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The World Isn't Prepared for Retirement (bloomberg.com)
An anonymous reader writes: Most online quizzes are relatively mindless, promising to reveal which vegetable, sandwich or rock band best represents your personality. That was not the case for a short online test given to 16,000 people in 15 countries this year. It revealed just how unprepared a good chunk of the world is for retirement. The three-question test, given as part of the Aegon Retirement Readiness Survey 2018, measured how well people understand basic financial concepts. Many of the participants failed the quiz, with big potential consequences for their future security.
Beyond the sobering lack of financial literacy, there were some rather curious data in Aegon's annual survey, published on Tuesday. For example, some 20 percent of workers surveyed in China envisioned spending retirement with a robot companion. But before we get to that, take a look at this question -- which only 45 percent of people around the world got right: Q. Do you think the following statement is true or false? "Buying a single company stock usually provides a safer return than a stock mutual fund."
The possible answers? True, false, do not know and refuse to answer. Sixteen percent of people got it wrong. "Do not know" was chosen by 38 percent. In the U.S., 46 percent of workers got it right. Good for you, America -- though Germany beat you handily. (The answer, in case you were wondering, is false.) It was an inflation question that had the highest percentage of wrong answers, however. More than 20 percent of workers didn't grasp how higher inflation hurts their buying power. Given that declining health was the most-cited retirement worry, at 49 percent, and health care is an area (in the U.S., especially) with high cost inflation, well, that makes the subject something older folks should have down cold.
Beyond the sobering lack of financial literacy, there were some rather curious data in Aegon's annual survey, published on Tuesday. For example, some 20 percent of workers surveyed in China envisioned spending retirement with a robot companion. But before we get to that, take a look at this question -- which only 45 percent of people around the world got right: Q. Do you think the following statement is true or false? "Buying a single company stock usually provides a safer return than a stock mutual fund."
The possible answers? True, false, do not know and refuse to answer. Sixteen percent of people got it wrong. "Do not know" was chosen by 38 percent. In the U.S., 46 percent of workers got it right. Good for you, America -- though Germany beat you handily. (The answer, in case you were wondering, is false.) It was an inflation question that had the highest percentage of wrong answers, however. More than 20 percent of workers didn't grasp how higher inflation hurts their buying power. Given that declining health was the most-cited retirement worry, at 49 percent, and health care is an area (in the U.S., especially) with high cost inflation, well, that makes the subject something older folks should have down cold.
Q. Do you think the following statement is true or false?
“Buying a single company stock usually provides a safer return than a stock mutual fund.”
I accidentally the whole question. Is that bad?
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Thanks for posting the question.
The difference in risk is so much that it's a fundamentally different activity, for the most common types of "single stock" people buy, and the most common type of mutual fund.
Typically when people buy a single stock they choose a new company with a lot of hype. The "value" of the stock is based on the hype. The most common mutual funds are index funds and the like, where you're invested in not only 100 different companies, but 100 different *mature*, profitable companies. It's very, very likely that in a big group of companies which have been making money for 100 years, most of them will keep doing what they've been doing - making money.
Investing in an index fund is just that - investing, putting money aside now so you'll have it later, and have more. Trying to guess which new company will do best, indeed trying out OUTguess everyone else, is fundamentally *gambling*, not investing.
Even if you guess right that Fitbit or Tesla will do well in the future, that expectation os already built into the current stock price. For that investment to be good long term, the company has to do BETTER than everyone expected them to. That's straight up gambling when you buy a single stock and it's a young company.
If the quiz was phrased as poorly as this summary, it's no wonder so many people failed.
The continual slide of wages vs inflation, the endless fun-ride of being 'obsoleted', being excluded through ageism, the effective death of the pension, and a bevy of other factors all align to basically ensure that nobody aside from people on the far upper end of middle class and the wealthy are able to retire.
Everybody else is just ignored by the system, and when the time comes, those that "have theirs" will fail to comprehend why they (everyone else) failed to save for retirement, will blame the victims who really would have loved to save for retirement, will refuse to take up the slack in society, because "they have theirs", and through it all, the people that have been systematically shafted because they were not born rich enough to get a suitable head start on this fun-ride will become an epicenter for systemic illnesses, and societal drains that the others will refuse to pay for.
But dont let that bother your little heads too much. Because the downward pressure of this disadvantaged class will further pull the upper middle class down, due to mandated tax increases and a yawning social welfare crisis caused by the earning gap, which will further push the next generation of upper middle class into serfdom.
Want to prevent this horrible nightmare future? It's really easy in principle, but impossible to implement in reality: Put a stop to the ever increasing wage gap, drive up baseline wages, and drive down top earnings, so that the middle class grows again instead of shrinks.
No. You are not such an amazing talent that you "deserve" to earn 100 times or more than the average person.
No. You arent.
No. NO YOU AREN'T.
Throughout history, people worked until they were physically unable to work.
The idea of retirement came about through FDR's "New Deal." Even then, the "retirement age" of 65 was considered very old, considering that life expectancy at the time was 61! Since then, life expectancy has risen by at least 10 years, but the "retirement age" has not risen with it.
Financial literacy is needed, yes. But is "retirement" at 65 a realistic goal for most people?
Company that makes money investing peoples retirements says more people need to use their services in order to retire.
First, let me say of course retirement is important. But lets be clear, saving for retirement is big business for the financial world. According to them you can never save enough because every penny you aren't saving is money not on their table.
Every day I go to work I see people who seem to talk about nothing but their retirement savings. And they mock the new generation coming in to replace them because at least according to them they aren't doing anything and in stead are actually living life.
