1 in 3 Americans Have $0 Saved for Retirement (2016)

https://www.gobankingrates.com/retirement/1-3-americans-0-saved-retirement/

by helloworld • 9 years ago

163 286 9 years ago

maaaats5• 9 years ago

A few years ago I learned about the FIRE-community. Financial Independence, Retire Early. I'm more in the FI part, saving a big portion of my income. By living on roughly half my income, I save up for a "year of not working" each year. This gives me a lot of freedom and ease of mind.

Keeping this up, one could theoretically retire with 16 years of working according to this calculator. It also shows americans saving the least https://networthify.com/calculator/earlyretirement

wiz21c2• 9 years ago

Honest question : how much do you sacrifice to be able to live on roughly half your income ?

hycaria2• 9 years ago

While I probably don't earn as much as OP, when I compare myself to my friends, I earn more than most and still spend less, living on about half my income too.

Main differences in lifestyle are I don't buy shit (I don't even shop online at all most of the time so no temptation, when I consider buying an item I ask myself "do i really need this" and most often find that I don't, I try to get most items from nearby businesses, I don't subscribe to stuff may it be paying services or even newsletters, hell I even found half of my furniture on the streets or second hand), I cook like 90% of my meals (takeaway is an extra 2-3 times per month average, I bring my food to work, I try to do as much as possible from scrap), I don't spend as much time/money in bars or other social activities as them, and I don't take trips across the globe (I am lucky enough to have enough family-owned places to spend my vacations at, I also avoid flying far for ecological reasons).

maaaats5• 9 years ago

People like to ask that question, as it gives them an easy out; "those guys probably live boring lifes".

I'd say I don't sacrifice much. I spent a month income on vacation this summer, went skiing in the alps this winter. I have hobbies I enjoy where I don't cheap out on gear or experiences.

I'm privileged to have an income that enables this. But still I'm baffled on how my peers with the same income use all their money. And I don't really see how they are able to spend most of their money, and how they benefit from it compared to me. For comparison, my salary is about $70K in Norway.

IF I'd felt I now sacrifices something of importance, it still would be worth it. I can take years off and do what I want, switch to a lower paying job with higher QoL etc, retire early or other things, while those not making the same "sacrifices" will have to work.

throwaway0255• 9 years ago

I do the same (actually I live on more like 40% of my take-home), and I don't feel as if I've sacrificed anything.

The amount I live on has slowly gone up since I started working. It's just that when I get a raise or promotion or new job, I don't spend the new cash flow, I save it.

A couple years from now I'll probably be living on 30% of my take-home, but the amount I spend every month will probably have gone up slightly.

The question you should be asking is how much do you sacrifice by not saving?

I could get fired tomorrow and my bills would still all be paid for years. When I retire it's going to be in a big house with kids and grandkids that have their college paid for. I can retire at 45 if I really want to. Knowing all that is incredibly comforting and peaceful.

Just the feeling is worth it. I used to spend my entire paycheck on bills and put the next month's spending on a credit card. My net worth was negative. That way sucks. This way is better.

People probably thought I had more money before because of all the useless flashy crap I bought. Fuck those people, I'm doing way better than all of them now and I know it.

I used to drive a really nice car thinking it made me seem important or something. Now I know only idiots are fooled by that trick, and to everyone else the car just made me look broke and stupid.

sgberlin3• 9 years ago

For me the only part that is a sacrifice, I guess that would be a "feature" for people who like cooking, is that I basically don't eat out when I'm at home. On the other hand I travel about 2 months a year and I just do that then.

icelancer10• 9 years ago

how much do you sacrifice to be able to live on roughly half your income ?

Unless the person has a very high salary, the sacrifice is that they don't have kids.

czechdeveloper• 9 years ago

This really depends on your income and where you live. I sacrifice nothing as half of my income is enough to cover lifestyle I want.

lemondrops• 9 years ago

I live on ~30% of my income, which I would consider a modest "upper entry level developer" in my country. I don't feel like I sacrifice anything, though it is true that I'm lucky to share an already cheap apartment with my SO. (But we also only have heating in two of our rooms, and not even a sink in the bathroom - we brush our teeth in the kitchen. I guess this would already be inacceptable for many...) I don't own a car because I can bike or walk everywhere. I only use prepaid cards for my mobile phone, no data plan, because I always found the idea of paying for mobile internet ridiculous when there is wifi all around us. (Plus, I don't like how being online all the times makes me check my phone so often.) I don't need a new shiny phone every two years and will use my Fairphone 2 until it dies on me. I do eat out 3-4 times a week for lunch at work, but when at home I cook 99% of the time. Sometimes I eat out with friends, go to the cinema etc. I buy clothes maybe once or twice a year but avoid expensive brands like the plague, except for things like running shoes or other "long term equipment".

When it comes to my hobbies, I don't sacrifice anything, but I naturally like to do things that are inexpensive or for free like excercising and spending time outdoors, reading, watching movies... My most expensive hobby is probably indoor rock-climbing, which I don't do that often sadly, and the subscription to the martial arts club that I train at weekly. I just spent almost 500€ to attend PyCon this year, and nearly three times that much for my yearly holiday.

For me it's not even a concious act of saving, I just naturally live this way and don't need much. I don't like owning too many things, they feel like a burden. The money keeps accumulating (I saved 30K€ the last two years, living as described above), and I honestly don't know what to do with it or how to use it wisely in regards of the future... Real estate seems like a good investment, but comes with its own problems.

sgberlin3• 9 years ago

Yes! I save roughly half. I don't plan to live on where I am right now in the future, so basically every month of working means 2-3 months of "not working" in a cheaper location.

onion2k2• 9 years ago

Money won't help very much if society collapses.

splike2• 9 years ago

How do you propose we save for the future then? Gold? Bottle caps?

SimonPStevens3• 9 years ago

Do plans like this ever take family and children into account though. As a single person it's all very well saving half your income if you are reasonably well paid. But if you have children I just don't think that's practical.

I saved a fair bit before kids. Then me and my partner made the decision that we wanted one of us at home to bring up the kids, and not have them raised by daycare workers. So now we have one income, and more expenses than before. I'm reasonably well paid, drive older small cars, don't have any particularly expensive hobbies or holidays. I still save, and contribute to a private pension, but the idea of saving 50% of my income is unachievable.

