Wow, this guy is saying exactly what I've been saying for all these years. He must be very smart.
I think that Social Security crisis is overblown. The real crisis is going be the 401k crisis, once the 401k generation starts retiring in big numbers, only to find that they have nothing other than Social Security checks.
QuoteOur Ridiculous Approach to Retirement
By TERESA GHILARDUCCI
I WORK on retirement policy, so friends often want to talk about their own retirement plans and prospects. While I am happy to have these conversations, my friends usually walk away feeling worse — for good reason.
Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts. The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day.
In my ad hoc retirement talks, I repeatedly hear about the "guy." This is a for-profit investment adviser, often described as, "I have this guy who is pretty good, he always calls, doesn't push me into investments." When I ask how much the "guy" costs, or if the guy has fiduciary loyalty — to the client, not the firm — or if their investments do better than a standard low-fee benchmark, they inevitably don't know. After hearing about their magical guy, I ask about their "number."
To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security. If you have an income-producing partner and a paid-off house, you need less. This number is startling in light of the stone-cold fact that most people aged 50 to 64 have nothing or next to nothing in retirement accounts and thus will rely solely on Social Security.
Even for those who know their "number" and are prepared for retirement (it happens, rarely), these conversations aren't easy. At dinner one night, a friend told me how much he has in retirement assets and said he didn't think he had saved enough. I mentally calculated his mortality, figured he would die sooner than he predicted, and told him cheerfully that he shouldn't worry. ("Congratulations!") But dying early is not the basis of a retirement plan.
If we manage to accept that our investments will likely not be enough, we usually enter another fantasy world — that of working longer. After all, people hear that 70 is the new 50, and a recent report from Boston College says that if people work until age 70, they will most likely have enough to retire on. Unfortunately, this ignores the reality that unemployment rates for those over 50 are increasing faster than for any other group and that displaced older workers face a higher risk of long-term unemployment than their younger counterparts. If those workers ever do get re-hired, it's not without taking at least a 25 percent wage cut.
But the idea is tempting; people say they don't want to retire and feel useless. Professionals say they can keep going, "maybe do some consulting" or find some other way to generate income well into their late 60s. Others say they can always be Walmart greeters. They rarely admit that many people retire earlier than they want because they are laid off or their spouse becomes sick.
Like the nation's wealth gap, the longevity gap has also widened. The chance to work into one's 70s primarily belongs to the most well off. Medical technology has helped extend life, by helping older people survive longer with illnesses and by helping others stay active. The gains in longevity in the last two decades almost all went to people earning more than average. It makes perfect sense for human beings to think each of us is special and can work forever. To admit you can't, or might not be able to, is hard, and denial and magical thinking are underrated human coping devices in response to helplessness and fear.
So it's not surprising that denial dominates my dinner conversations, but it is irresponsible for Congress to deny that regardless of how much you throw 401(k) advertising, pension cuts, financial education and tax breaks at Americans, the retirement system simply defies human behavior. Basing a system on people's voluntarily saving for 40 years and evaluating the relevant information for sound investment choices is like asking the family pet to dance on two legs.
Not yet convinced that failure is baked into the voluntary, self-directed, commercially run retirement plans system? Consider what would have to happen for it to work for you. First, figure out when you and your spouse will be laid off or be too sick to work. Second, figure out when you will die. Third, understand that you need to save 7 percent of every dollar you earn. (Didn't start doing that when you were 25 and you are 55 now? Just save 30 percent of every dollar.) Fourth, earn at least 3 percent above inflation on your investments, every year. (Easy. Just find the best funds for the lowest price and have them optimally allocated.) Fifth, do not withdraw any funds when you lose your job, have a health problem, get divorced, buy a house or send a kid to college. Sixth, time your retirement account withdrawals so the last cent is spent the day you die.
As we all know, these abilities are not common for our species. The current model for retirement savings, which forces individuals to figure out a plan for their retirement years, whether through a "guy" or by individual decision making, will always fall short. My friends are afraid, and they are not alone. In March, according to the Employee Benefit Research Institute, only 52 percent of Americans expressed confidence that they will be comfortable in retirement. Twenty years ago, that number was close to 75 percent.