Somewhere is a happy medium. I'd rather take off to NZ in August for a weeks snowboarding now than take a cruise when I'm 70. Of course there are long term costs associated with that. But that's life, sometimes you have to actually life it.
Some countries now have more debt than they have economic production. They could institute a 100% tax and still go bankrupt, even if that tax didn't effect the domestic economy. So the choice involved is taking on the debt in the first place. Once you have unsustainable debt, the country is going to go bankrupt and there's nothing they can do to prevent that.
Of course the tax rate DOES effect the economy, making the situation even more dire. Would YOU spend your life savings to open a business in a country with a 100% tax rate, so you're guaranteed to never make any money from your business? Would you even bother going to work, and showing up on time, if your take-home pay was $0 because of taxes?
Maximum government revenue occurs at a tax rate somewhere between 15% and 65% (arguing about the exact number is a significant part of economics). Once the tax rate is higher than the revenue-optimal number, government revenue goes down.
in the stock market. And that includes retirement programs. The gig economy, outsourcing & offshoring eliminating middle class jobs and the constant assault on Unions means they have no opportunity and with most living paycheck to paycheck they have no opportunity to save.
And nobody's going to convince me that half Americans are just irresponsible spend thrifts or lazy bums; especially since Europe is having none of these problems. Even if they are, what the hell is wrong with our civilization if that's the case? I thought America was the greatest country on earth. God's country and all that rot. Bullshit. Something's wrong. Something outside our control. And let's face it, we know damn well what it is
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The content of, and presentation style, reminded me more of an ad than some news article.
Yeah, and a pretty tone-deaf one at that. Guess what, Aegon Retirement Readiness Survey 2018? Not all of us have a barcalounger made from the dragonfire-melted swords of a thousand vanquished enemies to retire to, you insensitive clods!
Nothing posted to
It's hardly a surprise. In the US we're filled with "financial planners" and other similar people who pitch themselves as helping improve your financial life, when in fact they aren't even really obligated to make their clients fiduciary interests primary. They're nothing more than glorified stock salesmen, pushing high-load, low-yield branded mutual funds, crappy stocks and high-activity trading which they benefit from.
The sales pitch, even when its half-informative, is often a deceptive lure. Guy with shitty retirement planning breaks down and goes to a financial planner. Is told he's way behind the curve. Guy says "what about a no load mutual fund", and the planner is like "you could do that, but these days they only return 3% and based on my magic spreadsheet you need a more aggressive return, like my portfolio of targeted mutual funds and some individual company stocks where you can get that 10% yield you need to catch up".
So the guy buys into shitty funds and stocks that mostly likely just help the financial planner retire.
Financial planning education is non-existent in schools, fixing that would help. It would also help to crack down fucking hard on "financial planning" and require SIMPLE, BOLD PRINT, PLAIN ENGLISH, UP FRONT disclosures that planners are in the business of selling products, not in caring about your outcome. Or better yet, REQUIRE that financial planners (or whatever label you want to invent) MUST PLACE THEIR CLIENTS FIDUCIARY INTERESTS AHEAD OF THEIR OWN. If we had financial services that were about client interests and not just pushing shitty investments it would help everyone.
Brokers and salesman can continue their line of chicanery and fraud, but at least there would be a legitimate category of financial planners people could trust.
TFS is ridiculoisly American. ... "special".
You can have your own views, of course.
But don't be surprised, if the world considers your mindsets a bit
In most countries of this planet, people do not even consider stock trading legitimate concepts. (Due to profit essentially being immoral and anti-social, harming society, and being very close if not equal to stealing.)
Hell, you expect Chinese and other unamerican people to know the intricacies of capitalsim?
Come-on! I know "you Americans" are not "all like this". Get out or your country a bit, please. :)
(Oh wait! Leave the ordnance and agents and ideologies at home, please. ^^ You can bring some of your positivism and friendliness and can-do attitude, as long as it is realistic, and not delusional or a "firm belief" aka ideology.
Retirement is a concept that already implies fucked-up things like letting some tie-wearing cockroach leech on your profession, or worse, wasting your life on a mere job.
I have been self-employed for most of my life, and I don't want to live without being able to do what I love anyway. It is my profession, not my job. But for cases where I need to live while beig unable to do it, I have cooperative-provided insurance. (The cooperative is also a bank, which we own, and which is forced by law to always have enough reserves.)
You speak like a young person. Not much use after 55? Really?
Perhaps we should just practice euthanasia, to "clear" the old, infirm people out of the workforce.
I'm 51. I can still code circles around my younger peers, and my experience helps me avoid traps they regularly fall into. I don't think those abilities will suddenly disappear in four years.
"Most folks aren't much use past 55 or so and almost everybody is useless after 65 or so.".
That is idiotic.
From the result, 80% of people understand how inflation affects the value of their money, and 45% percent understand something about stocks, even though investing in stocks is required to manage retirement money (and only 16% got it wrong). All in all, not bad.
Considering you can buy bitcoin and gold and real estate mutual funds, the embedded risk is much higher than buying almost any fortune 500 company stock.
When you toss in the broker fees and backend fees many mutual funds charge, espcially the shady actively managed ones.
Well there's room to say the question is ambiguous.
However, I suspect that most people being polled are not doing this sort of reflective analysis on the question itself. They just are not sure how one picks a safe mutual fund.
