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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

by 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.

by 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.