Lifetime Saving for Retirement a Sham! Say It Ain't So ....

[flintlock]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

The problem to me is really a little of both. "asset price machinations" combined with very irresponsible savings and lifestyle of the general population. But the ultimate problem is the uncomfortable realization that we have "too many monkeys on the rock". Nothing has changed since the 1950-1970s so much as the population of the US. That is a big reason why Dad the truck driver can't afford to raise a family and then retire. Rather than some conspiracy, low wages are a natural result of higher competition for remaining US jobs. The fact we were sold a load of BS when we were told we could grow our way out of this is partly our own fault for believing it without question. We were told we'd compensate for the higher job competition with an expanded global market, which would create more demand for US labor. Of course anyone with common sense knows the nation with one of the highest standards of living has only one direction to go in terms of living standards in a global labor market. The US peaked a long time ago. Ponzi financing allowed us to prolong the day of reckoning, but that day is fast approaching and nothing we do is likely to avert some real suffering.

But people really do live way above their means today. They take for granted stuff that they really should not , like 2 vacations a year, a new car every few years, eating out several times a week, etc. I'm always amazed at what some people consider a sacrifice. Most guys I used to work with in construction never had a pot to piss in. Ever. They spent every dime as they got it. I remember paying an employee an extra $250 one week for a job well done. Monday he came in and told me how he took his family and a neighbor's family to PF Changs and blew the whole wad. That was typical. Now he's out of work and I try to send him some side jobs but he can't come up with the hundred dollars to buy materials so he can't do it! The job wold pay him $1500 for a few days work! I guess a certain element of society has always been that way, but it seems more and more are living like that. Hand to mouth. Being frugal went out of style so long ago that many have forgotten how to do it. $3 gallon gas but how many times do I see my out of work friends driving around because they are bored? It really is a lot harder to make it in some ways today, but in a lot of cases they have only themselves to blame. I lived like a monk for years so I wouldn't have to be in a situation where I had to borrow money to buy food like another friend did. Same guy used to own an airplane and two LEXUS autos. It's ridiculous. But I'm seeing more and more of that, where people let the pursuit of lifestyle ruin them. Come on people, is it really so bad to have to sit at home and cook your own meals and watch 300 channels of TV? That's roughing it?

[raja]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

While I know it was only meant to demonstrate the market downturn issue, these scenarios always piss me off because of several things:

1) "The rate of return is assumed to be starting salary of 40k growing at a rate of 3% per year until retirement." Thats not real life. Nor does it address falling living standards or rising work hours.

2) We are assuming inflation will only be 3 %?

3) So I have 1 mil at retirement. Its not the same 1 mil that it was 40 years ago. This is not inflation adjusted?

So basically all these financial planners are looking up at their tonsils.

These financial planners are either clueless . . . or know better and are attempting to induce the uninformed to hand over more of their money by impressing with a superficially learned presentation.

If we get anything like EJ's prediction of inflation, most retired people will be standing in the soup lines. Reminds me of Denninger's recommendation that the government immediatley set up huge interment camps throughout the country to provide the soon-to-be broke retirees with "three hots and a cot".

I have a better solution to solve the hunger problem of the retirees. . . let them Eat The Rich:

Eat the Rich: there's only one thing they're good for
Eat the Rich: take one bite now - come back for more

[don]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

What seems to be left out of all of the above is the socialization of labor in large scale places of production, which inevitably leads to common-interest organized leverage for a bigger piece of the wealth they're creating. We're seeing this in the areas where US off-sourcing has migrated.

[lektrode]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

My interpretation is that the ability of unskilled Americans of that generation to prosper relate to mispricing of labor through unionization, and inefficiency due to limited access to pools of cheaper foreign or immigrant labor. I'm not sure how to re-create those conditions today.

(EDIT: Or, maybe a better way to say the part about limited trade was that at the time, the labor market was tighter, and so market forces priced labor above subsistence.)

to this, i would answer that "the giant sucking sound" - that rather elequent quote that made ross perot famous - was right on the money, as its become quite clear (at least to me) that aside from the FIREmen/bankster's fraudulant activities, NOTHING IS MORE RESPONSIBLE FOR THE SCREWING OF THE MIDDLE/working class than _NAFTA_

pile on top of that the current group of MBA/LBO hustlers that use borrowed/OPM to pay too much for their targeted aquisitions and then liquidate the 'infrastructure' (see: comp usa) that made these companies profitable/industry-leaders (read: break-up/sell off productive/profitable parts, slash labor costs by laying off the highest paid (see: circuit city), eliminate dividend-payouts to amass cash they then shovel out the backdoor, smoke-n-mirrors BS to pumpup the stockprice, collect millions in 'bonuses' and then when the inevitable downturn happens, shitcan whats left of the help and declare bankruptcy or sell off the remaining assets piecemeal and shutdown the biz, walking away in a matter of months/years with the wealth that was built up over decades/generations - this ought to be a crime in itself, yet its glamorized (by the LBO crowd) with terms like "creative destruction"

methinks The US will eventually have to close the NAFTA door/giant sucking sound and operate more like new zealand does (as its been related to me by my kiwi friends): producing as much in-country as possible and importing/taxing only what we cant get internally (and for a 'kinda-rightwing-former-NH-resident' to say something like this IS somewhat astonishing... ;)