One the other hand there's a reasonable rule of thumb one can follow. Assuming you are satisfied with your present lifestyle then take your present salary and divide it by two and multiply that by 25. That's the baseline you need to retire. I say baseline because if you still have a mortgage or are going to need a medical policy to bridge from retirement to medicare eligibility or have an anticipatable major expense early on (e.g. 250,000 vacation cabin). Then your baseline needs to be higher. Then to this start figuring in your travel budget, or whatever your vices are. But if you are undershooting your baseline then you have a problem. It would not hurt you to have more! but make sure you are on that trajectory.
Some drink at the fountain of knowledge. Others just gargle.
You're both right.
I'm 51 and I do feel less capable in some ways than when I was 31. Lack of enthusiasm, more external interests and distractions, greater health infirmities. Which doesn't mean I'm incapable, on balance my experience and acquired wisdom balances out my constitutional inability to work 24 hours in a row -- I can't do it, but I don't need to.
Depending on your frame of reference, I'm either less capable because I don't do marathon all-nighters or I'm more capable because I don't need to.
I think the larger problem is that what happened traditionally is that the surviving elders became the pool of knowledge and wisdom. Their contribution wasn't hunting down the dangerous game, their contribution was knowing *where* and *how* to chase it down.
Modern capitalists, however, expect *both* and seem to value the sacrificial warrior more than the wide elder.
It was certainly a realistic goal for the political class to promote during an extremely unusual period in economic history: the glorious middle class years between 1950 and 1980.
Plus with the boomer bulge, this core demographic was due to control society at the polling stations until right about now. When these industrious, retirement-fund beavers had happy thoughts (whether naive or not) politicians could plan on a second term.
Reagan was the beginning of the end, though the most effective horseman of the middle-class apocalypse was probably Bill Clinton (his very capable fingerprints all over the knife handle of Greenspan's "hands free" insouciance–compatible banking-oversight reform acts).
———
Why did so many economically secure red state boomers vote for the Rage Fantasy Falsehood Twitter Storm of 2016?
Not for their own sake, but for the sake of their children—I heard them admit in somber post-election PTSD journalism—few of whom regarded their children as having any hope at all of cashing the same golden boomer ticket in their own lives.
This was how we got the wealth inversion: where the Trump voters were putatively wealthier than the Hilary voters. But many of the aging wealthy weren't voting on behalf of their own secure economic margins, but rather on behalf of the insecure margins of the next generation of kin coming up behind them. Grandpa thought he was throwing his grandson a political bone. Grandma through she was throwing her granddaughter a political bone. People in the red states are family firsters.
The logic might be flawed, but there's still a lot to be said for having your heart in the right place—especially when you're closing in on punching your own ticket for the great eternal retirement home in the clouds; and God will handle the rest, rest assured, what with the giant NPV rapture discount, that isn't even a long horizon, before Jesus returns, with a Christian version of Sharia law so inflexible and unforgiving as to make even your average soft-hearted militant Muslim weep with bliss.
———
What is a poll, anyway, but a giant statistical exercise in Family Feud talk radio?
Turn on your radio any day. Everything I've said here is out there, and pretty much in their own words, though not necessarily with the lines drawn quite so straight.
———
Here's a skill testing question for a real survey of PPE acumen on the ground: What the Greenspan singularity of 2008 shockingly unforeseeable, or a nearly forgone conclusion, like a pot of starchy potatoes left on boil, with nobody home in the kitchen, and froth spilling everywhere for at least five years prior to the actual kitchen fire alerted the emergency TARP paramedics—from the Goldman Sachs retirement home in the sky known as the Fed and the US Treasury?
———
Note: When retiring from Goldman into a high government post, you can't take it with you (your Goldman shares) but you can still do a solid for your tribal Wall Street next of kin.
Note: In the current administration, you can take it with you, disclosure be damned. If you connect too straight line a mental line, this apparently flies under the patriotic flag of "draining the swamp".
Because rules, you know, have too many teeth—which is just Clintonism by another name, under his pecker-fueled misdeed clone, though their personalities, otherwise, couldn't be more different: Clinton's bonfire was carefully piled high to the sky before it finally erupted into uncontrollable flame; Trump's bonfire is more like fork lightning rattling the heavens over a bone-dry prairie. Are thousands of small fires better than one big fire? I guess we'll find out. Unless, that is, Trump covers his tracks with
Typically when people buy a single stock they choose a new company with a lot of hype.
Not true. When people have their entire retirement savings in one stock, it is usually in the company they work for, acquired through an ESOP.
...puts out an online quiz about economics (which very few people understand), gets the results back, and declares that most people don't know how to manage a pension fund.
Yes, we should definitely all have pensions, especially from you... until the next financial crisis (created by you f**kers) decimates our pensions and makes them next to worthless, and/or you force our governments to impose austerity on us so that our healthcare and social security systems start to fail and people start dying.
So no, the world isn't prepared for retirement. We're heading back to pre-pension days faster than you can say low-accountability, high-risk financial instruments, and off-shore tax havens.
Debate is a form of harassment. Do not question my truth.
National spending causes inflation and national taxation removes that inflation.
National spending has nothing to do with inflation. Governments printing additional money is what drives inflation whether that money is spent out by the government or a central bank loans it out privately.
For the poorest the tax rate should be effectively negative and beyond a certain point it should be in excess of 90%.
I'd disagree on both counts. In the first, I believe that everyone should pay tax or they lack any skin in the game and don't pay the necessary attention to what government is doing. People who don't pay for something, tend not to care if the government spends foolishly. After all, it's not their money. However, once a person becomes responsible for paying for something, they tend to devote a good deal more attention and care to how their money is being spent.
The second is just as foolish because no one will willingly pay that much in taxes. What you end up with is a lot of money spent to avoid paying 90% taxes, which works out well enough in practice such that the ultimate results is that the government's revenue decreases and a lot of labor is spent on activities that wouldn't need to exist if the tax rate wasn't 90%.
