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Which number would you tweak to make a retirement fund financially balanced? I am not an expert, but of the top of my mind we have the following possibilities:

by atoav 3y ago

Which number would you tweak to make a retirement fund financially balanced? I am not an expert, but of the top of my mind we have the following possibilities: [1] balance the bottom of the age pyramid: get more working people. Either by creating a social/financial situation that gives young people the security to get kids or by easing work migration from places with many young people. [2] balance the top end of the pyramid: make the health aystem worse so people die earlier and you don't have to pay pensions so long [3] raise the retirement age so the fewer payers raise more money and you have to pay out less over time. [4] change the way retirement funds are allowed to work with the money so they can work with the interest [5] If bureaucratic cost is an issue with the retirement system you can save some money here, but it is going to be peanuts in comparison to the other measures. [6] Raise the money from elsewhere (e.g. by taxing investment gains oe by raising wages and have a bigger fraction of the wage going to retirement funds) Option 1 either takes long (kids that will be born in a few years will not be able to work until decades later) or has cultural side effects (a significant amount of migration can lead to all kind of tensions with the local population). Option 2 is not an option on ethical grounds. Option 3 is the easy option, although it has the side effect that people who know they are never going to retire might not want to get kids so the problem gets worse without some measure to counter this. Option 4 is something scandinavian pension funds already do (investing the money for returns), although the risk has to be managed properly then. If you can't motivate people to get more kids (well paying secure jobs and a positive outlook on the future) the only number you can reasonably adjust in an aging society is the retirement age. People live longer so they have to work longer. As a fraction of the average livespan they work the same. If France raises the retirement age by two years to 64 they are still retiring earlier than all surrounding countries. Italy: 67, Spain: 66, Germany, Belgium: 65

riku_iki 3y ago
> [6] Raise the money from elsewhere (e.g. by taxing investment gains oe by raising wages and have a bigger fraction of the wage going to retirement funds) yeah, for example I googled and found that corp tax dropped from 33 to 25 in last five years, so they literally took money from employees and gave to employers. But trivial change could be to make pensions base on retirement age: someone can retire at 62, but get smaller pension, and another could retire at 78 but get much larger pension, plus have pension base on contribution.
- NoLinkToMe 3y ago
  > But trivial change could be to make pensions base on retirement age: someone can retire at 62, but get smaller pension, and another could retire at 78 but get much larger pension, plus have pension base on contribution. That trivial change is essentially already the case. There's no law that requires you to work like some kind of slave. You can retire whenever you want. The laws are about the age to be eligible for full-retirement. You can already retire early and receive a lower retirement, or keep working for much longer and have a much higher income in retirement. > corp tax dropped from 33 to 25 in last five years To drive economic growth. France's gdp per capita is lower today than it was 15 years ago. In the US it's 45% higher than it was 15 years ago. France's corporate system wasn't working, and high taxes were a key reason from lots of studies. Anyway, taxes aren't really that relevant for retirement. If a person needs to consume 10 units of goods/services (e.g. food, clothes, healthcare, whatever), and workers produce 40 units each, a population of 25 workers can produce 1000 units and sustain another 75 retirees (1000 production, 1000 consumption). If you lower the retirement age such that there are just 15 workers and 85 retirees, you're now still consuming 1000 units, but only produce 600 units. There's massive shortages, prices skyrocket, and many people become poor because there's not enough production to meet their needs. Raising lots of money through taxes doesn't change this fundamental issue. Even if you give everyone $ 1 trillion dollars of money, in this economic system, there's still not enough production to meet needs. So you need one of two things to solve it: more workers (= more production), or more productivity per worker (= more production). That latter point is not something the government can really control, although high taxes tend to drive productivity per worker down because economic activity is less rewarding to the source of the activity, as the activity is taxed. So high taxes can actually make this situation worse. I'm aware I'm simplifying a lot but I hope it helps to show taxes don't address the root-cause issue.
  - riku_iki 3y ago
    > To drive economic growth. France's gdp per capita is lower today than it was 15 years ago. In the US it's 45% higher than it was 15 years ago. France's corporate system wasn't working, and high taxes were a key reason from lots of studies. actually, high corp taxes can drive economic growth, because they give incentive to companies to reinvest into the business and not into shareholder's pockets.
Aerroon 3y ago
The real solution would've been to not create an unsustainable pyramid scheme in the first place. Unfortunately the negative effects of it take so long to appear that the people who created the system will never feel them.
- atoav 3y ago
  Exactly. We should have based much more of our politics around dealing with the age structure in society, just like we should have dealt with climate change when it was still easier to deal with. But on the other hand the shareholders were very happy, so there's that.
- NoLinkToMe 3y ago
  The population pyramid is mostly due to the post WW II babyboom. Not sure what you're proposing then (family planning?) and now (also family planning but now reverse, mass migration?) going forwards to get a grip on a balanced population pyramid.
  - Aerroon 3y ago
    I think the population pyramid for most countries before WW1 and WW2 looked to be about the same shape. Here's Japan throughout the 20th century: https://commons.wikimedia.org/wiki/File:Japan_population_pyramids_1888-2019.gif https://commons.wikimedia.org/wiki/File:Japan_population_pyr... France: https://commons.wikimedia.org/wiki/File:France_Animated_Population_Pyramid.gif https://commons.wikimedia.org/wiki/File:France_Animated_Popu... I don't think they expected the population pyramid to turn out the way it did. People in the past worried about global overpopulation, I don't think they would've done that if they had had an idea that population would naturally cap itself out without anybody even doing anything. It's understandable why these systems were set-up, but some generation in the future (maybe us) will pay the price.
kilolima 3y ago
What about a system that could encourage partial retirement into part time service industries or consulting? Or to working at non-profits, subsidized by retirement funds. Of course this is already the case, but if it was formalized it could continue to help offset the retirement gap and provide a meaningful opportunities to retirees, and retirement could be seen as an opportunity to pursue a long sought secondary interest or make a difference, rather than being a net drain on society.

