This article needs to be printed everywhere, at all times.
I have no idea how some of the people I see every day are going to save up the $1.5 million (in today's money) they'll need to retire. Half of 'em can't even pay off their credit card bills every month.
My retirement strategy is to die young. If I start making a lot more money or my cost of living magically decreases over the next decade I might reconsider this but otherwise I don't think social security is going to provide any quality standard of living. If I can't continue to work (which I don't mind doing) I plan to check out. (sad but true)
Your understanding of life and things never changed before? Recall your beliefs 10 years ago. Now imagine 30 years passed - there is a very good chance that your desire to live will be strong. You will be miserably calling your current selfish self "an idiot" for not saving up while trying to meet ends on the government money.
No offense really, but some people can't extrapolate their own personality even 5 years ahead. Trust me, you will change with age, everybody does. Hopefully it won't be too late to start saving then...
I'm open minded about the future. I think the problem for people my age (30-ish) is that the entire time we've been working real wages are flat or negative. We've never had a chance to get ahead of the game. I make more money than most of my friends, lots of them have student loans to deal with too, and it's hard to project a way to save even $200k-$300k over the next 30 years. Of course I could cut my expenses, move into a cheaper place, eat lots of ramen, but that's just choosing to live poor now instead of later. So for now I'm making the choice to be poor later.
Yep, this is it. I have at least two friends from college that have spent over a year trying to find work. "Defeated" doesn't even begin to properly describe how they feel.
My present self is cursing my 20s self for having spent a load of time traveling and running up lifestyle inflation debts, basically boozing it up non-stop.
On the other hand, I have some really good experiences and memories.
But I've been incredibly focused on reducing debt and building equity for the past year or so, and I don't see that changing.
I'm just glad I woke up while I still have 35 years to repair the damage, I have my health, live in a country with affordable healthcare, etc.
Thinking the same thing here. If I'm not able to work I'm not sure how able I'll be to enjoy much else anyway.
This whole model of slaving away your healthy years in the hope you'll still have the savings and the strength to enjoy life after 70 seems like a scam to me. My plan is to work less each year but keep on working. This isn't so bad if you do work you enjoy.
Okay, it takes effort to make me suspend my rule against politics on HN, but I have my limits. If you are some kind of troll, I nominate you for an Academy Award.
First: Social security is solvent, it will be solvent for years, and to fix it will require a minor tax increase decades from now. Quit believing propaganda.
Second: Our future budgetary problems are nonetheless real. But they are all about health care. If you really want to worry about balancing budgets in 2040, worry about that. Social Security is fine and will continue to be fine unless somebody deliberately fucks it up. (By talking like a fatalist, as you do, you inadvertently help the cause of the people who are trying to fuck it up; that is why we are having this little chat.)
Third: The major problem in the USA today is that we have a massive excess of productive capacity. Not only can the country afford to feed, clothe, house, and entertain you quite nicely, but our biggest problem is that after we did this we might still have too much capacity. The economy is not well designed for such a situation, and it needs fixing.
(Aside: The fix is called "stimulus", literally known as "printing money". People won't spend money? Make them spend it now. Create new money and give it away; make the old money move by threatening to inflate it away in the future. That nobody in power understands this, or that they pretend not to, is an epic failure of education and/or governance; the consequence will be millions of impoverishments and, likely, early deaths, perhaps even your own. Tragedy sucks.)
To the extent that the country does not choose to feed, clothe, house, and entertain you and everyone around you, it is a problem of government, economics, and politics. It is not that we are physically incapable. It is that we are not so organized.
The solution is to organize.
Where will "the money" come from? Money is not a physical thing, like platinum. It's some numbers in a spreadsheet by which we keep score: If your number is higher, you get to control more about what the economy does.
If you wake up and discover that all the money belongs to a handful of people who have gamed the ruleset by which money is distributed, and that they are failing to use their giant pile of money to direct the economy to keep everyone else fed, clothed, housed, and entertained to the correct extent: You change the rules, or you stop playing the game.
By many orders of magnitude, the best option is to change the rules. Or, rather, to change one rule, to turn one knob that was designed to be turned: Raise taxes on the people with the money.
That anyone contemplates suicide rather than go down fighting for this simple rule change is a triumph of modern propaganda.
Get up out of the fetal position and be an American, for the love of all that is holy.
First: Social security is solvent, it will be solvent for years, and to fix it will require a minor tax increase decades from now. Quit believing propaganda.
Solvent in the sense that next month's check won't bounce? Or solvent in the sense that if it were an independent entity entitled to its current revenue streams, and nothing else, you'd happily buy someone's future SS income at 100 cents on the dollar?
Or, wait, solvent in the sense that if I had a balance sheet that looked like theirs, and I made the promises they make, I wouldn't be going to jail?