I hope that fear can make us all get real. The coming retirement income security crisis is a shared problem; it is not caused by a set of isolated individual behaviors. My plan calls for a way out that would create guaranteed retirement accounts on top of Social Security. These accounts would be required, professionally managed, come with a guaranteed rate of return and pay out annuities. This is a sensible way to get people to prepare for the future. You don't like mandates? Get real. Just as a voluntary Social Security system would have been a disaster, a voluntary retirement account plan is a disaster.
It is now more than 30 years since the 401(k)/Individual Retirement Account model appeared on the scene. This do-it-yourself pension system has failed. It has failed because it expects individuals without investment expertise to reap the same results as professional investors and money managers. What results would you expect if you were asked to pull your own teeth or do your own electrical wiring?
Although humans may be bad at some behaviors, we are good at others, including coming together and finding common solutions that protect all of us from risk. Surely we can find a way to help people save — adequately and with little risk — for their old age.
:yeah:
:mad:
Quote from: Barrister on July 26, 2012, 10:26:25 AM
:yeah:
Please do us all a favor, and go fuck yourself. It's not polite to brag about one's good fortune in front of the dead.
I can survive on $5 a day. I don't worry.
As to the article - yup, we are all good and fucked. I'm planning a menu of dog food for my retirement, on the assumption that this is what I'll be able to afford. :D
Quote from: CountDeMoney on July 26, 2012, 10:30:00 AM
Quote from: Barrister on July 26, 2012, 10:26:25 AM
:yeah:
Please do us all a favor, and go fuck yourself. It's not polite to brag about one's good fortune in front of the dead.
But bragging about our pension is the only benefit of being a public servant.
Well, other than the pension itself. -_-
The article though rings very true for my parents. They don't have a ton in RRSPs (Canuck equivalent to 401(K)) because there have been withdrawls due to past bouts of unemployment. My dad has worked very consistently, but newspapers are not a great industry to be in these days. He's been under-employed the last 5 years as well - great skills, but few want to hire someone in their late 50s.
They'll probably do okay though - because of my mom's teachers pension.
Quote from: Malthus on July 26, 2012, 10:33:38 AM
As to the article - yup, we are all good and fucked. I'm planning a menu of dog food for my retirement, on the assumption that this is what I'll be able to afford. :D
:yeahright:
Given what we know about your finances (i.e. paid off mortgage) I imagine you'll be just fine. You're also in that high-end bracket that can work for a lengthy period of time if need be.
Quote from: DGuller on July 26, 2012, 10:21:53 AM
Wow, this guy is saying exactly what I've been saying for all these years. He must be very smart.
And a little cranky he has a girl's name.
Quote from: Barrister on July 26, 2012, 10:35:53 AM
But bragging about our pension is the only benefit of being a public servant.
Well, other than the pension itself. -_-
Still. Go fuck yourself.
QuoteThe article though rings very true for my parents. They don't have a ton in RRSPs (Canuck equivalent to 401(K)) because there have been withdrawls due to past bouts of unemployment. My dad has worked very consistently, but newspapers are not a great industry to be in these days. He's been under-employed the last 5 years as well - great skills, but few want to hire someone in their late 50s.
They'll probably do okay though - because of my mom's teachers pension.
I'd say they can go fuck themselves too, but since they don't post here I don't know them.
Quote from: Malthus on July 26, 2012, 10:33:38 AM
As to the article - yup, we are all good and fucked. I'm planning a menu of dog food for my retirement, on the assumption that this is what I'll be able to afford. :D
Nah, not all of us, but a whole lot of us. Ordinary people are just not pension managers, and it's retarded to set up a system that requires them to be that. Hell, even I barely know what I'm doing with 401k, and while I'm not a professional investor, I'm far above average in my understanding of investments than most other people.
Quote from: Admiral Yi on July 26, 2012, 10:38:48 AM
Quote from: DGuller on July 26, 2012, 10:21:53 AM
Wow, this guy is saying exactly what I've been saying for all these years. He must be very smart.
And a little cranky he has a girl's name.
:face: :shutup:
Professionally managed? Sounds like this is just a way to legislate more money into the financial bubble.
Quote from: DGuller on July 26, 2012, 10:39:50 AM
Hell, even I barely know what I'm doing with 401k, and while I'm not a professional investor, I'm far above average in my understanding of investments than most other people.
I don't have to worry about 401ks, as I already possess .357. That's my retirement.