Now that's fine if you don't want kids, but I often think these lifestyle philosophies promote themselves as fantastic and obvious, and why doesn't everyone do it. But forget to balance them with the hidden sacrifices you have to make that they never seem to mention.

maaaats5• 9 years ago

I want kids some day, and I know saving 50% at that time might lead to sacrifices I don't want to make. But until then, I would probably have had a professional career anywhere from 7-13 years. Those savings can then accumulate rents for a long time, even though I wont be able to contribute any new significant amounts.

MaurizioPz• 9 years ago

I have 2 kids (5yo and 2yo) and right now no problem at following this plan (started when my first born was born). It can be done, you need to make sacrifices but the sooner you start the better you will be later on

splike2• 9 years ago

Thanks for sharing, that's pretty interesting.

My question is how do you typically invest your savings? Do you invest it into stocks, or something like Lending Club?

maaaats5• 9 years ago

Index funds, mostly.

billf1953• 9 years ago

You realize that saving half your income is actually living on a sixth. The government always get a third.

will_brown4• 9 years ago

I wonder what these figure would be in countries like Russia or China.

I would also say American's are simply bad at planning for the future, and highlight the fact that 75% of Americans die intestate (or without a Will). But, I think the truth is that is only part of the explanation. While a Will would benefit and be applicable to everyone, not just people with assets, retirement is purely for people who have some type of financial surplus and lets get real. Most Americans are debt financed, from housing, to transportation, to schooling, to even putting food on the table.

It would be very interesting to see how many of those 2/3's who are saving for retirement are actually debt financing their retirement funds (which admittedly makes sense with employer matching), meaning they are living off credit and going (further) into debt while simultaneously saving for retirement. I would venture to guess the numbers are much worse than this article even concludes.

TheAdamAndChe• 9 years ago

It's not so much that Americans are bad at planning, it's just that they're not taught to do it. It's not taught in schools, and because their parents didn't need to plan so much when the economy was much better, it wasn't a skill that has been passed down.

I bet a much of those "millennial trends" killing off overpriced businesses like Applebees and whatnot is due to the internet spreading financial literacy to the younger generations. That and they're too poor to eat there, but I bet the internet is having an effect too.

obstacle1• 9 years ago

Not being taught a thing and being bad the thing are not mutually exclusive.

icelancer10• 9 years ago

It's not so much that Americans are bad at planning, it's just that they're not taught to do it. It's not taught in schools, and because their parents didn't need to plan so much when the economy was much better, it wasn't a skill that has been passed down.

This is simply not that true. It was taught in my public school and taught to most of my friends that went to public schools near me. Also taught in college. It didn't help. The power of compounding interest is taught to almost everyone and even fake quotes from Einstein used to hammer it home.

My generation (mid-30s) faced a post-graduate nightmare of a job market after 9/11 and then the 2007 credit decoupling in combination with a massive run-up in real estate values in the largest cities in America. No one had money to save.

I have managed to save starting in my 30s but I have quite a few friends who work paycheck to paycheck. The education was there. The ability is lacking.

thaumasiotes• 9 years ago

While a [w]ill would benefit and be applicable to everyone, not just people with assets

What is the benefit of a will for someone who dies with no assets?

will_brown4• 9 years ago

What do you want done with your body?

Maybe more importantly if you have children you may wish appoint a guardian in the instance they are minors.

Say you are incapacitated and unable to make medical decisions, you may wish to provide instructions for specific circumstances and even appoint someone to abide by your healthcare decisions or exercise their judgment where your directive is silent. (usually called a Health Care Directive, while not a Will it is part of a basic estate plan you would receive when creating the Will).

gedy• 9 years ago

going (further) into debt while simultaneously saving for retirement

Maybe not your exact point, but people looked at me like I was from Mars when they found out I skipped 401k in order to save up for large down payment on a house, and to finance less. The interest saved using a 15 year mortgage vs a 30 year is (or was) huge.

radiorental• 9 years ago

While every case is different the 'interest saved' + federal tax saving on a 15v30yr mortgage do not compare favourably to compounding that money towards retirement.

In general terms, you're leaving ~5% on the table during the 15yr term. That 50-100k you saved could have turned into ~500k upon retirement

lsiebert3• 9 years ago

I'm not sure what fundamental characteristic of Americans would make them significantly different then the overall population of the earth in terms of planning.

Systemic economic reasons seem more likely. I'd note that you have to have wealth to pass it on, and that economic mobility in America has been in decline since the 80s, https://www.theatlantic.com/business/archive/2016/07/social-...

will_brown4• 9 years ago

We've all been raised on television to believe that one day we'd all be millionaires, and movie gods, and rock stars.

Sure you need wealth to pass it on, but notice how you limited you statement to wealth, that is why American's are IMO different than the overall population of the Earth in terms of planning. I think other cultures are more in touch with reality and not so consumed with wealth. The reality is even if you die with no wealth to pass on, you have a body (what is to be done with it?); you may have minor children (who do you want to be their guardian?); and you may not die but simply be incapacitated (who will make your health care decisions and what do you want those decisions to be?).

jk23232• 9 years ago

Americans, both people and companies, are much more short term focused then, lets say Germans or Nordic countries in Europe.

And again, no comparison with let's say China. A government in China may not only make a 5 year plan, but a 50, 100, 150 year plan. This may look mind puzzling to you and you can doubt it's effectiveness. But nevertheless they do.

It is said that Deng said, when asked what he thinks about the French revolution (1789!): "It is to early to tell"

blubb-fish9• 9 years ago

The average American has a weaker social network than people from other countries. Americans are also highly focused on consumption and status symbols - more than people from Russia or China.

izacus2• 9 years ago

I wonder what these figure would be in countries like Russia or China.

Doesn't at least Russia have a mandatory pension contribution like rest of Europe?

nmbr213• 9 years ago

Yes, 13% of one's income, but since the start of economic crisis in 2014 all pension accumulation has been frozen, i.e. for the last 3 years all contributions went to sustain the current system without going into savings.

kmike84• 9 years ago

Yes, it has. Isn't Social Security a similar thing in US?

For comparison: average pension in Russia is ~$220/month ("average" means there are people who get less than that). Wikipedia quotes average SS payments as $1,230/month.