Some countries now have more debt than they have economic production.
So, the debt doesn't have to all be paid in one year.
47 and I am able to pick up on the latest and greatest easier than ever. It's the same patterns and anti-patterns repeated ad nauseum. Understanding databases and servers better than most operations folks helps too.
One thing I have stopped doing is giving a crap about politics or trying to advance in the organization having flirted with being a manager for a while and deciding it wasn't something I enjoyed doing.
love is just extroverted narcissism
It's the US that isn't prepared, not "the world". Civilised countries with a mentality not stuck in the early 20th century have retirement programs, medical insurance and a social welfare at least trying to offer a dignified retirement to everybody.
Or at least we try, and in details in which we don't succeed, we recognise that as a problem that's to be fixed.
> The World Isn't Prepared for Retirement ...
>
> Stock market blah-blah
Does it occur to slashdotters that in many countries of the world, retiree need not worry about such financial wisdom? As long as they work, the pay taxes and social security participation to the guvmint (TM) i.e. unified nation state and as soon as they retire, the guvmint pays them a pension month after month. (This usually means medical and medicine service is nationalized too, with a parallel private sector where you can optionally go to, if you have money to burn and want luxuries, like single bed hospital room or vanity-based plastic surgery.)
Keep in mind that the control group of people questioned fall into the following category:
-Surf the internet looking for quizzes to take.
-Have nothing more important to do than take online quizzes.
Extrapolating that the world isn't ready for retirement based on a three question survey delivered via online quiz is bad science.
Here's a better headline:
The more likely you are to know what kind of fruit represents your personality, the less likely you are to be prepared for retirement.
That says it all.
I've done one better than you and have put it all in bitcoin!
love is just extroverted narcissism
and sitting quietly waiting to go to work (or better yet, working 16 hours a day) then the nasty little heathens deserve what they get. Maybe that's not what you intended, but it's the sentiment you're echoing whether you know it or not. It's a narrative pushed by the ruling class so they can steal all your money. Don't fall for it.
/. is the best you can do you've already lost that battle. Me? I'm just venting.
It's a verifiable fact that Millennials are worse off than their parents and grandparents. It's kind of a big deal, since that's the first time in centuries that's happened. It's even worse because they're _better_educated_ than their parents and grandparents. They're working harder for less.
You're being lied to, or you're lying. I don't know which. If it's the former, wake up before it's too late. If latter, well, I don't know what you think you're doing serving the ruling class. Maybe you think if you do good enough they'll let you join. Maybe you think you can make money off the rubes like Steve Bannon & the Televangelists do. You can't. If posting on
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First, what the _hell_ are you doing on /.. I don't think Bernie Madoff could pull that off with a pyramid scheme. You must be some kind of financial genius.
Second, you do know what inflation is, right? At the current rate you're $1 million saved will have about $140k in buying power in 50 years based on the Cureau of Labor Statistics' calculator. Only inflation is _much_ worse than it was 50 years ago, so better plan on that being $100k.
Also, better plan on a few major market crashes wiping out your savings. We just repealed Dodd-Frank and a whole bunch of other Wall Street regulations that were passed after the 2008 market crash.
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The individual is wrong, but I am sure they see themselves as one of the smartest in any room. In time that may change, maybe not.
;) ;)
;) There is no need to say or do anything except deliver the application/fix their problems etc and move on the the next adventure.
;)
Age discrimination is what it is, and it is rampant in the tech industry. The wise ones doing it, keep things under wraps because it is easy to do as long as nothing is done/said in the open.
But the wise understand, Today most everyone who is an employee in the tech industry will sooner than later be the one moving on, voluntarily or not.
Years ago, I chose to leave a large corporation in my 30s in order to make my own way. I have been self employed for over 30 years. The last 20 years solely as a contract programmer.
I am 62 and taught my self Swift (because I saw a sale) and have my first In-House iPad app in the field for a client. And am sitting here in my office using an MDM to manage clients devices scattered across the US.
Moving into the Apple device world from remote Linux Server based development work was, well interesting. The Apple world is, well the Apple world
I am currently re visiting lisp on the side, been a long time but with the AI buzz, it looks like there will be some fun things going on
Anyway, I am drifting. This individual and managers like them are the norm in the tech industry. Every time I run into them I smile to myself. Because I know I am most likely more capable/wiser than they are
Just my 2 cents
That is another important and common case, having stock solely in the company one works for. That's uniquely high risk because if something goes bad with the company you can lose your job and your savings, at the same time.
I will probably soon have an opportunity to get into my employer's stock pre-IPO, and it will probably jump right after the IPO, so it would be a good idea for me to get in. BUT I don't want both my job and my savings to subject to whatever happens with this company, so I'll be looking to get out pretty quick. I'll have to look at the plan details to see how I can do that, and when. I may well keep the stock and switch jobs.
I retired at age 55, my income now is the same as my take home pay was when I was working. Around $72K USD.
it's missing 'I don't give a shit' since I get a pension in Europe where I don't have to care about stocks, the employer and employee both paying the same amount (usually around 8% each) into the employee's state guaranteed pension fund from day 1.
the median income crash the economy every 8-10 years like clockwork. How do you build wealth when everytime you start the rug gets yanked out from under you. Meanwhile I get saddled with high taxes to fund their bailouts and the wars needed to protect their foreign investments.
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If you could figure that out then you would be in the 60% of people who also got the question right. If you can't then the idea of no-load is a meta concept.
Additionally, have you ever thought about what happens if every one in the world is invested in an index fund? Strange markets. And then when everyone heads for the exit doors, what happens?