Quote from: Barrister on July 26, 2012, 10:35:53 AM
But bragging about our pension is the only benefit of being a public servant.
The downside to a defined benefit pension is that the benefits can be redefined relatively easily.
Quote from: Barrister on July 26, 2012, 10:35:53 AM
The article though rings very true for my parents. They don't have a ton in RRSPs (Canuck equivalent to 401(K)) because there have been withdrawls due to past bouts of unemployment. My dad has worked very consistently, but newspapers are not a great industry to be in these days. He's been under-employed the last 5 years as well - great skills, but few want to hire someone in their late 50s.
My dad is about the worst possible case. He was educated as an economist, so he thinks he understands a lot. Except he really doesn't when it comes to investments, which is the worst situation. To compound that, he also lacks bullshit detector, and easily falls for pitches, which is also a bad situation when you have a habit of speaking with financial advisers at your local bank :bleeding: . All these things considered, he got lucky to not get burned in the financial clusterfuck of late.
Quote from: Admiral Yi on July 26, 2012, 10:46:07 AM
Quote from: Barrister on July 26, 2012, 10:35:53 AM
But bragging about our pension is the only benefit of being a public servant.
The downside to a defined benefit pension is that the benefits can be redefined relatively easily.
I don't know about "easily", but it can happen, sure.
But there are risks in just about everything. You run all kinds of investment risks with your RRSP - the company you invested in can go under, the companies you invest in can go under, you can have a currency crash.
I'm not certain that the risk that the GOA unilaterally reduces my pension down the road is any worse than those other risks.
Quote from: Barrister on July 26, 2012, 11:00:04 AM
I'm not certain that the risk that the GOA unilaterally reduces my pension down the road is any worse than those other risks.
I'm pretty such the Canucks have a lot more protections and mechanisms in place to prevent that sort of thing, as opposed to here, where they can destroy a pension program for fun and profit.
I think the article is pretty much spot on, although not as much for the reasons he is stressing.
Nobody expects people to be able to manage their investments like an investment fund manager - that is why we have mutual funds. Isn't that the entire point of a mutual fund?
The problem is not that people do not manage their investments well, it is that people simply as a group do not invest enough of their income into retirement.
His "plan" to solve this sounds kind of nebulous. A what - federal level mandated retirement program? Don't we already have one of those, and the people running it consistently take all the money put into it and spend it immediately?
Quote from: Berkut on July 26, 2012, 11:04:03 AM
I think the article is pretty much spot on, although not as much for the reasons he is stressing.
Nobody expects people to be able to manage their investments like an investment fund manager - that is why we have mutual funds. Isn't that the entire point of a mutual fund?
The problem is not that people do not manage their investments well, it is that people simply as a group do not invest enough of their income into retirement.
Yeah, generally speaking, the reason your IRA or 401K doesn't have enough in it for you to have a comfortable retirement on isn't because it was mis-managed and lost money, but because you simply didn't put enough in it for it to earn enough for you to retire on, even at a good rate of return.
Quote from: Barrister on July 26, 2012, 11:00:04 AM
I don't know about "easily", but it can happen, sure.
But there are risks in just about everything. You run all kinds of investment risks with your RRSP - the company you invested in can go under, the companies you invest in can go under, you can have a currency crash.
I'm not certain that the risk that the GOA unilaterally reduces my pension down the road is any worse than those other risks.
I think one lesson that needs to be taken away from the recent spate of state and municipal bankruptcies and contract renegotiations is that just because you have a defined benefit pension does not mean you're immune from market downturns. Your pension plan invests in financial assets just like the rest of us, and downturns create unfunded liabilities that either get filled by new revenue or by...cutting benefits.
In addition to which you're exposed to changes in taxpayer sentiment that have nothing to do with economic fundamentals. My original point was that with a defined contribution pension you're not dependent on the good will of strangers in this way.
I may be a luddite, but I don't trust any pension plans and just plan to save/invest enough of cash in bonds, foreign currency and real estate. Right now I'm paying off quite a hefty mortgage so that's also an investment and saving up the matching amount as the monthly mortgage payment, in deposits and the like. But then I will probably die of heart attack before I retire so I will start thinking about retirement if it looks like I live long enough.
Quote from: Berkut on July 26, 2012, 11:04:03 AM
I think the article is pretty much spot on, although not as much for the reasons he is stressing.