I don't have numbers, but my feeling is that almost no one has retirement savings in Russia; it is uncommon to save for retirement. It looks much worse in Russia overall - majority of population hopes to work until retirement age, then work more, then live off those tiny Social Security-like payments.

On the upside, a lot of people is debt-free (though this is changing), and some level of medical services is also free.

tbronchain• 9 years ago

Whenever you legally work in China, after a certain amount of time (don't remember the details) and regardless of your citizenship, you will receive a fixed amount of money when you retire, according to the amount of time you worked and your salary. Interesting thing is, foreigners can apply to get their money anytime they want when they stop working, not sure if that applies for Chinese citizens. Their is also a "housing" fund supposed to help for paying your mortgage or rent, paid by the employer. All this is managed by the government but you can improve it using private retirement plans and insurances, however employers cannot (shouldn't) be allowed to not sponsor the government one.

It is in some ways similar to some Western European countries, like France, where you are supposed to get money from the government once you have worked a certain amount of time and you decide to retire. I guess it differs a lot in the execution though.

agumonkey• 9 years ago

Beware, France retirement is getting frail. Not at all like a $0 as in the US, but many elders have tiny jobs to compensate for a lower than expected sum.

lsiebert3• 9 years ago

Health care, education and other costs keep rising, (even when adjusting for inflation).

Wages have been stagnant when adjusting for inflation.

And hey, it's almost time for the census to report. September 12, 2017. https://www.census.gov/newsroom/press-releases/2017/advisory...

l5870uoo9y• 9 years ago

If we are to realise the great potential that lies ahead with mass automatisation and AI, we must ensure that whole of society benefits from this. There must be more focus on sectors such as logistics which are being hit first by mass automation. We need to define a new social contract between employees, workers and technology to make this work.

lsiebert3• 9 years ago

Hmm... Contracts tend to favor those with more power. I worry that the wealthy will see those less fortunate not as a potential engine to accelerate overall growth, but as a burden, and, with the weakening of workers rights and unions accelerated by the trends you mention, the new social contract may be less beneficial then even current circumstances.

In which case I'm sure there will be those who blame immigrants, people of color, the government, unions, etc. Certainly it won't be the wealthy who are blamed, they will be instead admired for their supposed acumen, despite the fact that the majority of the wealthy inherit their wealth, and that majority has been rising. https://www.economist.com/blogs/buttonwood/2014/03/inequalit...

fastbeef• 9 years ago

This is really scary. The whole western world is in for a rude awakaning in the coming years with regards to retirement.

Retirement is the golden carrot dangled in front of us for all our working lives, an embodiment of Protestant work ethic - "work hard and you will be rewarded in the end". However, very much has changed since retirement and pensions were designed. I can't find a good source, but (in Sweden) when pensions were introduced after WW2 people worked from their late teens until they died (40+ years of productivity), produced 3 or more children per woman (good population age distribution, the classic "pyramid") and the average lifespan was 64 years (1 year before retirement).

Nowadays, many of my peers don't get a "real" job until their early/mid-thirties (work for 30 years of producitivty), produce 1.7 children per woman if they reproduce at all (leading to a top-heavy population where fewer and fewer young people must support more and more old people) and life expectancy is much, much higher. Now, these things are in of themselves good, but they break the original design horribly. I really, _really_ hope that we can cross the chasm to a robot-centric/base-income society before it all breaks down.

EDIT: Found this after posting: https://en.wikipedia.org/wiki/Pensions_crisis

morecoffee• 9 years ago

The whole western world is in for a rude awakening in the coming years with regards to retirement.

No kidding. Who will pay for all the people who didn't save? The people who did. I have very little expectation of keeping most of my money as I get older.

frisco• 9 years ago

I have very little expectation of keeping most of my money as I get older.

Welcome to the world of Bitcoin and Monero.

sddfd4• 9 years ago

Exactly and now tell anyone that it was ever a good idea to not provide basic pensions for everyone and make payments mandatory.

If that had been the case then at least everyone had paid at some point.

icelancer10• 9 years ago

Who will pay for all the people who didn't save? The people who did.

Correct. It is generally a good idea to consider all of the money being paid into Social Security to be completely wasted. I am in my early-mid 30s and I do not expect to see a dime of it. I think it will either be insolvent or subject to some ridiculous tax structure if people have earned X dollars in their lifetimes or spent too many years in high tax brackets (which I expect to in my late 30s and 40s).

Taxes will also go up dramatically as the years go by. I have a maxed-yearly Roth IRA but I also don't expect the government to keep their promise on letting me take out 100% of it tax-free despite all my contributions being post-tax. I expect to be double taxed on that, because, well, why not?

Retirement is ridiculous. It's just generally safe to assume all of your money is going to be taxed at a much higher rate and through loopholes/broken promises by the government. We face a really huge shortfall in the next few decades in public welfare programs, Social Security, and other tax-advantaged vehicles that I doubt will be honored down the line.

nostrademons3• 9 years ago

Depends how history plays out in the future. If people who save end up paying for people who didn't, it implies one of three things: 1) financial panic 2) inflation or 3) taxation.

All of these are fairly likely, but looking back at history, there are a number of other possible futures that would take care of the problem. Mass plague, where all the old people die off. Mandatory euthanasia, where the government kills all the old people. War or anarchy, where both young and old die indiscriminately. Colonizing other planets, which opens up vast new resources. Mass automation of health & elder care, so the robots pay for the people who don't save.

The depressing thing is that most of these are pretty horrible, and the two that aren't - automation and spaceflight - are probably the least likely. But then, history is filled with black swan events that open up human frontiers that nobody could've imagined. Maybe one of them will save us.

m1sta_• 9 years ago

When you don't have enough to survive it's difficult to argue that taking what you need is immoral.

bengale• 9 years ago

Who could possible afford 3 children these days?

oh_sigh3• 9 years ago

Apparently only the poorest people in the world: https://en.wikipedia.org/wiki/Income_and_fertility

dublinclontarf• 9 years ago

Most people.

hellweaver666• 9 years ago

I have 3 kids. I earn a decent wage but nothing excessive and my wife doesn't work (she looks after the kids). We live in a city, don't own a car and walk or bike most places.