[lektrode]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

What seems to be left out of all of the above is the socialization of labor in large scale places of production, which inevitably leads to common-interest organized leverage for a bigger piece of the wealth they're creating. We're seeing this in the areas where US off-sourcing has migrated.

and with any luck at all, THEY will start to price themselves out of OUR labor market - a devloping trend, as i've been noticing as some co's have discovered that offshoring isnt as 'efficient' as it was initially thot.

[lektrode]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

The problem, of course, is predicting 40 years of events is an impossible task.

Someone who started working in the 1950s, for example, would not be able to predict the US going off the gold standard in 1971 - and all the subsequent asset inflation.

or as in my fathers case (self-empl insurance adjuster) having your state gov pass a 'no fault' ins law that decimated yer biz (whereupon we became 'economic refugees of taxachusettes') and THEN that same law causing ins rates to skyrocket vs neigboring states (NH to my knowledge is still about 1/2 what MA rates are - its hilarious: here in HI, with 'no-fault' we have one of the lowest rates of 'collision', while at same time have one of the highest rates of payout on 'bodily injury' - just how is that possible? = offtopic i know, i digress...)

Similarly someone who started working in the 1990s would not have been able to predict the upcoming US 100% devaluation.

Even a case like a Detroit auto worker starting work in the mid-70s in Detroit: clearly there were signs of secular decline,...

and by the mid-80's it was quite obvious to me, as semi-skilled labor at the time, that there was no future in manufacturing, at least not like in the 50's-70's, whereby one with limited education/skillset could work their way up the ladder to some higher level of income/benefits as prev generations were able to - now? - if one doesnt have a BA, one barely qualifies for 'entry level' jobs that dont even pay 1/2 what UAW new-hires make today?

the whole labor equation has been skewed/screwed by 'education-inflation' brought to us by the flood of federal grant$/loan$ that havent done _squat_ to raise the quality of the labor force, while they price the semi-skilled OUT of participation in the labor market, unless one knuckles under to the fraud of "get that BA degree so you can get a good paying job" in retail, social work, or low-level-biz-admin, cuz to really get anywhere, now ya need a phreakin MBA ???

this whole BS scheme by the education-industrial complex, as mouthed by obama, that The US will be better off after we blow trillions more on attaining "the highest level of college grads" in the world is out n out fraud - what? - we'll be better off than china/india when we all have 'advanced degrees' in what? social-studies, political "science", international-studies, womens-studies, yada yada yada vs more people who know how to do stuff like manufacture widgets, build houses, fix cars, design-build-run-repair power plants, railroads, bridges and other infrastructure etc etc?

and since The US is now a 'service economy' we dont really need to do 'blue collar' work anymore - we'll just out-source all that sweaty kind of stuff and all get 'educated' so we can what? be retail clerks, or take in each others laundry or scrub toilets in the tourist industry? (as the chinese/indians get rich off manufacturing our 'consumer goods' for us, taking all our middle class jobs away)

what BS!!!!
we all arent ever going to need to know how to solve fractal equations, or do dissertations on the use of infant formula vs mothers milk in the developing world, so much as we all need to know how to apply common sense to know when the political aristocracy is ROBBING US OF OUR BIRTHRIGHT AS AMERICAN CITIZENS vs how the ACLU is doing precisely that on a daily basis!

Arguably without a clear and consistent government policy, any and all prediction of future returns in impossible. And equally so clear and consistent government policy can only be detected retroactively.

and even if i dont know why, i agree.

c1ue for prez!

[sunskyfan]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

Let's see. If you start saving at 25 and retire at 65 and live to 85 and you want to live at the standard of living you have when you are 65 for that final 20 years you have to store at least 50% of your income from 40 years to give you that last 20 years. Probably more like 65% since you earn much less at 30 that at 55. Unless you can exploit others productivity either via taxes or lower foreign wages you just can't get there. Sure, there are productivity gains but there is also a loss due to a larger medical footprint as you get older. The retirement myth for the general population seems pretty obvious to me.