Nobody expects people to be able to manage their investments like an investment fund manager - that is why we have mutual funds. Isn't that the entire point of a mutual fund?
The problem is not that people do not manage their investments well, it is that people simply as a group do not invest enough of their income into retirement.
Agreed.
I think one concrete step that would be very helpful is to publicize the "rule of 20." Whatever savings you have when you retire, divide that by 20, and that's how much you can spend each year.
Quote from: Berkut on July 26, 2012, 11:04:03 AM
Nobody expects people to be able to manage their investments like an investment fund manager - that is why we have mutual funds. Isn't that the entire point of a mutual fund?
Mutual funds don't make things that easy. You've got dozens to choose from, how do you evaluate the options and choose? How do you balance your choices? You can still fuck up pretty badly here. Sure, you can search for advice, and you'll find it. Lots and lots of it. And we know how good financial advice is on average.
Quote from: DGuller on July 26, 2012, 11:27:00 AM
Mutual funds don't make things that easy. You've got dozens to choose from, how do you evaluate the options and choose? How do you balance your choices? You can still fuck up pretty badly here. Sure, you can search for advice, and you'll find it. Lots and lots of it. And we know how good financial advice is on average.
:yeahright: How exactly can you fuck up pretty badly investing in mutual funds through your 401k?
Quote from: dps on July 26, 2012, 11:10:59 AM
Yeah, generally speaking, the reason your IRA or 401K doesn't have enough in it for you to have a comfortable retirement on isn't because it was mis-managed and lost money, but because you simply didn't put enough in it for it to earn enough for you to retire on, even at a good rate of return.
It's easy to be paralyzed by lack of knowledge.
Quote from: Admiral Yi on July 26, 2012, 11:13:30 AM
Quote from: Barrister on July 26, 2012, 11:00:04 AM
I don't know about "easily", but it can happen, sure.
But there are risks in just about everything. You run all kinds of investment risks with your RRSP - the company you invested in can go under, the companies you invest in can go under, you can have a currency crash.
I'm not certain that the risk that the GOA unilaterally reduces my pension down the road is any worse than those other risks.
I think one lesson that needs to be taken away from the recent spate of state and municipal bankruptcies and contract renegotiations is that just because you have a defined benefit pension does not mean you're immune from market downturns. Your pension plan invests in financial assets just like the rest of us, and downturns create unfunded liabilities that either get filled by new revenue or by...cutting benefits.
In addition to which you're exposed to changes in taxpayer sentiment that have nothing to do with economic fundamentals. My original point was that with a defined contribution pension you're not dependent on the good will of strangers in this way.
I freely admitted that was true. Howeevr the state of finances of the province of Alberta are miles away better than probably most jurisdictions on the planet.
I just questioned whether that risk was any greater than the risks you run saving on your own. Short of burying gold in the back yard you are still dependent on the good will (or at least not the active malice) of a whole series of strangers.
Quote from: Admiral Yi on July 26, 2012, 11:29:09 AM
Quote from: DGuller on July 26, 2012, 11:27:00 AM
Mutual funds don't make things that easy. You've got dozens to choose from, how do you evaluate the options and choose? How do you balance your choices? You can still fuck up pretty badly here. Sure, you can search for advice, and you'll find it. Lots and lots of it. And we know how good financial advice is on average.
:yeahright: How exactly can you fuck up pretty badly investing in mutual funds through your 401k?
Invest it all in REITs or Foreign Market funds (and choose the funds that skim 2-3% in fees)? Try to time the market by shifting in and out of equity positions? Keep a huge chunk of it in your company stock?
Quote from: CountDeMoney on July 26, 2012, 11:03:07 AM
Quote from: Barrister on July 26, 2012, 11:00:04 AM
I'm not certain that the risk that the GOA unilaterally reduces my pension down the road is any worse than those other risks.
I'm pretty such the Canucks have a lot more protections and mechanisms in place to prevent that sort of thing, as opposed to here, where they can destroy a pension program for fun and profit.
Well... mine is a government pension. There are protections in place to protect my pension - put in place by that same government.
If the government did want to destroy my pension, they are the ones who could change those same rules.