They don't cost that much more if you're willing to be sensible (each kid doesn't need a TV and a games console or even their own bedroom). We're very moderate on how we spend our money - we don't blow thousands at Christmas just to give kids tat they won't play with, we keep clothes and re-use them as the younger kids grow up. We eat at home as a family, don't take extravagant holidays etc etc.

juliendorra• 9 years ago

In France a large part of childcare is subsidized : kindergarden (the less you earn the less you pay, but there is not enough spots), schools since 3 (free for everybody), good public health centers if you want (PMI). Also prenatal care is free (you don't pay thousands of euros to have a baby.) That result in good numbers for a western country: in comparison with Germany for example, women tend to have more children (2.3) and have them younger with less impact on their career and revenue.

gambiting• 9 years ago

It's most expensive to have 1 child - then each child after the first is cheaper to raise, especially if they are of similar age. Once you get to 3+ kids it almost makes no difference. But, it depends very heavily on your lifestyle. If you think that every child needs their own bedroom, they all have to go to private schools, they all have to go to Disneyland every year, if you have to pay for healthcare and/or kindergarten, then yeah, the costs are exponential. But if you live in any modern country with good social care(this does not include US) and you think kids can survive without luxuries, then yeah, it's actually completely doable.

tonyedgecombe5• 9 years ago

Only the very rich or very poor have lots of children now.

orthros• 9 years ago

I have 7 kids, my wife stays at home and homeschools them. We live frugally. Outside of enormous COL areas like San Fran, NYC, LA, etc. it can absolutely be done.

The first couple kids are the most expensive, by the way. And thrift stores are my best friends.

collyw• 9 years ago

"Nowadays, many of my peers don't get a "real" job until their early/mid-thirties (work for 30 years of producitivty), produce 1.7 children per woman if they reproduce at all (leading to a top-heavy population where fewer and fewer young people must support more and more old people) and life expectancy is much, much higher."

With increases in productivity, this could be sustainable, but as this article points out, wages have basically stagnated in comparison since ~2000.

http://www.nytimes.com/2012/12/12/opinion/global/jobs-produc...

secfirstmd• 9 years ago

This is the basic issue. Liberal capitalism made a de facto deal in 80s. Lower taxes for business, create more jobs but with less benefits, resulting in lower intake for governments but the losses will be made up through income taxes through higher wages. Except that deal has turned out to be rubbish, businesses continued to find ways to lower taxes (Ireland, BVI, Netherlands, transfer pricing etc). At the same time wages were held down. The gains of course were largely grabbed by the top 1 percent.

I'm a capitalist but I know that this is no longer sustainable. Fundamentally there comes a point were failure to raise wages means your customers can longer afford to buy your stuff. So your biting the hand that feeds you. Then you end up with the customers creating a credit bubble to try and replace what they have lost through low wages, resulting in sub prime crash, US student debt etc etc

cylinder• 9 years ago

The productivity gains ($) are shared by the firm and the software/hardware which is responsible for the increased productivity, not the employee.

misja111• 9 years ago

There is some irony in the things you're saying:

Retirement is the golden carrot dangled in front of us for all our working lives ..

And then:

.. and the average lifespan was 64 years (1 year before retirement)

Wouldn't it be more rational to try to get as much happiness and fullfillment from the years you spend working and healthy, instead of waiting for those few years you might have after your retirement? And maybe, if you don't have much money to spare, it would also be more rational decision to spend your money now instead of saving it for an age which you might never even reach ..

Spearchucker• 9 years ago

You make some good points. Working yourself to the bone until retirement is probably not the best approach. Spending ALL your money is maybe a bad idea though.

My plan is in the middle somewhere. I earn a decent living, and have a modest pension. The plan though is to save enough for a large piece of land in a cheap but stable country (inasmuch as THAT's possible - current thinking is Austria or South Africa), with a house, and then become self-sufficient on that land. Until I cash in my chips.

coolg54321• 9 years ago

I second that. Someone said Yesterday is history, tomorrow is mystery and today is a gift! but still there should be a balance

tonyedgecombe5• 9 years ago

In our industry it's a reasonable assumption we are going to live well past the age where most of us can find work.

crdoconnor• 9 years ago

The dependency ratio has gone up something like ~11-15% since the 50s whereas GDP has gone up something like 2-300%.

This is where your pension wealth actually went:

https://cdn.americanprogress.org/wp-content/uploads/2014/09/...

Retirement is the golden carrot dangled in front of us

Not exactly. The 1% keeps pushing the "demographic time bomb" trope through the media precisely to make us believe that that this "golden carrot" is a vain hope.

jononor3• 9 years ago

What would they benefit from that? Would it not be better if people were just working good and hard in the belief of a good retirement in the end?

apexalpha6• 9 years ago

The whole western world is in for a rude awakaning in the coming years with regards to retirement.

Most Western countries have mandatory pension systems in place. In my country, NL, everyone has to pay money into pensioen funds that invest it for you.

efdee• 9 years ago

Sadly, in most of the Western countries, your pension payments go to paying the pensions currently being handed out. By the time you'll need yours, unless something changes, there won't be enough money to pay it.

That's why you're now encouraged to enlist in private pension saving plans and all those things.

At least, that's the outlook in Belgium.

kk_cz• 9 years ago

(good population age distribution, the classic "pyramid")

I would say that this is part of the problem: relying on something that is basically a ponzi scheme. Of course the European social systems work if you can constantly increase your population. But this doesn't work in the real life - the area of the country doesn't increase, therefore you can't increase your population infinitely. The reason young folks nowadays don't have 3 kids is that it's just not economically feasible any more. Add the fact that the top of the pyramid is getting wider every year (life expectancy is increasing) and here we are. The system was flawed since the beginning and now we are hitting the limits.

nostrademons3• 9 years ago

Ponzi schemes are much more common in nature than humans like to think. The default population dynamics for most species are feast-or-famine: population grows exponentially until it exhausts all available food sources, and then mass numbers of individuals die off all at once, leaving more resources for the survivors. Hell, life is a ponzi scheme: our cells divide, accumulating genetic mistakes (= technical debt) each time, until our body's ability to repair the damage is overcome by the accumulated mistakes. And then we die, hopefully having produced a fresh new individual to repeat the process.