by atoav 3y ago

riku_iki 3y ago

> [6] Raise the money from elsewhere (e.g. by taxing investment gains oe by raising wages and have a bigger fraction of the wage going to retirement funds) yeah, for example I googled and found that corp tax dropped from 33 to 25 in last five years, so they literally took money from employees and gave to employers. But trivial change could be to make pensions base on retirement age: someone can retire at 62, but get smaller pension, and another could retire at 78 but get much larger pension, plus have pension base on contribution.

NoLinkToMe 3y ago
> But trivial change could be to make pensions base on retirement age: someone can retire at 62, but get smaller pension, and another could retire at 78 but get much larger pension, plus have pension base on contribution. That trivial change is essentially already the case. There's no law that requires you to work like some kind of slave. You can retire whenever you want. The laws are about the age to be eligible for full-retirement. You can already retire early and receive a lower retirement, or keep working for much longer and have a much higher income in retirement. > corp tax dropped from 33 to 25 in last five years To drive economic growth. France's gdp per capita is lower today than it was 15 years ago. In the US it's 45% higher than it was 15 years ago. France's corporate system wasn't working, and high taxes were a key reason from lots of studies. Anyway, taxes aren't really that relevant for retirement. If a person needs to consume 10 units of goods/services (e.g. food, clothes, healthcare, whatever), and workers produce 40 units each, a population of 25 workers can produce 1000 units and sustain another 75 retirees (1000 production, 1000 consumption). If you lower the retirement age such that there are just 15 workers and 85 retirees, you're now still consuming 1000 units, but only produce 600 units. There's massive shortages, prices skyrocket, and many people become poor because there's not enough production to meet their needs. Raising lots of money through taxes doesn't change this fundamental issue. Even if you give everyone $ 1 trillion dollars of money, in this economic system, there's still not enough production to meet needs. So you need one of two things to solve it: more workers (= more production), or more productivity per worker (= more production). That latter point is not something the government can really control, although high taxes tend to drive productivity per worker down because economic activity is less rewarding to the source of the activity, as the activity is taxed. So high taxes can actually make this situation worse. I'm aware I'm simplifying a lot but I hope it helps to show taxes don't address the root-cause issue.
- riku_iki 3y ago
  > To drive economic growth. France's gdp per capita is lower today than it was 15 years ago. In the US it's 45% higher than it was 15 years ago. France's corporate system wasn't working, and high taxes were a key reason from lots of studies. actually, high corp taxes can drive economic growth, because they give incentive to companies to reinvest into the business and not into shareholder's pockets.

Aerroon 3y ago

The real solution would've been to not create an unsustainable pyramid scheme in the first place. Unfortunately the negative effects of it take so long to appear that the people who created the system will never feel them.

atoav 3y ago
Exactly. We should have based much more of our politics around dealing with the age structure in society, just like we should have dealt with climate change when it was still easier to deal with. But on the other hand the shareholders were very happy, so there's that.
NoLinkToMe 3y ago
The population pyramid is mostly due to the post WW II babyboom. Not sure what you're proposing then (family planning?) and now (also family planning but now reverse, mass migration?) going forwards to get a grip on a balanced population pyramid.
- Aerroon 3y ago
  I think the population pyramid for most countries before WW1 and WW2 looked to be about the same shape. Here's Japan throughout the 20th century: https://commons.wikimedia.org/wiki/File:Japan_population_pyramids_1888-2019.gif https://commons.wikimedia.org/wiki/File:Japan_population_pyr... France: https://commons.wikimedia.org/wiki/File:France_Animated_Population_Pyramid.gif https://commons.wikimedia.org/wiki/File:France_Animated_Popu... I don't think they expected the population pyramid to turn out the way it did. People in the past worried about global overpopulation, I don't think they would've done that if they had had an idea that population would naturally cap itself out without anybody even doing anything. It's understandable why these systems were set-up, but some generation in the future (maybe us) will pay the price.

kilolima 3y ago

What about a system that could encourage partial retirement into part time service industries or consulting? Or to working at non-profits, subsidized by retirement funds. Of course this is already the case, but if it was formalized it could continue to help offset the retirement gap and provide a meaningful opportunities to retirees, and retirement could be seen as an opportunity to pursue a long sought secondary interest or make a difference, rather than being a net drain on society.