Quote from: Barrister on July 26, 2012, 11:34:41 AM
Quote from: CountDeMoney on July 26, 2012, 11:03:07 AM
I'm pretty such the Canucks have a lot more protections and mechanisms in place to prevent that sort of thing, as opposed to here, where they can destroy a pension program for fun and profit.
Well... mine is a government pension. There are protections in place to protect my pension - put in place by that same government.
If the government did want to destroy my pension, they are the ones who could change those same rules.
Right, and since Canadian society appears to be much less predatory than American society, I don't think you'd have the same problems Yi mentioned.
Quote from: Barrister on July 26, 2012, 11:30:25 AM
I just questioned whether that risk was any greater than the risks you run saving on your own. Short of burying gold in the back yard you are still dependent on the good will (or at least not the active malice) of a whole series of strangers.
Au contraire. You are dependent on legal protections. If my online broker hates my guts The Man still has my back.
Quote from: Admiral Yi on July 26, 2012, 11:38:37 AM
Quote from: Barrister on July 26, 2012, 11:30:25 AM
I just questioned whether that risk was any greater than the risks you run saving on your own. Short of burying gold in the back yard you are still dependent on the good will (or at least not the active malice) of a whole series of strangers.
Au contraire. You are dependent on legal protections. If my online broker hates my guts The Man still has my back.
Sounds to me like you are dependent on legal protections as well if your online broker hates your guts.
Quote from: Barrister on July 26, 2012, 11:39:40 AM
Sounds to me like you are dependent on legal protections as well if your online broker hates your guts.
That's what I was saying. I'm indifferent if my online broker hates my guts or not. I'm indifferent if the CEO and the board of companies I own shares in hate me.
Also as a government employee - what else am I supposed to do?
I could theoretically pretend I will not receive a pension, and thus put away into RRSPs a sum high enough to live off of in retirement. However that seems hugely wasteful - given that I am 37, not 21, I would have to save a significant % of my take-home pay.
And then when I retire I have more then enough money, so I guess I just give it to my kids when I die?
Quote from: CountDeMoney on July 26, 2012, 11:37:18 AM
Quote from: Barrister on July 26, 2012, 11:34:41 AM
Quote from: CountDeMoney on July 26, 2012, 11:03:07 AM
I'm pretty such the Canucks have a lot more protections and mechanisms in place to prevent that sort of thing, as opposed to here, where they can destroy a pension program for fun and profit.
Well... mine is a government pension. There are protections in place to protect my pension - put in place by that same government.
If the government did want to destroy my pension, they are the ones who could change those same rules.
Right, and since Canadian society appears to be much less predatory than American society, I don't think you'd have the same problems Yi mentioned.
We'll see. In about 25-30 years, there are going to be a lot of people trying to retire who saved nothing for their retirement, and put everything into cocaine, strippers, snowmobiles and a new truck every other year. At that point, if a politician wants to balance the budget by trimming those 'excessive and unfair' public pensions, he'll have a constituency.
Quote from: Barrister on July 26, 2012, 11:42:57 AM
Also as a government employee - what else am I supposed to do?
Same as anyone else does--realize the stream of money you're expecting has some uncertainty built into it.
Quote
Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts.
Good lord, where to begin.
401ks and no-load mutual funds are both less than 30 years old. It would be extremely hard for a person who began their working career since then to find themselves in the above situation without living in near-homeless conditions and/or making a huge effort to avoid saving anything at all. People retiring in 2010 are from before that generation, and probably have their retirement funds supplemented by different vehicles from the earlier era.
DGuller is trying to sell you annuities, guys. :P
Quote from: MadImmortalMan on July 26, 2012, 11:50:31 AM
DGuller is trying to sell you annuities, guys. :P
I think he might be right to do so. :ph34r:
Quote from: MadImmortalMan on July 26, 2012, 11:49:27 AM
Good lord, where to begin.
401ks and no-load mutual funds are both less than 30 years old. It would be extremely hard for a person who began their working career since then to find themselves in the above situation without living in near-homeless conditions and/or making a huge effort to avoid saving anything at all. People retiring in 2010 are from before that generation, and probably have their retirement funds supplemented by different vehicles from the earlier era.
I also noted that this dude Teresa made no mention of assets *outside* retirement accounts.
Quote from: Admiral Yi on July 26, 2012, 11:52:33 AM
Quote from: MadImmortalMan on July 26, 2012, 11:49:27 AM
Good lord, where to begin.
