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> Australians have now accumulated well north of a trillion dollars of assets against their retirement. Out of curiosity, could you elaborate on how this is im

by _dps 14y ago

> Australians have now accumulated well north of a trillion dollars of assets against their retirement. Out of curiosity, could you elaborate on how this is implemented practically? Social Security, on the face, presents itself a lot like this but is really just a combination of a payroll tax and an entitlement program (i.e., there's no saved money anywhere that's yours; there's just the expectation that the government will pay out some benefits at the right time). Depending on your political worldview you could say the same about Americans, or you could also say that they've accumulated nothing in SS because SS (per the supreme court) does not legally guarantee any sort of payout and doesn't hold any securities tradeable on an open market. If I had to design such a system myself, I'd personally go with forced savings of roughly the size of the current payroll tax in the form of actually-owned marketable government securities in individually named accounts, with a separate entitlement program to partially support those for whom retirement is still out of reach. If the Australian system looks anything like this, as opposed to how the US has designed Social Security, I tip my hat to them for practicality :-)

rayiner 14y ago
There is no "saving for retirement." As a practical matter, all forms of financial savings for retirement are at their root getting the working generation to give part of their production to the non-working generation. The American system does this directly through a tax. The Australian system does it indirectly by mandating savings in private financial instruments that achieve the same essential transfer.
- 94c3 14y ago
  i understand why social security is like this. why are retirement vehicles like 401ks and IRAs like this? for the young but well paid worker, do you suggest not saving for retirement?
  - rayiner 14y ago
    Of course not. I'm just pointing out that at the end of the day, if you want to allow a significant portion of the population to "retire" you have to confront the same basic issue: those people aren't drawing down on goods and services they stashed away while they were working, they're taking away part of the production from the working generation. That's the universal constant of old people--it was true even back before we had retirement systems and the elderly were taken care of by their kids.
    - jacques_chester 14y ago
      You seem to think that money in an interest-bearing bank account or a mutual fund is the same as cash under a bed. It's not. You also seem to think that the size of the economy fixed and that allocation is a zero-sum game across time and space. It's not. Thus you are conflating welfare schemes with savings schemes. They're different.
      - chii 14y ago
        > money in an interest-bearing bank account or a mutual fund is the same as cash under a bed. of course they aren't the same. But in aggregate, the reason investments work is because down the line, somebody is producing goods/services, and some of the profit of those production is paid out in the investment. In the scenario where there are too many retirees, this fails, because who is actually going to be creating the value that the investment accounts pay out? Imagine there are W workers, and R retirees, where W > 2R (2 workers per retiree). If suddenly, half the workers retired, then now there is only 1 worker per 2 retiree. If they demand the same amount of goods, what would happen? I predict rampant inflation as demand outstrip supply - sure the investment account might pay out handsomely, but that's a lie, because the cost of living will rise (remember, lots more mouths to feed, way less people doing actual work), and the poorest suffers first.
- jacques_chester 14y ago
  Accumulating investment capital has a different effect on the economy than taxing and spending.
jacques_chester 14y ago
> Out of curiosity, could you elaborate on how this is implemented practically? You are required to pay 9% of your pre-tax income into a registered superannuation fund of your choice. These funds invest on you behalf. Upon retirement you receive a lump sum or annuity, depending on your plan. The government does not take the funds, does not invest the funds and does not make the payments. Payment is not guaranteed. The Australian Government still has a pension scheme (which is means-tested and so is reduced if you have plenty of superannuation), but it is not dressed up as an investment vehicle. It's recognised for what it is: welfare paid out of general revenues.

by _dps 14y ago

rayiner 14y ago

There is no "saving for retirement." As a practical matter, all forms of financial savings for retirement are at their root getting the working generation to give part of their production to the non-working generation. The American system does this directly through a tax. The Australian system does it indirectly by mandating savings in private financial instruments that achieve the same essential transfer.

94c3 14y ago
i understand why social security is like this. why are retirement vehicles like 401ks and IRAs like this? for the young but well paid worker, do you suggest not saving for retirement?
- rayiner 14y ago
  Of course not. I'm just pointing out that at the end of the day, if you want to allow a significant portion of the population to "retire" you have to confront the same basic issue: those people aren't drawing down on goods and services they stashed away while they were working, they're taking away part of the production from the working generation. That's the universal constant of old people--it was true even back before we had retirement systems and the elderly were taken care of by their kids.
  - jacques_chester 14y ago
    You seem to think that money in an interest-bearing bank account or a mutual fund is the same as cash under a bed. It's not. You also seem to think that the size of the economy fixed and that allocation is a zero-sum game across time and space. It's not. Thus you are conflating welfare schemes with savings schemes. They're different.
    - chii 14y ago
      > money in an interest-bearing bank account or a mutual fund is the same as cash under a bed. of course they aren't the same. But in aggregate, the reason investments work is because down the line, somebody is producing goods/services, and some of the profit of those production is paid out in the investment. In the scenario where there are too many retirees, this fails, because who is actually going to be creating the value that the investment accounts pay out? Imagine there are W workers, and R retirees, where W > 2R (2 workers per retiree). If suddenly, half the workers retired, then now there is only 1 worker per 2 retiree. If they demand the same amount of goods, what would happen? I predict rampant inflation as demand outstrip supply - sure the investment account might pay out handsomely, but that's a lie, because the cost of living will rise (remember, lots more mouths to feed, way less people doing actual work), and the poorest suffers first.
jacques_chester 14y ago
Accumulating investment capital has a different effect on the economy than taxing and spending.

jacques_chester 14y ago

> Out of curiosity, could you elaborate on how this is implemented practically? You are required to pay 9% of your pre-tax income into a registered superannuation fund of your choice. These funds invest on you behalf. Upon retirement you receive a lump sum or annuity, depending on your plan. The government does not take the funds, does not invest the funds and does not make the payments. Payment is not guaranteed. The Australian Government still has a pension scheme (which is means-tested and so is reduced if you have plenty of superannuation), but it is not dressed up as an investment vehicle. It's recognised for what it is: welfare paid out of general revenues.