Assuming no great technological breakthrough, the same thing will happen on a societal level: we'll die. But then, we knew there was 100% chance of that happening from the beginning.

arethuza• 9 years ago

"work hard and you will be rewarded in the end"

An alarming number of people I know who had high flying careers and who retired with huge pension funds died within a relatively short time of retiring.

Maybe its something weird about my extended family....

BjoernKW• 9 years ago

What makes me angry about this is that politicians in industrialised nations have no qualms with bailing out current retirees (because those will save them their next few re-elections) and shoring up mindless consumption at the expense of those who try to live more frugally.

Yet at the same time the very same politicians claim there's not enough money for implementing a universal basic income right here, right now.

6t6t6t6• 9 years ago

300 years ago, 80% of the population had to work in agriculture just to keep the country fed and alive. Now, less than 5% work in agriculture and we produce so much food, that supermarkets have to throw more than half of what they buy.

Productivity has been growing in a exponential way since the beginning of the industrial revolution. Automation will allow many of the products we consume today to be produced almost without human intervention.

My point is that we, as a society, will be able to maintain the same standards of living (or increase them) while the workforce shrinks.

The only issue here is how the wealth produced by the automation will be distributed, but I can imagine a future where people is actually employed during less than half of their lives and still live well enough.

lwhalen• 9 years ago

I have accepted a long time ago that I will be unable to 'retire' in the traditional sense. I fully expect to be working pretty close to 40+ hours a week when I keel over (hopefully quickly, and without a prolonged illness). "Die old, happy, and fast".

gasof• 9 years ago

What incentives do people under 30 have left to build a pension?

Is it a better deal than schemes like putting 80% of your extra money on the bank and 20% in riskier investments?

gehsty• 9 years ago

In the UK the benefits of paying into a pension are tax based, you don't pay tax on what you put in, and you then take it out at a lower tax threshold on retirement (compared to what you would pay to have it in your pay packet).

If you are a higher rate tax payer this is a huge benefit - you can take up £40k before it becomes taxable, tax for high earners can be 40% - but it doesn't really help people on lower incomes who are at most risk of not having any savings.

anonymousDan• 9 years ago

Aren't you at risk though of the government shifting the goalposts (e.g. wrt retirement age)?

jk23232• 9 years ago

You can build a nest egg to "leave". I did.

Companies are multinational today. So can you.

godzillabrennus• 9 years ago

The wealth imbalance taking shape over the last 40 years is likely why.

Everything in our modern world feels like it's about to pop. Too much change too quickly for our establishment to adapt.

WalterBright• 9 years ago

Don't overlook the massive increases in government spending at all levels. That money has to come from somewhere.

RobertoG4• 9 years ago

Government spending could be called also government investment.

Money is only a number. Real resources is what have to come from somewhere.

meirdavis• 9 years ago

I don't think this study paints a complete picture. It asked about specific retirement funds, rather than wealth in general. If someone aged 50 has 20k in an earmarked retirement fund but a net worth of 1.5m, that person is fine, but considered by this study to be unprepared for retirement.

systematical• 9 years ago

Okay, but how many Americans have that kind of networth?

jldugger• 9 years ago

Well, that's not super surprising, for a variety of reasons.

1. Young people don't save. The survey defines millienals as age 18-34. I figure half of that group is working low skill jobs and can't afford to "save" (more on that later), or attending college and is not eligible to 'save'. And many of those graduated at age 22 should spend the next 10 years focusing on student loan debt repayment -- very few investments pay off better than 6.8 percent fixed!

2. Social Security covers spouses. Stay at home moms who divorce at year 11 after a midlife crisis gone wrong are eligible for 50 percent of their spouse's eventual benefit. More if they're dead.

3. Social Security does alright by low income workers. Reuters estimates a hypothetical 'return' of 6.79 for a very low income couple born in 1943. https://www.reuters.com/article/us-column-miller-socialsecur...

4. A lot of Americans live paycheck to paycheck. There was that Federal Reserve study that said something like half of americans surveyed couldn't come up with 400 dollars to pay for an emergency. I don't anyone actually thought 'maybe it's because their savings are all locked up age 59 & 1/2'.

JumpCrisscross• 9 years ago

Young people don't save

Balancing that equation, however, one can expect--ceteris paribus--those people to have some combination of lower (a) taxes to fund education for the next generation or (b) costs associated with having to pay for their respective kids' college costs (since those kids will also take on debt to finance education). Blowing a hole in this model is the increasingly-glaring reality that today's generation will have received no support from the last one, thus being forced to finance its education and have to pay for the next generations' educations.

icelancer10• 9 years ago

The best fix for this - which is in the works - is destroying the higher education model through MOOCs and alternative credentialing programs. The education bubble can't be long for this world.

foxfired• 9 years ago

This is a direct testament to:

Socialism never took root in America because the poor see themselves not as an exploited proletariat, but as temporarily embarrassed millionaires.

patrickaljord10• 9 years ago

This is assuming that socialism helps the poor, which is something anyone who has even very basic knowledge of 20th century history knows could not be farther from true.

bhaak4• 9 years ago

I think you and the OP have a clash of definition and are looking at different models of socialism.

You look at the socialism how it was conducted in the USSR and Eastern Europe where OP is probably looking at Western Europe.

Socialism isn't well defined and ranges from far left to Democratic socialism. Discussions with an American POV often neglect to acknowledge that in Europe lots of governments in Europe have socialist parties in them.

oh_sigh3• 9 years ago

Or, common morality among working class is that you shouldn't take what isn't yours and you didn't work for. So, they are taking a moral stand on the matter, even though they could make out materially better by taking a little bit of their rich neighbors earnings.

mjevans2• 9 years ago

I don't believe the stock market is a stable or good place to invest (anymore).

I think the historic performance figures of the US stock market related to the unusually positive world position of the country after the last world war.

There was a baby boom, there was a space race, there was a 'cold war' and lots of planned spending and many tech advances.

I've seen an unending series of bubbles (and suspect they were happening even when I was a kid); the baby boomers looking for places to invest for a quick return, only to have their nest eggs smashed by the greedy sales people who (I at least hope) believed those were actually sound investments even though they should have known better.

Thus, I see the stock market as almost a casino; with odds rigged for the rich with not-quite insider trading.