401ks and no-load mutual funds are both less than 30 years old. It would be extremely hard for a person who began their working career since then to find themselves in the above situation without living in near-homeless conditions and/or making a huge effort to avoid saving anything at all. People retiring in 2010 are from before that generation, and probably have their retirement funds supplemented by different vehicles from the earlier era.
I also noted that this dude Teresa made no mention of assets *outside* retirement accounts.
The limited set of people I know who are up for retirement are generally going to do well because their homes have increased substantially in value and are fully paid off.
My wife's grandma (in her 80s, so not a recent retirement) lives high on the hog because the modest bungalo they purchased in Surrey, BC decades ago sold 5 years ago for close to a million. She moved to small town Alberta where she bought a very nice house for less than $100k
Quote from: Barrister on July 26, 2012, 11:51:36 AM
I think he might be right to do so. :ph34r:
You still need to worry about counterparty risk. :ph34r:
Quote from: Admiral Yi on July 26, 2012, 11:45:25 AM
Quote from: Barrister on July 26, 2012, 11:42:57 AM
Also as a government employee - what else am I supposed to do?
Same as anyone else does--realize the stream of money you're expecting has some uncertainty built into it.
But he's just one person, so in effect he self-insures against uncertainty. Self-insurance options for ordinary individuals are often:
1) Hope for the best.
2) Insure against it at prohibitive cost.
If he could taken a portion of his equity in his public pension and transfer it to some other pension schemes, then his realization of uncertainty of his public pension may be worth something.
Quote from: Barrister on July 26, 2012, 11:56:54 AM
Quote from: Admiral Yi on July 26, 2012, 11:52:33 AM
Quote from: MadImmortalMan on July 26, 2012, 11:49:27 AM
Good lord, where to begin.
401ks and no-load mutual funds are both less than 30 years old. It would be extremely hard for a person who began their working career since then to find themselves in the above situation without living in near-homeless conditions and/or making a huge effort to avoid saving anything at all. People retiring in 2010 are from before that generation, and probably have their retirement funds supplemented by different vehicles from the earlier era.
I also noted that this dude Teresa made no mention of assets *outside* retirement accounts.
The limited set of people I know who are up for retirement are generally going to do well because their homes have increased substantially in value and are fully paid off.
My wife's grandma (in her 80s, so not a recent retirement) lives high on the hog because the modest bungalo they purchased in Surrey, BC decades ago sold 5 years ago for close to a million. She moved to small town Alberta where she bought a very nice house for less than $100k
There are problems with using your house as your retirement piggy-bank ... for one, it means banking on one asset class doing well as an investment, and if it doesn't you are screwed. Pity those in the US who were set to retire when the real estate market combusted.
I'd just diversify my savings if I had to take a public pension. I'd start up an IRA or something on the side, buy some real estate, etc.
Edit: Annuities too!
What MIM said DGuller. You don't need to insure 100% of the probability distribution. The bottom .0001% means we're living on rats and dodging fallout anyway.
Quote from: Admiral Yi on July 26, 2012, 12:09:37 PM
Quote from: Barrister on July 26, 2012, 11:51:36 AM
I think he might be right to do so. :ph34r:
You still need to worry about counterparty risk. :ph34r:
And inflation (unless that is built in).
Quote from: Admiral Yi on July 26, 2012, 12:25:27 PM
What MIM said DGuller. You don't need to insure 100% of the probability distribution. The bottom .0001% means we're living on rats and dodging fallout anyway.
I didn't say you had to, there is always a risk of ruin, even the best insurance companies are expected to go bust once in 100 or 200 years. I'm just saying that in Beeb's case, even insuring up to an acceptable risk margin may be just too cost-prohibitive. He can't just take some of his eggs from his only basket, and put them in another basket. He would have to obtain another basket and another pile of eggs.
Quote from: DGuller on July 26, 2012, 01:50:44 PM
Quote from: Admiral Yi on July 26, 2012, 12:25:27 PM
What MIM said DGuller. You don't need to insure 100% of the probability distribution. The bottom .0001% means we're living on rats and dodging fallout anyway.