Finally on a more esoteric level, did you know that when cap gains occur because some one else sells their shares, you pay a share of the cap gains they triggered? That doesn't happen with a single stock. And usually it's not a big effect except when every one is exiting at the peak and you are still holding shares of the mutual fund. You can easily have a cap gains even on almost you entire portfolios value even though you didn't sell anyhting.
Some drink at the fountain of knowledge. Others just gargle.
...if you could invest into the market, which has returned an average of about 10% over the last 30 years, all the money that has been confiscated from you in the form of social security taxes, how much money would you have now?
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
The peak tax rate in the 1950s was over 90% (on incomes > $200K, about $2M today), under a Republican president. The economy thrived. Because there wasn't such an extreme wealth disparity then, only about 10,000 households paid the peak rate.
Keep in mind this was incrementally on the amount of income that exceeded $200K. The overall tax rate for these people was maybe 45-50%. And capital gains tax was much lower, as it is today.
The long-term average return with a low-fee index fund is around 9%-10% per year. About the same as the AVERAGE return from individual stocks - which makes sense because index funds are composed of many individual stocks.
The risk and volatility is much lower - you can almost guarantee you won't make much more than 10% or much less than 9%, over the long term.
A lot of the volatility of index funds is actually volatility of inflation - they tend to have higher nominal returns when inflation is higher, so the real returns are more stable than the nominal returns.
Even if retirement is 5 or 10 years away?
If you retire at 65, you can expect to live another 20 years. So if you are 5 or 10 years out, you have a 25 to 30 year time horizon, which is enough to smooth out volatility. If you have significant savings, you should stay mostly in stocks.
Seems to me you ought to shift into less volatile options.
There are index funds designed to be less volatile. They track utilities and health care, which tend to have fairly steady profits even in recessions.
Close to retirement, yes you should still have your stock investments in low-expense index funds. You should ALSO have bonds and maybe some other types of investments. As you get nearer to retirement, you should typically buy more and more bonds, but your stock choices shouldn't change much.
I say typically - there are times when the rates on safe bonds are so low that it's hard to justify buying them, even close to retirement. I suppose it also depends on what "close to retirement" means - when you'd LIKE to retire, or when you MUST retire? For many people, they plan to retire in eight years, but they could work two extra years if the market goes to shit. That's different from a 60-year old airline pilot, who MUST retire at 65, like it or not.
Q. Do you think the following statement is true or false?
“Buying a single company stock usually provides a safer return than a stock mutual fund.”
A: I work in IT, not the investment business. Considering this is one of those things you REALLY don't want to screw up, I have a financial advisor who is a fiduciary who answers these questions for me. I meet with this person bi-annually to discuss where we are and where we need to be in order for me to retire at 55. Based on the fact that I dump a considerable amount of my salary into retirement accounts ( and have done so for many years ) he is confident that I will be able to retire at my current planned age without any issues.
Thus, the short answer to these type questions are: Talk to my Finance Advisor.
"Retirement" has been a part of most cultures for over a thousand years. I wouldn't be surprised if it's been around for as long as humans have stuck together as a family. In most cultures, when your parents/grandparents get too old and frail to do physical labor, they move into your house and you take care of them until they die. (Though a few cultures took the opposite approach and simply killed the elderly.)
Social Security is the exact same thing, except it expands it from direct descendants taking care of their direct ancestors, to all descendants as a whole (everyone of working age in the country) taking care of all their ancestors as a whole. Young working people pay into Social Security, and the money is given to retired people as a monthly stipend. (No, the government does not put it into a savings account where it waits for you until you retire.)
Having a larger pool of companies in the fund changes the probability distribution function. The bell curve gets narrower and taller in the middle the more stocks you put in the fund, meaning you're more likely to get an outcome closer to average, less likely to get an extreme outcome.
It's a consequence of statistics, nothing to do with stocks. If you roll a 1d6, every number between 1 and 6 has an equal chance of appearing. If you roll a 2d6, the bell "curve" becomes a triangle, with 2 and 12 being the least likely outcome (1 in 36 chance), and 7 being the most likely. A 3d6 turns flat sides of the triangle into a true bell curve. Increasing the number of dice results in the curve narrowing even further. By the time you get to 10d6, it's virtually impossible to get either of the extreme outcomes (1 in 60 million chance of getting a 10 or a 60).
So when you put thousands of stocks in a mutual fund like an index fund, it's virtually guaranteed to perform at the market average. Whereas if you buy stock from a single company it could perform average, or you could make a lot more money, or you could lose everything. Insurance companies and casinos rely on the same thing - by grouping lots of insured or gamblers together, the overall outcome becomes much more predictable. The increased accuracy of prediction (outcome closer to the average) allows them to make money despite decreasing their margin (offering a lower price for insurance than the competition).
> a business in a country with a 100% tax rate
Or worse, the country decides to do a "haircut" like Cyprus did. In other words, they just stole money out of accounts in banks. At first the number of taking 1% was floated then I think the final number was 47.5%. Why would you ever save money if the government could just take almost half of what you saved? That's after paying taxes on making it in the first place.
> The overall tax rate for these people was maybe 45-50%.
I'm not sure about the overall tax rate on that specific group at that time, but 45% is one to the average overall tax rate today, for taxpayers.
You make $100, the government first takes 7.5% (really 15%) FICA tax, then an additional 25% income tax. You use some of that money to buy a gallon gas for $3, the government takes another 13%. That's 45.5% total tax.