My 'retirement plan' is to keep working, and to keep working, and to maybe live long enough that real socialism can happen after automation eats every job I don't want.

kobeya2• 9 years ago

I don't believe the stock market is a stable or good place to invest (anymore).

The facts have consistently shown otherwise...

sddfd4• 9 years ago

What about exchange traded funds?

The general trend is still upwards and the Bubbles don't change that.

Of course if you get in just before a bubble bursts, you lose at first and may have to wait a long time to break even. But judging from history (data since 1900) you will break even eventually.

IanCal• 9 years ago

There's a good story of the worst market timer, who invests only at peaks: http://awealthofcommonsense.com/2014/02/worlds-worst-market-...

blubb-fish9• 9 years ago

That's my strategy.

I invest in 1000+ Euro batches in ETFs. By now I covered half of the world or more.

Nonetheless it is a bit frustrating to see ETFs bouncing up and down - everytime Mr Trump says something stupid you can expect the MSCI World to drop and with it everything else, too.

Even a globally diversified ETF seems to be indirectly highly US centric. The DJ drops - then also ETFs focusing on Asian EMs drop. It's a bit ridiculous.

And sometimes I am sceptical if the average market growth of up to 10% per year can be expected for the future.

Neracked• 9 years ago

I see the stock market as almost a casino; with odds rigged for the rich with not-quite insider trading.

The stock market is a casino if you want it to be one. And historical data shows that the odds are rigged in favor on the people investing consistently in diversified low-fee funds over a long period of time (decades) which is compliant with the timeline for preparing ones retirement.

saiya-jin• 9 years ago

as somebody who lived in one of those 'real' socialism of east europe behind iron curtain, I sure hope not. it twisted people and general mentality in unimaginable ways, and even though we have technically 28 years of democracy, this and next few generations are and will be f*cked up by the evil legacy of this period.

at the end it doesn't matter what type of system you want to retire in. numbers don't lie, and if there won't be enough young to cover your retirement, no system will magically provide you comfortable times. simple logic is, if you want to increase the odds of comfortable retirement, save for yourself, invest and be generally smart with money (thing I see extremely rarely among young).

and to be honest, I consider this correct by far the best and fair system. if one strives for monetary wealth in life, one should work hard and do life/education/career choices accordingly. it is perfectly OK to have other priorities in life, for many it might be the best path to happiness and fulfillment. but then bear the consequences of those choices and don't rely on others to throw cash on you for not doing your part earlier.

davelocity• 9 years ago

The four most expensive words in the English language are "this time it’s different."

https://en.wikiquote.org/wiki/John_Templeton

icelancer10• 9 years ago

I don't believe the stock market is a stable

It never was.

or good place to invest (anymore).

Yeah, history isn't on your side, nor is the future projected value of how corporations are accumulating wealth. If anything, buying shares of corporations who are doing a good job of accumulating capital has never looked better.

The major bubble is higher education, and real estate. But the latter is largely due to government meddling and the former... well, is also due to government meddling in part, but mostly this rapidly dissolving belief that college somehow churns out positive ROI for most attendees. This is becoming less and less true; it's only a matter of time before it collapses. It will happen in my lifetime easily, and I predict it will happen within two decades.

mjevans2• 9 years ago

Historically the population has increased. The most likely outcomes of that which I foresee are a global resource war, pandemic, or pollution killing most of the population.

peterburkimsher• 9 years ago

I don't expect to live in the same country 5 years from now. I currently live in Taiwan, and hope to move to New Zealand at the end of the year. My dad told me I should think about retirement, but I see no reason to save for retirement when I can barely pay for the visa application. I've already made the lifestyle sacrifices - I don't even have a driving license, I can't afford to marry, and I travel once or twice a year only to visit parents.

Once, I had money that I thought I didn't need for a year. It was a scholarship from university, awarded simply because I studied engineering. I decided to invest it. I bought $1000 of gold, and $1000 of shares. I wanted to buy Apple shares, but the banker at UBS told me that I would have to pay huge fees simply to get the shares - unless I bought shares in the bank, which had no fees. But that was 2008.

The bank shares went down to $300. The gold went up to $1070. It was a terrible investment. I lost all trust in bankers.

During that year, I went on exchange programme to California and some situations in life meant that I desperately needed the money. But it was locked up in shares and gold, and I couldn't get to it. So now I just keep a current account. Major life problems happen to me quite regularly, and I can't have my resources locked away when I need them.

Maybe I'll be able to save after I settle down somewhere. But I also wonder whether just giving it all away to friends would provide a better investment. Social capital is resistant to inflation, war, banking crises, environmental disasters, and everything else I expect to happen during my lifetime.

tehlike• 9 years ago

giving it all away to friends? terrible idea. Most often in life, you are on your own.

Al-Khwarizmi• 9 years ago

Friends are of course very important, but you make it sound as in a Civilization game: throw some gold at them so their friendliness towards you will increase by X points. It doesn't work like that!

apexalpha6• 9 years ago

Don't pick stocks. Buy the entire index. Also, don't take such advise from banks.

robertlagrant• 9 years ago

The graphs showing what different ages groups have saved for retirement seem to forget that older people have had more time to save.

dredmorbius• 9 years ago

Analysis will generally look at what cohorts had at the equivalent stages of their lives.

michaelbrooks3• 9 years ago

I'm from the UK and have little to no savings. What has helped me to save is using a Messenger bot called Plum. It looks at my income and outgoings and will save little bits of money when it thinks is the best time to take it out. It also knows exactly what amount to take out at the time as well and is super clever. I have managed to save just over £200 over the period of 5 months which may not seem like a lot, but it's the most I've saved and has helped me a lot.

Imagine how much I can save in 5 years if I don't take anything out and this is without having to lift a finger or even think about what I need to do in order to start saving. If America has anything like this, then I recommend you try it out.

