if there is not enough people willing to change bedpans for as low of a price as was originally expected.

hartator 4y ago
Yes, they can play with inflation and debt, but at the end of the day, it's just a question of people resource and time allocation. Money is just a proxy.
toomuchtodo 4y ago
There will be a market clearing price for that work, and these accounting mechanizations are simply sussing out what that price is (in comparison to other broad societal work to be done). If caring for the elderly is made more valuable than say, slinging JavaScript, that’s where some of the labor will go.
- PeterisP 4y ago
  Sure, but the fact that your savings or pension plan contributions "should have" been enough for a certain amount of care can't guarantee that it will be enough for all or even half of it when the time comes; it's perfectly plausible (and with certain worker/retiree ratios even inevitable) that the market clearing prices will have to be higher than what would be enough for most people. And the key factor is that if everyone (or their government) saved twice as much, that wouldn't help because if the worker/retiree ratios are the same, then twice as much retirement savings should simply lead to a twice higher market clearing price for that work due to "these accounting mechanizations".
  - omegaworks 4y ago
    >then twice as much retirement savings should simply lead to a twice higher market clearing price for that work due to "these accounting mechanizations". You assume: * The labor market isn't flexible, that higher pay won't attract new workers * There isn't a wage at which workers would be satisfied meeting their basic needs. And this makes your conclusion that the labor would simply absorb additional funding too rigid.

nyokodo 4y ago

> Every single pension system has the working population pay for the retirees. Which is just a socialized form of the previous social security system which had children or grandchildren look after their parents. Of course, the glaring difference is that social security schemes have motivated many millions, who otherwise might have, to not have children at all or an inadequate number and so contribute very little to nothing towards the future maintenance of the system while still cashing the checks once they retire. Of course this system does help the minority who can't have children for whatever reason but it does look like we've swapped looking after that cohort for a few decades for effectively no social security system for anyone once this ponzi scheme collapses.

nemothekid 4y ago
>Of course, the glaring difference is that social security schemes have motivated many millions, who otherwise might have, to not have children at all or an inadequate number This implied link between public pensions and demographic collapse paints a picture that social security was destined to fail because people wouldn't have children for the purpose of taking care of them in old age. The millennial generation, the largest American generational cohort, were born almost 50 years after the founding of social security. How does it make sense that public pensions motivated millennials to not have children, but not their parents? Across all developed countries where you have demographic collapse you have societies where it becomes more and more expensive to raise children. The public pension system requires that the economy grows year after year and that becomes hard when your population shrinks. As to why the population is shrinking you have to look at why people aren't having children. And when you ask that question you get way more "I can't even afford to buy a house" and not "the government is going to take care of me when I'm old".
- 988747 4y ago
  [dead]
- mbar84 4y ago
  To prepare for retirement, you have two options: 1. Have children and treat them well. 2. Save and invest, so capital is available for the few children of the next generation to work with. As long as millennials are doing option 2. there isn't a problem. If they rely on the pension system, then that would be a problem.

ur-whale 4y ago

> Every single pension system has the working population pay for the retirees. Where do you think the money comes from? Disagree. Counter-examples: 401k in the US Second pillar in Switzerland. The money comes from the people saving and investing their own money for their old age. Shocker, I know.

justeleblanc 4y ago
You utterly missed my point. You say people invest money. Aren't they expecting a return? Where does that return come from? If there is no return on investment, are we really talking about a pension, or just saving up for late age unemployment?
lazyasciiart 4y ago
Those are not pensions. The 401k system is explicitly an alternative to the older pension systems. Words mean things.
- jbn 4y ago
  but these are pensions, more specifically they are supplemental pensions on top of the basic one like US social security, or France's basic pension from SS (which is supplemented by "complementary pension" from other regimes like AGIRC/ARRCO).
cdavid 4y ago
it is a common misconception that how the retirement is funded makes a huge difference in how much you need to save. In most situations, it does not matter nearly as much as people believe. Dependency ratio will determine in large part how much people will need to save to get a given level of retirement income. For example, your 401k ability to pay for your retirement will depend on productivity gains , growth, saving, investments happen in the future. Those will look very different if you have 4 working age people for one non working person, vs 2 working age people for one non working one. In the extreme case, if nobody is working anymore when you retire, your 401k will likely worth almost nothing. The problem in France is not how it s funded, but the fact that retirement incomes are way above the funding level. France, with Italy, are the only two OECD countries where retirees have a higher income that working people, which is insane. However, since retirees vote much more than other demographics, their too large income will not be touched.