[lektrode]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

Let's see. If you start saving at 25 and retire at 65 and live to 85 and you want to live at the standard of living you have when you are 65 for that final 20 years you have to store at least 50% of my income from 40 years to give you that last 20 years. Probably more like 65% since you earn much less at 30 that at 55. Unless you can exploit others productivity either via taxes or lower foreign wages you just can't get there. Sure, there are productivity gains but there is also a loss due to a larger medical footprint as you get older. The retirement myth for the general population seems pretty obvious to me.

being a bit pessimistic, doncha tink?
i mean, going forward, one can count on having all their medical needs covered by obamacare, collect foodstamps to eat and then live in their cars!

[dcarrigg]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

As for government policies that keep wages steady with inflation -- that is an example of a regulated (and therefore not free) labor market. That is one of the options I mentioned.

There was never another option than regulated labor markets. Never. Markets are established by law, whether written or known by convention. They are then regulated by mob, government, tribal leaders, or what have you. I defy anyone to find an historical example to the contrary.

Neo-serfdom and debt peonage for 95-99% of the worlds population.

Wealth beyond the dreams of averice for the remaing minority 1-5%.

"oh, what a world it would be"

The best laid plans of mice and men... (Raja's post above gave me the idea for the picture)

[stetts]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

Dear Lektrode,

Your last paragraph, "methinks The US will eventually have to close the NAFTA door/giant sucking sound and operate more like new zealand does (as its been related to me by my kiwi friends): producing as much in-country as possible and importing/taxing only what we cant get internally (and for a 'kinda-rightwing-former-NH-resident' to say something like this IS somewhat astonishing... ;) " is dead on.

I'd like to see more discussion on this concept. I believe the US is really well positioned to take full advantage of this approach. We have everything from coal, iron ore, uranium, plenty of rich farmland and most of everything we need to be largely self-sufficient for a long, long time. Anything imported is welcome, but only after high taxation. Exports of any finished product could be encouraged.
Since I'm persuaded that we have this huge military partly to ensure a continual supply of oil and other things we deem essential, looking inward would go a long way to deleting this necessity. Yes, drill here, drill often. (I just got done accompanying a group of home-schooled kids to a tour of the nearby horizontal gas well drilling operation. They've really cleaned up their act.)
We'd need to do a lot of number and fact research to see if this is really possible, but the concept seems workable to me. And far preferable to this current "we are one with the world" nonsense. The world really doesn't love us--we're tolerated because we matter. However, that lasts only so long as power does.
Meanwhile, I'd hope that somebody in the southern states can produce blueberries in the winter, just like Chile. I'd hate to give those up.
Take care. Stetts

[sunskyfan]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

You meant add GM subsidized cars don't you? ;)

[c1ue]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

Although I am in favor of killing off the asset price inflation game, it's not clear to me whether this will help raise the wages of unskilled labor above subsistence.

As for government policies that keep wages steady with inflation -- that is an example of a regulated (and therefore not free) labor market. That is one of the options I mentioned.

I'm not talking about raising minimum wage or any such ridiculous crap.

What has been allowed to occur is banksters inserting their greedy fingers into every conceivable pie - from home loans, to student loans, to commercial property, to LBOs, and on and on.

While I cannot guarantee that the wage/cost of living disparity of the past 3 decades is solely due to banksters, I do see a huge number of threads all leading into FIRE.

The point I'm making is simple: asset price inflation seems great - but the point we are at today is a result of 3 decades of this stealth stealing.

Why is it that minimum wage people in every other 1st or even 2nd world nation are better off?

This is the true issue.

It isn't that sacrifices won't be necessary, or that there is any way to insulate everyone - lazy, unskilled, or otherwise - from the harsh realities of real life.

It is that all the sacrifices being made are being made by those least able to afford them, whereas those most able are the ones getting the subsidies - both the direct ones of the past 2 years and the decades of indirect ones.

As I've noted before, Americans in general seem to think that if they only tried harder, that anyone can achieve the American Dream.

The reality is that this is no longer true. The shifting of wealth deciles both up and down is now lower in the US than in Europe - that land of aristocracy, of socialism, of frequent strikes and what not.

And while there are banksters in every nation, why is it that the US and the UK seem to have suffered to most? Followed by those gullible PIIGS nations who listened to US, UK, German, and French banksters?

Why is it that in Iceland, there are dozens of arrests while in the US - not a single one has yet gone through?

Bill Black, if anything, understates the dichotomy.

Poor man, he still wonders why the 'Democrats' aren't 'protecting' the people.

One way or another, real change will come.

But back to the subject at hand: unless you are the relatively rare individual who has truly un-outsourceable skills, or are in the corporate elite, or are a great suckup, or are a great salesperson - there just isn't hardly any regular work by which an American can make a decent living for multiple decades and be able to retire.

Yet this was true - not just in the post WW II to early '60s era of European and Japanese rebuilding, but even up until the mid '70s.

Again, while I'm no 'Money should be 100% backed by gold' fanatic - it is true that the separation of money from any physical backing has greatly enabled the bankster set.