The gas goes in your car which is taxed every year. I put $24,000 into buying a house, after earning $36,000 and paying $12,000 tax. On that house I used $24,000 to buy, I pay $2,000 taxes each and every year, forever. Over my lifetime, the total tax on the house will be over 100%, more than I paid for the house.
About 40% of people pay no income tax, or negative income tax (their "refund" is more than they paid), but there are a LOT of taxes, income tax is just one part of it. For many years, I even paid annual taxes for owning a desk and a laptop, which I used in self-employment. Not only was my income taxed both when I earned it and when I spent it, but every year I paid to pay taxes (again) for continuing to own a deal, a chair, some pencils, etc.
it just that. Bullshit. We had decades of stability until Regan came along and started repealing depression era laws designed to stop another depression. Liz Warren's been going around trying to get people to understand that and failing because the media (which has a pro-corporate bias) won't cover her except when Trump calls her names.
The big thing is keeping risky Wall Street stuff away from safe Main Street Stuff. Also regulating commodities and keeping crap like High Frequency trading and other parasitic & short term investment tools under control or just plain dead. There's a lot more to it than that (it's a complex subject) but just doing that would put a stop to a lot of this crap. If you want to know more go read some of Liz Warren's books plus "But Where are the investor's Yachts".
TL;DR, you've been lied to.
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Wages have not kept up with inflation, productivity gains are all going to the top 1%, there is no savings, there is no possibility of savings, there is no possibility of retirement. People are hoping and praying they will stay healthy and employed till the day they die.
And some idiot is blathering about 2% interest for five years, 1% interest on 2% inflation, and something comparing individual stock with mutual funds. Get a grip. Might as well quiz south indian brahmins the question of transubstantiation of the eucharist or the Vatican cardinals the difference between hiranya shraddham and a regular shraddham.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
All I ask is the opportunity to prove to the world once and for all that I am financially irresponsible. While proving that money cannot make me happy.
<blink>down the rabbit hole</blink>
You do realize you can have most of those things and not spend much at all right? You don't need a $1000 smartphone to have a smartphone, my kids have $50 ones and a data limit...I think that's maybe $25/mo all in per line. You don't need a $3000 TV, I think my 55" LG was $400ish. This is (adjusted for inflation) far less than your parents and grandparents spent on theirs in the 1970s. You don't need a $80/mo cable package, OTA is free and Netflix is up to what, $14? now. You will need internet but you probably needed that anyway.
Unfortunately you will also need a college degree, housing and medical care and all of those costs have risen astronomically. This isn't anything recent, very arguably our mean standard of living (in the USA) hasn't improved since the 1970s. We have cooler toys but we don't have single earner households unless you count the many many divorcees and/or the trophy wives of executives but that was the middle class norm in the 1970s.
For the record I am well above "paycheck to paycheck" and still do those things.
I think thatâ(TM)s a dangerous arrogance. Whatever wrongs are ascribed to the boomer generation, most older boomers still have wisdom about many things. Itâ(TM)s a natural process every generation has possessed, regardless of their generationâ(TM)s historical wrongs. Humans that have lived 50-60+ years have seen and experienced a lot.
Note that the "haircut" is no different from an instant 47.5% inflation, except it's not as effective against people stashing money under their mattresses.
Provided you stay current (sadly, many do not) more power to you. You're still considered an inferior choice because management fails to get that while you won't work "deathmarch" hours you also won't be needing much handholding.
Carousel is a lie. Life clocks are a lie. There IS NO RENEWAL.
... is bogleheads.org. Yes, it's a cheesy, almost appeal-to-authority name, but bogleheads.org has a ton of info, and a lot of very smart posters, if you want to learn about investing and retirement planning. It's priceless. Check out "getting started" in the wiki, before reading the forums. Read some books by William Bernstein, Larry Swedroe, one of the bogleheads books, and "A Random Walk Down Wallstreet".
The gist of it all is:
1) save as much as you can
2) use low-cost index funds
3) choose a reasonably appropriate stock/bond ratio (maybe some gold too, but that's an entire subject itself, and highly debated) and choose a reasonable foreign allocation (20-30% of stock), or use a low-cost target retirement fund, or use a fee-only advisor.
4) max-out your 401k (because your effective/average tax rate will almost certainly be lower in retirement, than your marginal rate is now)
5) stick to your plan. Most strategies (portfolios) have mean variance. If yours is down, you might change into another one before it too goes down too. You're not paid for that risk. So choose something simple you can stick with. Don't under-estimate how hard that can be, for years, for decades, especially with 401ks with different fund choices, and new asset class fads coming and going.
That's an interesting observation and it has me thinking.
It didn't seem right at first, yet it did. I had to ponder it a bit. I thought about money flowing in and out of the country. I thought about the the companies in the index can outperform the economy as a whole. Still, those factors didn't seem to fully explain how for 100 years returns have SIGNIFICANTLY outpaced economic growth.
Then it occurred to me we must carefully distinguish between RETURNS and growth. There's no reason a five-pound chicken can't keep producing 300 eggs every year. A cow keeps producing 2,000 gallons of milk each year long after it's finished growing. General Mills has made money paid out dividends every year for the last 120 years. They don't have to grow any bigger to be a good investment.
The market can't *grow* bigger than the economy, but companies can certainly continue to make money, and returns can very well stay at 10% while the economy grows at 3.2%. How big a company is, or how fast it's growing, has little to do with how profitable it is, and therefore how much is returns to investors. Often enough, making a company *smaller* can be part of making it more profitable, by either cutting unnecessary expenses or focusing on what the company does best.