Solvent in the sense that there's enough money to pay full benefits until the late 2030's or early 2040's without any changes. And solvent in the sense that minor adjustments to benefits or taxes will fix it beyond that.
The accounting profession has created a term for entities that are almost solvent, and can almost pay off their debts. The term is "insolvent."
It's dangerous to have entities for which the clock is running out. What we should aim for is the opposite: a social security system that's gradually accumulating assets, and can eventually use that to offload its risks (by, for example, paying a life insurance company to assume some of its obligations).
That way, 1) we know how much things cost, and 2) our problems are gradually getting solved. Now, we have the opposite situation.
If you wake up and discover that all the money belongs to a handful of people who have gamed the ruleset by which money is distributed, and that they are failing to use their giant pile of money to direct the economy to keep everyone else fed, clothed, housed, and entertained to the correct extent: You change the rules, or you stop playing the game.
Do you think that every rich person has simply gamed the system and that none of them have actually earned their money? To make a blanket accusation against every rich person and simply say that their taxation is the cure is nowhere close to being an American.
I vote and I follow politics closely. I haven't totally given into the idea it's hopeless but I'm deeply skeptical about the ability for democracy to solve these problems. We have a progressive President who enjoys a majority in congress and he's still not able to enact a really progressive agenda. I'm starting to feel like the system is completely rigged. The people voted for change and all they're getting is Republican filibusters preventing most of it from happening. It's a subversion of democracy. Even if you win elections certain factions in this country are going to prevent progress.
I think the US needs to seriously start rethinking its system. What's the use of being so rich if you need to contemplate retiring to another country or dying early after you stop working?
Please look at Europe and Canada. They have their problems, sure, but they take care of their old and sick. And they do it with less money!
This actually works wonderfully if he buys up a lot of property. When everybody moves in and brings their money with them, land values shoot through the roof, and the people who owned that land make out like bandits. Folks who owned small orchards in Silicon Valley in the 1950s made out like bandits (assuming they managed it well), as did people who bought humble ranch-houses in the Boston suburbs in 50s and 60s.
Big cities in developing countries are expensive too. A better idea would be to find some beach property in South America; the continent is developing and getting older as well, so lots of people are retiring to the sea-side (as I said, big cities are expensive).
In the south of Brazil you won't find many bargains left, but I've read that lots os europeans are buying houses in the northeast (the infrastructure is a lot worse there, but it's 3.000km closer to Europe).
Ask the cubans that were forced to leave how much they got for their land. One of the things that people take for vantage and dont realize is the stability of the US government. I'm not saying that mexico is on course for collapse but the police have lost control of the north border
$1.5m is a bit high for the average case. The median household income in the United States today is about $50k, so if you estimate 80% of your income for retirement, that's $40k. The conditional life expectancy of a 65-year-old is ~17 yrs, and inching up very slowly, so maybe will be 20 years in a few decades. So that's $800k in today's money, modulo investments.
And that's assuming zero contribution from social security. Even if social security gets chopped at some point, I don't expect it to go all the way to $0; people working today and paying in will probably get some payout. Even if it's only $10k/yr, that reduces the needed savings to $600k.
Granted, most people don't have anywhere near $600k either, so it might be arguing between whether they need to save infinity or 2*infinity more than they currently are.
Yes, but your math only works if you don't exceed the life expectancy... if you want to be reasonably sure to have money into your 90s, you'll need more.
But that's sort of the point. I don't have a problem with this article which is largely good advice but I think it's useless. Everyone knows what he's saying is true yet people aren't saving.
As someone whose friends are predominantly in their 20s I can tell you people generally give 2 excuses...
1. "One of these startups will eventually work and I know I'll cash out on at least 1 big IPO before I retire so it doesn't matter"
2. "I don't know anyone whose saved for retirement and the average american household owes 20% more than they make. So the Government will have to do something and even if I don't have enough money I'll be taken care of"
So the bottom line is people are in denial and you can print this article up and tape it to their heads and it still isn't going to fix that problem
3. If I do save, it will all be taxed off me to pay for those who didn't.
Here in the UK, the last government started levying a tax on the pension funds, and the present government hasn't revoked it. So people who have guaranteed pensions paid for by the taxpayer, out of tax revenues, are doing so off the backs of those in the private sector who save for their retirement. It disgusts me.
Yes, it is worse. Already private sector workers know, despite record levels of NI, we cannot expect the State to look after us in our retirement. To tax us further to secure the votes of the unionized public sector is the worst sort of political cynicism.
You've hit upon the most important and possibly most overlooked point in macroeconomics. At the level of the whole economy, modulo things like inventory, there's no way for aggregate savings to be anything other than aggregate consumption + investment. Every good or service is produced by someone and consumed by someone else. If you don't have both parties, there's no transaction.
When you "save" money, it's essentially a claim check against someone else's income. It's a way of recording that you contributed more than your fair share to the economy this time, so at some time in the future, you have the right to consume more than your fair share.
