5 ms·

I kind of think we have proven that most people are not, and cannot be, capably responsible for their own retirement. The 401k was an experiment, and that exper

I kind of think we have proven that most people are not, and cannot be, capably responsible for their own retirement. The 401k was an experiment, and that experiment has largely failed. The answer is probably a more generous and better funded Social Security, except that fund keeps getting raided for other purposes.

koolba 2y ago
> I kind of think we have proven that most people are not, and cannot be, capably responsible for their own retirement. This is one of the reasons I suggest people buy a house rather than renting. The financials may not always make sense, but it forces savings in a way that many people would not otherwise do. How many people do you think would manually pay a large chunk of their paycheck into a savings account every months before deciding whether they can afford an extra order of curly fries? Rent eats first and having a mortgage lets you actually save some of that (once you get past the substantial interest heavy starting year). > The 401k was an experiment, and that experiment has largely failed. Retirement accounts are not the problem. It’s a general lack of financial education. People can barely calculate simple interest. Compound interest is even less natural. Calculating the present value of a fixed payment annuity in 25 years? We’re a slim minority that can do that from scratch. Some of the best savers are the ones that do not even understand the financial constructs, but take the savings rates and methods as gospel. Faithfully putting away percentages of their salaries that are orders of magnitude higher than the rest. > The answer is probably a more generous and better funded Social Security, except that fund keeps getting raided for other purposes. Social security is claimed to be “money you paid into”. But that cannot be true if the net amount grossly exceeds what you paid in. That system simply would not work without another revenue source. People have to pay massively more into it over their entire working lives. And if someone wants a pension the financial product exists. Except nobody wants to actually pay for it because an inflation adjusted guaranteed annuity for life is incredibly expensive! So the present value of it divided out would be more than people are willing to actually pay.
- techbro92 2y ago
  A lot of people struggle with regular literacy despite being educated on it for their entire life. I don’t think more education will help these people.
- prepend 2y ago
  > How many people do you think would manually pay a large chunk of their paycheck into a savings account every months before deciding whether they can afford an extra order of curly fries? People are irrational. I have a loved one who told me they can’t afford car insurance, but subscriptions to Spotify, Netflix, Duolingo, and uses DoorDash, etc. I think people are wired to think that small purchases are ok but that long term things are “not possible.” Of course there’s also a sense of people wanting to have some joy in their life now and choosing to gamble away future prosperity.
  - ryandrake 2y ago
    > People are irrational. I have a loved one who told me they can’t afford car insurance, but subscriptions to Spotify, Netflix, Duolingo, and uses DoorDash, etc. Yes, that's the Avocado Toast problem. You point out that maybe, just maybe, they don't need all of these optional luxury expenses if they can't afford to do "normal adulting". The response is always a cornucopia of excuses and fatalism: "Saving $5 is not going to make me financially stable!" and "There's no way I'll ever retire--I might as well live a little today!" and "I can't just eat rice and beans every day!" and "Why shouldn't someone have just one little luxury to make them feel happy?" and "The cost of my flagship smartphone is trivial, just 1% of my student debt!" It's not the actual Toast that's the problem, it's the attitude that excuses the toast.
    - analognoise 2y ago
      “To the capitalist, every luxury of the worker seems to be reprehensible, and everything that goes beyond the most abstract need – be it in the realm of passive enjoyment, or a manifestation of activity – seems to him a luxury.“ - Karl Marx
    - 2y ago
bryanlarsen 2y ago
The notion that a nation can save for retirement is a fundamental misunderstanding of money. Money is pieces of paper that determines how a nations resources are divided. Having more money in a "Social Security fund" is useless. If the social security fund is massive when it comes time to withdraw money from it but there are no resources to divide, then inflation will ensure the fund is worthless. If the fund is tiny but there are lots of resources to divide, the money will go a long way. Individuals can save money to ensure they get a larger share of the resources in the future. But overall money is a zero sum game -- if one person has a greater share, everybody else has a lesser share. As a country, to support retirees you invest in the productive capacity of the country -- train nurses, build infrastructure & housing, et cetera.
- nly 2y ago
  So put another way, you need to allocate resources now to produce more resources in the future. We call this investing
  - from-nibly 2y ago
    Investing dollars? Cause that's not sufficient. You need to invest in stuff and in autonomy.