So maybe what we REALLY need is a VC gambit: convert all dollars today into 1/20th of the 'New Dollar' tomorrow - thus fixing the debt issue.

Then make the New Dollar a fractional reserve on something physical. Doesn't have to be gold though it is the most likely.

In the meantime start whacking all the bankster favoring legislation: white collar crime being lesser than drug possession, subsidies for bankster-ish areas of all sorts, capital gains vs. income tax distinction, etc etc.

[ASH]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

There was never another option than regulated labor markets. Never. Markets are established by law, whether written or known by convention. They are then regulated by mob, government, tribal leaders, or what have you. I defy anyone to find an historical example to the contrary.

That is true, but I would argue that where ideology and human behavior are concerned, the lack of a physical instantiation of an abstract ideal does not prevent humans from seeking it. Rhetorically, it is convenient to talk about Christians or Communism or "free" markets, even if we doubt that "pure" instantiations of such values can exist. In particular, in the realm of dueling economic and political models, these idealized philosophies are expressed in watered down form as differing approaches to policy. Even if the very idea of an "unregulated" market has internal contradictions -- and a perfect socialist economy "has never been tried" -- a "free marketeer" is likely to propose different policies than a "socialist". Given that there are political/economic idioms, and we are all aware of them, it saves some time to use shorthand.

It's true that any arrangement of the labor market would also constitute some form of 'regulation' -- in particular an arrangement meant to optimize the amount of labor that a given price can command still constitutes 'regulation'. But I hope it was clear from the context of my other posts that by "regulated labor market" I meant specifically the type or regulations aimed at raising the wages of labor by restricting its supply, mandating minimum levels of compensation, and so forth.

[jtabeb]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

I've said it before and will say it again here and now, the only solution to this conundrum is guaranteed income for all that provides a reasonable quality of life. I've laid it out before but basically guaranteed income for all in trade for entitlements seems to be the only way to reform in a sustainable way. Give people the means to provide for themselves, but allow them the freedom and attendant responsibility to decide how they want to spend their guaranteed income. I'm sorry if this concept angers some in the forum but after reading books like the bell curve, I think we all have to realize that though we are all equal in our rights, it ain't just so with regards to our capabilities. A modern society should recognize this and structure itself with this understanding in mind. And, one would hope anyway, provide for a means of support for those who are less capable of supporting themselves. Whether the cause of unemployment is technological or outsourcing, the policy solution needs to address the same question. How to deal with people who are left behind by progress. I don't like the free-market ideologist's solution of turning human existence into a form of neo-feudal subsistence type of survival. I am a champion of free-markets for all, but it seems to me that with the global output gap as large as it is, there is a better, more progressive way that we can move society forward. Guaranteed income is that way. It is free market based (people get to choose what they spend money on), It doesn't bind the government to soaring commitments (it's a fixed commitment, could be variable to account for expansion or contraction in the economy), and most importantly, doesn't regress the human condition back to the dark ages. These are all win-win things from my vantage point. The difference in my view between guaranteed income and unemployment insurance is that everyone should get guaranteed income all the time. Any compensation you earn is on top of your guaranteed income. That way, you never disincentivize work (like the current unemployment system does).


This appears to be the basis for a new social contract that is slowly starting to develop in this country. (We are going down this path already) What else can you call 150+ weeks of unemployment benefits other than guaranteed income?


The Germans have it right IMHO, no limit on unemployment benefits. The British have it right on healthcare. Sweden had it right on how to handle a financial crisis.
And freegold has it's place in stabilizing the worlds monetary system ( at least that's my interpretation of Robert Zoelick's comments on gold).

http://fofoa.blogspot.com/

[Serge_Tomiko]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

My interpretation is that the ability of unskilled Americans of that generation to prosper relate to mispricing of labor through unionization, and inefficiency due to limited access to pools of cheaper foreign or immigrant labor. I'm not sure how to re-create those conditions today.

(EDIT: Or, maybe a better way to say the part about limited trade was that at the time, the labor market was tighter, and so market forces priced labor above subsistence.)

That's easy.

1. Moratorium on immigration until unemployment rates fall below 3-4%,
2. import tariffs with a low minimum of 25% and additional increases to offset unfair practices
3. banning of trade of manufactured goods from nations with living standards below our own,
4. a wage-price mechanism
5. tax rates based upon multiples of the average income, i.e. fix the maximum income a citizen can earn by his own labor at say 100 times the average and by usury say 50 times the average.

That's a good start.

Note: labor cannot be "mis-priced". Society is by definition a collection of individuals who agree to certain standards, both cultural and legal. Such standards can be anything, but history tells us all societies that last share similar attributes, i.e. a justice system, marriage, religious arbitration of cultural customs, etc. Labor is simply one aspect of this, and it falls at both ends of the spectrum - slavery at one end and total despotism on the other.