If everybody contributes more than their fair share, who's using up the excess? And then if they all go to cash in their claim checks at the same time - say, when the baby boomers retire - who'll produce the goods and services needed to satisfy those claim checks?
I haven't implemented this myself (yet), but perhaps the solution (for an individual) is to store value through scare resources (eg gold and other precious metals, maybe land) rather than through money (ie stored labour).
It still has the same problem: the price of gold goes up as everyone purchases claim checks denominated in it, and then crashes as everyone tries to cash out those claim checks for the goods and services they need to live.
The real solution is to store value in resources that increase the productive capacity tomorrow, so that when everyone tries to cash out their claim checks tomorrow, there will still be enough goods to satisfy them all. In other words, investment. The problem is that an investment is only a good investment when it increases the productive capacity for something that people actually want tomorrow. It does no good for everyone to invest in houses when they really need health care upon cashing out those claim checks.
And there are often technological barriers that prevent dollar investments from being productive. You can pump all the money into biotech research that you want, but you're still not going to get a cure for cancer until someone actually cures cancer. Innovation has a random element that isn't always amenable to throwing money at the problem.
People often wonder why the U.S. economy did so well after WW2, compared to the Depression before and the 1970s malaise afterwards. IMHO, it was because the large amount of pure scientific research undertaken during the war created a large stockpile of fundamental scientific breakthroughs that were ready to be exploited. All the hard, risky parts of innovation were already done, funded by the War Department, and so companies could readily transform surplus cash into innovations that made people's lives better in the future.
I'd say that especially the types of people who hang out here would get completely bored stiff if they did ever retire.
The work we do (programming etc) can be done into your 80s,90s,etc. Sure, people will probably want to slow down a bit, and when sight starts failing etc but it's not like we're sportsmen or builders or anything strenuous.
My 80- to 90-year-old relatives are in nursing homes with failing minds and bodies. That will happen to almost all of us eventually, and your quality of life then depends on paying for quality care. No matter how much you love your work, there will probably come a time when you need to support yourself from savings, not salary.
I suppose it's not legal in most places, but I think if I reached an extent of failing mind where I was unable to do any sort of productive work, even part-time, I'd take the euthanasia option. What's the point of just sitting around senile in a nursing home for years on end?
I do still agree some significant savings are needed, e.g. for the case where your mind is still reasonably good, but you need physical assistance. But this article is talking about thirty years of living off savings! I definitely do not want to live thirty years of my life in which I'm completely unable to do anything but sit in a nursing home living off my savings.
Definitely don't agree with the last point, if it isn't accompanied by a minimum of mental awareness and quality of life. Certainly the (thankfully, few) elderly people I've known who died after a long, drawn out decline were quite unhappy about it. My grandfather lived 10 years past going blind, breaking his hip, and going increasingly senile, and spent about the last five years of that time constantly asking why God wasn't letting him go when it was his time to go. Doesn't sound appealing to me.
I think everyone I know over 65 has given whatever do-not-resuscitate/no-life-support/etc. directives they can, and would give more if it were allowed. The single most common fear I've heard people of that age express is not a fear of dying, but a fear of living too long past the point where their health runs out.
Look at facts. The vast majority of the elderly die of their health and not suicide.
Annecdotally, my grandfather, 102 years old, is a bit senile at this point yet still chases women, sings whenever he likes, and is generally an upbeat fellow. My wife has late stage Huntington's Disease and yet still enjoys simple pleasures. I share a dread future with my wife yet I am still here as well.
Happiness can be found in the most desperate of conditions.
Despite DNRs and such, there are many and simple ways to end our own lives. And, yet, the vast majority live them to the end.
Take this conversation, set it aside for 20 years, then tell me how you feel. I suspect the combination of marriage and children will change your outlook.
I don't think it has to be all bad. The article is talking about people saving enough money to live purely off their savings for 30+ years without working, which seems like a kind of silly goal. Why would someone spend something like half of their adult lives not working? At that age, I expect I'll either have enough presence of mind that I'll be doing some sort of work (even if reduced), or else I'll be senile/decrepit, in which case I definitely hope I don't drag out my end for 30 years. The idea of planning for 30 years of complete idleness seems crazy.
Rather than retiring at a specific fixed age, it makes more sense to me to retire at a specific time-til-death or health status: say, when you're down to 10 years of life expectancy, or too sick to work, whichever comes first. Actually I think 65 was probably chosen because it was once roughly the age where those things were true.
While this is true, I think my answer still stands even if you plan on retirement for only 10 years. It doesn't really matter, they don't have enough income to live how they're living now, let alone having extra to support themselves once they are no longer working.
I have no idea how some of the people I see every day are going to save up the $1.5 million (in today's money) they'll need to retire. Half of 'em can't even pay off their credit card bills every month.