_b8r03• 9 years ago

If you want a good place to go to look into getting more for your financial future that's UK relevant, the /r/ukpersonalfinance reddit has a really amazing flowchart and they're really helpful.

dan12343• 9 years ago

The flowchart is greate, but nothing compared the encyclopaedia that is /u/pflurklurk, who hangs out there.

michaelbrooks3• 9 years ago

That is definitely a great subreddit. I have also created my own site to help people in the UK save and manage their money through the use of apps and bots [0].

http://aisaver.co.uk

dan12343• 9 years ago

How much of a cut does Plum take?

michaelbrooks3• 9 years ago

Currently, they don't take a cut, but are funded through seed funding and have a successful campaign on Seedrs. They do have plans to partner with different providers and help you save money on energy and bills where they will make affiliate revenue. If you want to know more, then I recommend you check out their website [0], I have also created a small comparison site that lets you see saving, management, banking and investment apps [1].

[0] https://withplum.com [1] http://aisaver.co.uk

edison85• 9 years ago

Luckily social Security is there and spouses that don't work receive 50% of the benifits so there's a big chunk of the 1 in 3. Add up all your yearly earnings capped at $110k today's dollars, convert to today's dollars, divide by 420. Take 90% of first 850, 33% of 850-5200, and 16% of the rest. If you've worked minimum wage for your entire life and your spouse stays at home, that's still 95% of your yearly income. If you have home equity that means no mortgage payments or even a potential reverse mortgage.

If you are Middle class, can move to lower CoL too. It's really not that big of a problem if we increase age/decrease benifits for extremely high earners

Aoyagi• 9 years ago

But they do have a new iPhone the week it comes out, right?

kobeya2• 9 years ago

The 1 in 3 that don't have any savings? Probably not.

dan12343• 9 years ago

Not having savings doesn't necessarily mean they don't have access to easy credit.

Apple even run their iPhone Upgrade Programme[1] to get people paying monthly for their new phone (+ Applecare).

[1]https://www.apple.com/uk/shop/iphone/iphone-upgrade-program

Sholmesy• 9 years ago

I would say they probably do.

I think the OP's point is that those that save often spend or debt-finance a lot of things like phones & cars.

I feel slightly jaded when I see people with $1k phones who clearly can't afford it, when I'm rocking an iPhone 5. Probably not a healthy psychological state and I feel a bit like a "financial puritan" at times, but it irks me for some reason.

I understand debt and having access to capital is useful in a lot of ways (expansion, plant & asset purchase etc), but I feel like being able to buy a rapidly depreciating asset on credit, at extortionate rates, that provides no additional utility to capture value (a $200 and $1k phone have similar utility) is a bit of a ridiculous scenario.

loco5niner2• 9 years ago

More likely the ones without savings got the latest iPhone than the ones with savings. How do you think each group got where they are now?

StanislavPetrov• 9 years ago

What makes this even worse is that a lot of "savings" that people DO have put away for retirement are in the form of pensions, bonds, and other financial obligations that are underfunded and mostly illusory. You need look no farther than the state of Illinois to see just how bad the situation can get. A lot of people who think they have pensions and other payments coming from the state of Illinois (and soon, many other states, cities, and municipalities) are going to be very, very disappointed. We are drowning in debt on every level, both personal and governmental, and the FED and other central banks are running out of ways to make it seems like it isn't a big problem.

kamaal12• 9 years ago

Pensions have long been a mess because of shady union practices. They generously award over time to retirees in the last 3-4 years of service, this often sends up their average compensation by a factor of 3 to 4. Then you also have other benefits. No pension fund can pay for something like this. So you have to take money from the tax payer to pay for these people. The day tax payers decide to call it quits, it will all collapse.

Plus this still doesn't say anything about people in non-govt sectors.

NicoJuicy2• 9 years ago

This is actually depressing, i save over 1500 € / month in Belgium...

But, i need to invest more. And then again, i don't spend money on stupid things ( perhaps reason #1 why people can't save money.. I don't need the latest iphone or anything. My car is used from 2008, some people just want to buy a new one and spend 5x as much for a vehicle)

Only 2 ways to get rich: Invest or save more than someone else.

aidenn0• 9 years ago

In the US, if you don't have health insurance, than having savings is arguably unwise. A single illness or injury that requires an ER visit can easily total $250k which would completely wipe out the savings of someone making 2x the minimum wage ($7.50/hr) and saving at a rate of 10%[1].

If you don't have the assets, then the hospital is limited in how much it can recoup from you, and they usually write it off rather than garnishing your wages. Might as well live large until that happens.

1: Also as a note, this person making double minimum wage and working 40 hours per week is making ~2150€ / month. There are vast numbers of people doing much worse than this. In fact it's fairly close to the 33rd percentile of household (not individual) income in the US (~$30k/year which works out to 2121 € / month).

nicky0• 9 years ago

As someone from a country with a state care system. This is fascinating, I never heard that perspective. Why save, when they'll just come and take it from you when you get sick! It's pretty tragic but it makes perfect sense.

anarazel• 9 years ago

Using 401ks/IRAs/etc protects you against that to some degree.

NicoJuicy2• 9 years ago

I am very disgusted by this system, coming from Belgium.

I think America is far below Europe's health system

sametmax13• 9 years ago

Not just in America. I don't have any saving at all, and a lot of people around me neither, and I'm in France.

Now theoretically, we all pay regularly to the state for that. But in practice, none of us believe we will see the color of it when we grow old.

Last week a dear and poor friend of us said she wanted to go to school again, but that the one she wanted in cost 5000€/year and she didn't have the money.

We secretly discussed to create a common money pot to pay the tuition for her. I suggested that we all put 500 € each and solve the problem.

All the participants were all above 30, none of them had children, all of them were working. Half of them don't even own a car, as in my city it's a useless expense. Yet it was a rude awakening: most of the people at the table could not afford such an amount. Even once in their life for a very old friend.

So we discussed a bit, and it turns out most of us don't have any saving and just live by the day. Comfortably, granted. They are not poor, they eat well, they have clothes and can afford pleasures. But if anything happen to any of us, we are screwed. We have no buffer of any kind.

The cost of life is, of course, part of the cause of this. But also the fact that our lives are very instable : breakups, job changes, moving in/out, make it hard to save. It's also a cultural problem: enjoying ourself have been more important that savings.

But there is also another issue: individualism. The thing is, most of us could probably find 500 € to give away. But the solidarity is not strong enough for this effort.