koolba 2y ago

> I kind of think we have proven that most people are not, and cannot be, capably responsible for their own retirement. This is one of the reasons I suggest people buy a house rather than renting. The financials may not always make sense, but it forces savings in a way that many people would not otherwise do. How many people do you think would manually pay a large chunk of their paycheck into a savings account every months before deciding whether they can afford an extra order of curly fries? Rent eats first and having a mortgage lets you actually save some of that (once you get past the substantial interest heavy starting year). > The 401k was an experiment, and that experiment has largely failed. Retirement accounts are not the problem. It’s a general lack of financial education. People can barely calculate simple interest. Compound interest is even less natural. Calculating the present value of a fixed payment annuity in 25 years? We’re a slim minority that can do that from scratch. Some of the best savers are the ones that do not even understand the financial constructs, but take the savings rates and methods as gospel. Faithfully putting away percentages of their salaries that are orders of magnitude higher than the rest. > The answer is probably a more generous and better funded Social Security, except that fund keeps getting raided for other purposes. Social security is claimed to be “money you paid into”. But that cannot be true if the net amount grossly exceeds what you paid in. That system simply would not work without another revenue source. People have to pay massively more into it over their entire working lives. And if someone wants a pension the financial product exists. Except nobody wants to actually pay for it because an inflation adjusted guaranteed annuity for life is incredibly expensive! So the present value of it divided out would be more than people are willing to actually pay.

techbro92 2y ago
A lot of people struggle with regular literacy despite being educated on it for their entire life. I don’t think more education will help these people.
prepend 2y ago
> How many people do you think would manually pay a large chunk of their paycheck into a savings account every months before deciding whether they can afford an extra order of curly fries? People are irrational. I have a loved one who told me they can’t afford car insurance, but subscriptions to Spotify, Netflix, Duolingo, and uses DoorDash, etc. I think people are wired to think that small purchases are ok but that long term things are “not possible.” Of course there’s also a sense of people wanting to have some joy in their life now and choosing to gamble away future prosperity.
- ryandrake 2y ago
  > People are irrational. I have a loved one who told me they can’t afford car insurance, but subscriptions to Spotify, Netflix, Duolingo, and uses DoorDash, etc. Yes, that's the Avocado Toast problem. You point out that maybe, just maybe, they don't need all of these optional luxury expenses if they can't afford to do "normal adulting". The response is always a cornucopia of excuses and fatalism: "Saving $5 is not going to make me financially stable!" and "There's no way I'll ever retire--I might as well live a little today!" and "I can't just eat rice and beans every day!" and "Why shouldn't someone have just one little luxury to make them feel happy?" and "The cost of my flagship smartphone is trivial, just 1% of my student debt!" It's not the actual Toast that's the problem, it's the attitude that excuses the toast.
  - analognoise 2y ago
    “To the capitalist, every luxury of the worker seems to be reprehensible, and everything that goes beyond the most abstract need – be it in the realm of passive enjoyment, or a manifestation of activity – seems to him a luxury.“ - Karl Marx
  - 2y ago

bryanlarsen 2y ago

The notion that a nation can save for retirement is a fundamental misunderstanding of money. Money is pieces of paper that determines how a nations resources are divided. Having more money in a "Social Security fund" is useless. If the social security fund is massive when it comes time to withdraw money from it but there are no resources to divide, then inflation will ensure the fund is worthless. If the fund is tiny but there are lots of resources to divide, the money will go a long way. Individuals can save money to ensure they get a larger share of the resources in the future. But overall money is a zero sum game -- if one person has a greater share, everybody else has a lesser share. As a country, to support retirees you invest in the productive capacity of the country -- train nurses, build infrastructure & housing, et cetera.

nly 2y ago
So put another way, you need to allocate resources now to produce more resources in the future. We call this investing
- from-nibly 2y ago
  Investing dollars? Cause that's not sufficient. You need to invest in stuff and in autonomy.