I'm guessing that this "death march" concept mostly applies in Silicon Valley. Never in my 30-year career have I felt pressured to work long overtime hours for extended periods of time. I've never even heard of anyone having to do this. And here in Houston, I run into older programmers regularly.
In one sense, you're right. Older, more experienced programmers do tend to have larger salaries, which makes them less desirable to some companies. But companies that have to actually run based on their income (as opposed to a speculative startup) often learn to appreciate the wisdom and skill that comes with experience.
That's an interesting observation and it has me thinking.
Now you're thinking, I like it :)
If you can get a stock that gives you 10% dividends (and isn't doing some kind of weird trick) then of course, take it. The total amount of money in the world is going to equal the total amount of goods, though. If the amount of money increases without the amount of goods increasing, then you will see inflation, and each 'piece' of money will decrease in value.
Another important distinction to consider: some things are capital goods, others are consumption goods. Buying a chicken will give you a steady stream of income (dividends), but if you want to increase the value of your stock, you need to buy another chicken. Or a factory, or hire more people. (of course you can save some eggs for a while, but most consumable goods get used up surprisingly quickly. We need a constant stream of production to maintain value).
So you can broadly draw the outlines of the economy by looking at the total number of capital goods purchased (factories, chickens, etc) and total number of consumables purchased.
"First they came for the slanderers and i said nothing."
Simply because one CAN do something, does not mean that they SHOULD.
There are very real consequences for the whole society, that WILL eventually come home to roost, from trying to take everything you can, because you can.
Labeling people that see the bigger picture, and say "Whoa, Hold up there buddy!" as "Suckers", is how you end up with a world where 1% of people own 99% of resources, and where most people live either impoverished, or close to impoverished.
No, you are not justified in demanding wages that high. You just are not. I can see MAYBE wages that are 2 to 5 times median, for very special vocations that are not possible for most people, and are indespensible--- but not 10, not 100, and certainly not 1000 or "100000000000000000 times"
Money is a tool Roman. Like a screwdriver, or wrench. You use it to accomplish things. If you are hoarding money as a status symbol, you are not actually using that money for any real purpose, other than to make your dick feel hard. If you are making more money than you can possibly spend, while other people are literally starving to death, you really cannot justify that.
When your conspicuous spending and hoarding habits, after having secured obscene quantities of the stuff that you can simply not spend fast enough, causes a systemic imbalance in the economy, you have become a problem, and you really are not justified in insisting that you continue in that direction.
But asking the "haves" to realistically evaluate the consequences of their privilege and act appropriately is like asking a 2 year old to not eat cookies before dinner, while leaving the cookies out on the table.
Likewise, society needs to take that privilege away from the have frequently, because leaving that privilege in their hands has without exception resulted in systemic collapse of society. Great leaps forward in the human condition have all come from periods where everyone has been brought low by such collapses, and everyone has to proceed from merits again.
Think about what happens when monthly pay-ins occur from companies. Think about what happens when companies dump in profit sharing or matching funds at the end of the year. Some companies don't do it that way but more than a few do including mine who OBTW will withold all matching if you leave before Jan 1st - cute huh? 401K haven't been around all that long, what happens when all of those folks who signed up when it began reach retirement age and begin withdrawing? As you pointed out, things are going to get weird. My worry is what happens when we begin to have a large portion of the population reach retirement age and we realize that maybe 10% are prepared for it? Being sighted in the land of the blind could be hazardous...
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I work for an investment bank. Dudes this is pure PR. Slashdot - news from banks, advertising that pays out. WTF?
There are two rules for success:
1. Never tell everything you know.
The real problem isn’t lack of knowledge. But problems in real life.
I worked in tech for a while.
I made money during the tech bubble during the 1990s. It popped in 2003. For a period of 2003-2005 I was making less then I was before. And it took me almost that time to readjust my life style. Selling your home finding a new one. Having to decide to pay off your expensive car or sell it for a cheaper one (both not easy choices).
Then there is family who may not be willing to make the same financial sacrifices that you may want. Emergency with home/auto/health cut into your savings as well.
That 5k after taxes a month can be used up rather quickly and not for fancy life style luxury. Just for maintaining an average like that this average should offer you.
Granted at this average salary we have enough to save for retirement. But that is an average. So half the population is below average, meaning that may not have the money to save for retirement. And some who are above average may not Choose to do so.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
Yes, but you should give up even $25/mo and live on noodles until you hit 70 so you an enjoy the fact that your life is over and you did nothing.
I don't think you understand what bankrupt means.
National spending causes inflation and national taxation removes that inflation.
National spending has nothing to do with inflation. Governments printing additional money is what drives inflation whether that money is spent out by the government or a central bank loans it out privately.
In most, if not all, Western nations, government issuance of a debt is a small fraction of currency creation. Most of it is created by private demand for debt, which is part of why the events of 2008 were so significant.
It can of course get very complicated - the total tax depends on what portion you spend on housing, how much you spend on gas, etc. There are thousands of pages of tax law (between 4,500 and 75,000, depending on how you count), so my quick explanation can't be accurate for any given person's actual liability in a given year. That being obvious, I did take a short cut with the math.
The point being your money is taxed:
Before it's written on your pay stub (the "secret" 7.5% + more the employer isn't allowed to mention on your pay stub).
When you get paid (FICA and income tax).
When you spend the money (sales tax, gas tax, phone taxes, etc).
Every year after you spend it, repeatedly (car taxes, property taxes, business personal property taxes).
It seems to me that inflation may be directly tied to the ratio of stuff being sold to the amount of money used to purchase stuff.