I didn't say you had to, there is always a risk of ruin, even the best insurance companies are expected to go bust once in 100 or 200 years. I'm just saying that in Beeb's case, even insuring up to an acceptable risk margin may be just too cost-prohibitive. He can't just take some of his eggs from his only basket, and put them in another basket. He would have to obtain another basket and another pile of eggs.
As we've seen, the risks of government insolvency and financial institution insolvency can be intertwined. :(
Quote from: Barrister on July 26, 2012, 03:49:21 PM
As we've seen, the risks of government insolvency and financial institution insolvency can be intertwined. :(
You can still put some savings into overseas things. Buy a couple houses and rent them out. Government insolvency won't make a house disappear, and people still need to live somewhere.
Quote from: Barrister on July 26, 2012, 03:49:21 PM
Quote from: DGuller on July 26, 2012, 01:50:44 PM
Quote from: Admiral Yi on July 26, 2012, 12:25:27 PM
What MIM said DGuller. You don't need to insure 100% of the probability distribution. The bottom .0001% means we're living on rats and dodging fallout anyway.
I didn't say you had to, there is always a risk of ruin, even the best insurance companies are expected to go bust once in 100 or 200 years. I'm just saying that in Beeb's case, even insuring up to an acceptable risk margin may be just too cost-prohibitive. He can't just take some of his eggs from his only basket, and put them in another basket. He would have to obtain another basket and another pile of eggs.
As we've seen, the risks of government insolvency and financial institution insolvency can be intertwined. :(
That's a very good point as well. The concept of diversification is actually widely misunderstood. Diversification doesn't do a thing about general clusterfucks, it's only insurance against individual fuck-ups.
I had thought Soc Security was in more trouble, listening to some political and other pundits, non-ideological types, like the Simpson-Bowles committee. But it's apparently doing ok, or well enough, through about the 2030s. And even then it's projected to just go into a small deficit but which will widen over time.
However, I do worry about the huge govt deficits and how that may impact all the govt programs, like Medicare, Soc Sec, and more. I do think we should be making some reforms over all, with all programs and spending, reforms, not trashing them.
The tax breaks they gave us, "Bush" tax cuts, come out of Social Security, which doesn't make sense to me really. If they want to do tax cuts, they should be done otherwise. But I guess there would be issues over what ever was targeted anyway.
I pulled out the calculator to see how I am doing with the 20 rule.
I was horrified.
Then I remember that, in addition to what I have saved throughout the years, I still have my inflation adjusted pension, guranteed by the trillions of cash reserves of the nearly debt free HK government, which run gigantic supluses (the record was 50% of annual expense) year after year.
Then I remember that my wife has the same.
And I note that we are both still working.
:cool:
Remember Mono that if there's a banking crisis in China (and there will be), all the money in HK will be seized. Don't neglect your savings.
Quote from: Neil on July 26, 2012, 07:58:20 PM
Remember Mono that if there's a banking crisis in China (and there will be), all the money in HK will be seized. Don't neglect your savings.
Why do you think all those Chinese dudes are investing in properties nobody lives in? Heh.
Quote from: Neil on July 26, 2012, 07:58:20 PM
Remember Mono that if there's a banking crisis in China (and there will be), all the money in HK will be seized. Don't neglect your savings.
All the money in HK is negligible when compared with the wealth on the mainland. We can't save them :D
Quote from: Monoriu on July 26, 2012, 08:50:27 PM
Quote from: Neil on July 26, 2012, 07:58:20 PM
Remember Mono that if there's a banking crisis in China (and there will be), all the money in HK will be seized. Don't neglect your savings.
All the money in HK is negligible when compared with the wealth on the mainland. We can't save them :D
Why would that stop them from robbing you? Did the irrelevance of the public sector unions in the US vis-a-vis the budget save them?
Quote from: Neil on July 26, 2012, 08:52:44 PM
Why would that stop them from robbing you? Did the irrelevance of the public sector unions in the US vis-a-vis the budget save them?
:mellow: Public sector unions *are* the state budgets.
My primary complaint about the private retirement savings account is the high fees. I think if the government forces its citizens to save in the private accounts (as in the case of HK), there should be a government-managed "default" fund (or funds) for people to choose. These should be passively managed, low fee, well-balanced portfolios that aim to deliver consistent (but not necessarily high) returns.
I am not sure if the 20 rule is sufficiently conservative. I think 25 is a safer bet.