throw0101c 4y ago

> Every single pension system has the working population pay for the retirees. Nope. At least not completely. Canada switched away from a pure pay-as-you-go (PAYG) system in the 1990s: > Move towards a hybrid structure to take advantage of investment earnings on accumulated assets. Instead of a "pay-as-you-go" structure, the CPP is expected to be 20 per cent funded by 2014, such funding ratio to constantly increase thereafter towards 30 per cent by 2075 (that is, the CPP Reserve Fund will equal 30 per cent of the "liabilities" - or accrued pension obligations). * https://en.wikipedia.org/wiki/Canada_Pension_Plan#1996_reforms https://en.wikipedia.org/wiki/Canada_Pension_Plan#1996_refor... Asset returns are used to help fund benefits. A number of pension funds in Canada have moved away from a (pure) PAYG model: * https://en.wikipedia.org/wiki/Pensions_in_Canada#Canada_Model https://en.wikipedia.org/wiki/Pensions_in_Canada#Canada_Mode...

bjourne 4y ago
On a macroeconomic scale it is still the workers paying for the retirees. Doesn't matter how many millions you have in the bank if there aren't working people you can trade your money for goods and services with.
akavi 4y ago
PAYGO vs investment earnings is purely a financial construct. The central issue is that physical goods and services need to be produced around the time that they're consumed, and at a given point in time, an economy has a fixed capacity to generate these goods and services. If you have a non-producing population, and a producing population, then the only way for the non-producing population to consume a given quantity of goods and services is for the producing population to not consume those goods and services. Whether you call the reduction in consumption ability of the working population "taxes" or "investments" doesn't change this fundamental fact, except insofar as it alters certain behavioral incentives around deferring consumption and legal frameworks around property rights. (This isn't 100% of the story, since you can "lay claim" to production of working people overseas via international investment, but is accurate in broad strokes.)
- nimbleplum40 4y ago

coryrc 4y ago

China's building massive amounts of underused housing. US boomers could have built long-lived buildings and infrastructure (high-speed trains) which provide usefulness to people later in exchange for them paying some money for retirees. Instead, they built ever-decaying roads and rotting ticky-tacky boxes and left nothing durable for future generations. Hell, they even ripped out trains in cities across the country. (Seattle interurban among so many examples).

nradov 4y ago
Construction quality in China is generally bad, especially in lower tier cities. Those buildings and infrastructure aren't going to last.
joelwilliamson 4y ago
Wasn't the Seattle interurban torn up in the early 1940s? I don't think you can blame that on the boomers.
- coryrc 4y ago
  That's probably correct. Burke Gilman trail ripped out tracks in the 70s though.
kaushikc 4y ago
China is what the US used to be. Even Charlie Munger said that they are displaying more mercantile behaviour whereas the US is being protectionist and enforcing non-trade based policies across the globe.

JenrHywy 4y ago

In Australia, it is a mix. Most people should have a self-funded retirement as a result of mandatory superannuation during their working life. Those who haven't accrued enough can fall back on the aged pension, but this should become less and less common (mandatory super was only introduced in the 90s).

nonethewiser 4y ago
As they should. Everyone needs skin in the game.

roflyear 4y ago

Corporations extract value from countries in the form of labor and resources. It's in their best interest to pay for pensions to sustain the populace.