Imagine a simple economy, where the only thing being sold is "bag of groceries". There are 100 bags of groceries for sale. In this economy, there are $1,000 in checking accounts, $1,000 that people seek to spend. If $1,000 is spent, and 100 units are purchased, the average purchase price is $10 each.
If someone shows up with a truckload of of groceries, so there are 1,000 bags of groceries for sale, and still $1,000 being spent, the average price paid will be $1.
I note that we can arrive at the current price level in each scenario without asking about the homes the consumers live in. Whether they have $50,000 homes or $500,000 homes doesn't enter the equation. The price level is what's being sold this year divided by the dollars being spent.
This tells me that the price level is based, primarily, on current economic activity, buying ad selling, and only tangentially affected by goods, such as houses, that people have, if they aren't selling at the moment. This society may be preppers, with each consumer having a stockpile of 100 bags of groceries they maintain at home. It could be Manhattan, where few people have more than a couple bags in reserve. Either way, if 1,000 bags are sold, and $1,000 is spent, the price is $1 per bag. The amount of goods *sold* in the period matters, not the amount of goods in existence.
In real economies, we talk about the savings rate. The US savings rate is tiny, something like 2%-3%, so almost all of the money consumers get is available for trade. Some countries have a savings rate of over 50%, though. That's half the income not available for purchasing.
I would even venture to say that even in the United States, the lower class, which makes up 25% of the population. The idea of retirement is probably only rich, white people, (anyone upper middle class and above), are the only ones who will ever be able to retire.
Again, in my opinion, and I know more about computers than this subject. I just think the entire article is really telling the whole story. Just the story of those groups of people that make enough to save up and are able to retire are not prepared for retirement.
Personally, I'm choosing not to think about retirement until I hit 70. If you notice most successful, and rich, people never seem to retire they continue to work throughout their life finding other jobs, or starting their own businesses, or just managing their own funds. Not that I'm going to be that successful. I just don't think retirement is for me as I like having a job and being able to make money. I'm still saving for retirement but I'm no seriously planning on using it till sometime after 70.
Save Pangaea!! Stop Continental Drift!!
It seems to me that inflation may be directly tied to the ratio of stuff being sold to the amount of money used to purchase stuff.
Oh yeah, you got it exactly right, good job. You pretty nearly derived the money equation there, MV = PQ.
Conceptually, another way of looking at it is that all the value is on one side of the equation (all the things in the world). You can increase or decrease the money supply all you want (the other side of the equation is the money supply), but the money (at any amount) will still only be able to buy the things.
"First they came for the slanderers and i said nothing."
The key words are "learn to appreciate". Unfortunately the people making decisions are often not engineers and don't always "get it" that one experienced, current developer can be worth five juniors. That's not universally true but it certainly is a thing. We may do the technical interview but you have to get TO that point before we have any input whatsoever.
As for that deathmarch thing being exclusive to startups or silicon valley, I don't really think that's the case but it is indeed part of that culture. We make estimates based on projects that have unknowns. If the penalty for failure (delay) is low, no big deal, if it is high then you either maintain a healthy level of apathy or you do what must be done.
Gen X and Millenials if you believe everything you read, you'll fall for this piece of WallSt. PR bullshit. I own 1 stock.
Had I not bought AAPL at $12 and $17 USD back in 1996 en-mass, I would not have a nice retirement. A BabyBoomer, many of my peers lost 50% during the 2008 recession and Dot.com crash before it.
Invest in people, know them well then put your money down on a company that stands for something other than next quarter's earnings statement.
Lacking the intel, sources and time to do otherwise; you shouldn't be in equities traded Casino style in AI nanoseconds.
We had decades of stability until Regan came along and started repealing depression era laws designed to stop another depression.
Ah, Comrade Silvergun, did you forget about Carter's Era of Stagflation?
Taking guns away from the 99% gives the 1% 100% of the power.
MV = PQ is called The Equation of Exchange. Exchange, not existence. Q is the amount of stuff PURCHASED in a given year or quarter, not the amount of stuff that EXISTS.
So it's not "all the things in the world", but rather "all the things that were bought and sold today".
I'm an old man. It is clear that the world simply cannot bear the additional cost of non-contributing peoples. This is why they lifted the limit on what you could earn on Social Security. Does anyone think that things will get better when the solution to lubricating the economic engine is to print money?
folks can't do daily manual labor much past 55. Not 40 hours a week of it. Yes, there are exceptions. They're exceptions.
Even if office work experience is over rated. I need 1 experience guy to keep tabs on 10 newbies. Those newbies work 60 hours a week on salary and don't mind doing it since their careers are getting started. In terms of raw output you can't compete with them. Yes, they'll work hard to fix their mistakes, but in a dog eat dog world with more workers than jobs that's not a bug, it's a feature.
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Thanks, this was my thoughts exactly. A quick Google search shows numerous bear markets of the Dow in the 20th century, before Reagan.
There's your problem, you think that one thing that consistently drives down wages is cheap imported labor.
It never has, never will. Countries have royally screwed up their economies assuming it does. The problem is that the "imported labor" needs feeding, and quickly learns it needs the same salaries everyone else does.
Britain tried to increase immigration in the 1950s because it thought the same thing. Wages did not come down. H1Bs are not driving wages down in the US either.
You are not alone. This is not normal. None of this is normal.
https://www.theatlantic.com/ma...
Yeah, the accumulation at the tippy top is pretty disgusting...
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You are 100% correct.
Increasing government spending and lowering taxes/interest rates does indeed temporary "fix" the economy...at the expense of pretty much everyone who will still be alive and dealing with the massive government debt you've created after the fact. If you are unclear on this maybe ask someone from Greece/Italy/any other country that has already done so.