So if friends won't get out of their way to do that, I have little hope that society will solve the retirement puzzle. People care about _their_ retirement, not about everybody's retirement, not how society will find a balance or how their neighbor is going to survive.

oskarth• 9 years ago

So we discussed a bit, and it turns out most of us don't have any saving and just live by the day. Comfortably, granted. They are not poor, they eat well, they have clothes and can afford pleasures. But if anything happen to any of us, we are screwed. We have no buffer of any kind.

The solution to this largely a matter of a shift in attitude. Start saving 10% of your salary right now and stop buying new clothes, eating out etc. Having a buffer is way more important. There are plenty of resources for learning how to live frugally. The benefits of having a cushion, however small, are enormous.

Of course, that doesn't take away from the other points you mention. But it's by no means an unsolvable problem for the average comfortably-living individual.

codebeaker• 9 years ago

I can second this, I started putting just €100/month away and was pleasantly surprised to see it tick over into the €1000 mark very quickly. It's a standing-order at my bank, triggered when any large deposit is made (e.g it fires when my salary is paid).

Now that I reached a milestone (even if I did kill the account from 300->0, 250->0 a couple of times in emergencies) I intend to increase how much I put in there. 10% of my salary is a lot to do without, my wife doesn't work, we have two kids and a mortgage and a (useless expensive) car. But the €100 I simply didn't miss, and the €200, that will get me to the next milestone, when I'll jump to €300, and so on and so on will all soon arrive.

cjsuk6• 9 years ago

I worry about savings. The inflation vs interest makes it a bad proposition for long term. Short term 6 month buffer zone is good.

Does anyone have any advice in this area? How can I keep the value of my 10% savings in 30 years time with low risk?

I don't want to go to an IFA. They sell me a product.

sametmax13• 9 years ago

I agree, hence the "It's also a cultural problem".

There is also the fact that we know the French health care system, the social aids you get if you loose your job, and your family will all come into play for some category of problems.

And there is the gamble for more comfort vs responsibility. My generation really don't want to take any kind of responsibility for anything, including society, the planet and their own life.

But even if you consider that:

- saving 10% of my income will not, in any way, let me live through my retirements. Not at half of my current life style anyway. And I do earn more money that most people.

- those are people in a very comfortable situation. Now take people with children, a loan and a standard job, and you have a much less simple picture.

- most people have been told the story that the retirement system will work, or that we will make it work. Beside, they don't thing 30 years ahead for anything.

- a lot of people won't make rational choices in their life. Taking a loan they should not, making a child they can't afford, getting married with the wrong person... Expecting people to save is already at another level of planning. We failed at educating people, but we also told them it was ok to do what they were doing.

- we have a huge value scale issue here. frugality, quality, solidarity... Those are not the thing that society promotes. Solving the retirement problem is not just an economical issue. When banks are bailed out, medias scream "money and consumption" and Trump rules the most powerful country in the world, convincing somebody to not go for take out is quite hard.

- fixing and cookie are getting a lost art.

- things do cost way more. 10% is a lot for some people.

vertex-four• 9 years ago

Attempting to actually have a life outside of the work, eat, sleep cycle and save money is difficult, though. Reading the experiences of "frugal" people suggests that they often barely do anything that isn't absolutely required to survive and hold down a job - this must surely be incredibly bad for their mental health from my perspective, but perhaps some people can live like that.

The actual trick is probably to make most of your savings in other places - a smaller house/apartment with less "stuff" to fill it might feel just as good, ensure that you always have some form of pre-cooked food in the house to avoid the temptation of takeout for no reason other than having no energy to cook, figure out whether you can spend less on transport (do you really need the big new car for the one time a year you go on vacation, or could you rent a vehicle or take the Greyhound/Megabus/etc for that weekend?), figure out whether you actually need the latest flagship phone and an unlimited data plan (maybe consuming netflix, youtube, and spotify on the mobile network isn't such a great idea?). These are big-ticket items and it's almost always possible to save significantly on them without changing your lifestyle if you're "comfortably living".

Suncho• 9 years ago

I don't know if a shift in attitude would help, at least not in aggregate. It might work for one person, but if everyone did it, then it could end up being a wash or we could see other weirdness..

If everybody started saving 10% of their salary, the decrease in consumer spending would put deflationary pressure on the economy. That could, in turn, lead to a few different possible scenarios depending on the economic policy decisions of the government and the central bank:

1. If the economic authorities refused to respond and decided to "let nature take its course" on the economy, the reduction in consumer spending would lead to businesses shuttering and people losing their jobs. Maybe instead of 1/3 of people not saving any of their salary, 1/3 of people just wouldn't have salaries in the first place.

2. The central bank can lower interest rates thereby making it easier for people to borrow. This easy borrowing would provide an incentive for people to spend. This could counteract the effects of whatever was incentivizing them to save in the first place. Or maybe we'll end up in a situation where people think they're saving, borrowing, and spending all at the same time and what's really happening is that they're "investing" in some kind of asset bubble that they don't know is a bubble.

3. The fiscal authority borrows and spends money into the economy to make up for the drop in consumer spending (and, if distributed well, that money circulates and boosts consumers pending too). This fiscal expansion route is kind of the opposite of the monetary expansion route in scenario #2. Here, the government is going into debt in a stable and controlled manner. With the central bank lowering interest rates (#2 above), you're encouraging the expansion of private debt, which is unstable and can collapse.

I don't make economic policy, but if I did, I'd tend to lean toward option #3. Of course, it entails the central bank and the country's government working together to make it happen. The ECB would have to encourage (or at least allow) the EU member nations to go further into debt. In the case of America, the Fed doesn't have that kind of control over the government. If Congress decided to take on massive government debt and spend new money into the economy, the Fed would have no choice but to take the necessary actions to keep prices stable (raise interest rates, etc).

Well, that turned into a little rant about things I care about. I guess my overall point is that if Everyone started saving 10% of their salary, it would be a huge shock to the economy, and probably not a good one. And what happens next would depend on a lot of things that I think about a lot.

Anyway, solving this "problem" is not just about a shift in attitude toward saving. At least not in the general sense. I do agree with you that it's not an unsolvable problem for an average comfortably-living individual.

cjsuk6• 9 years ago

I'm in the same situation.

I'd give 500€ away to someone. I have done before on numerous occasions. The problem is not solidarity, it is trust and the human condition. If I give that money to someone, it'll turn into an iPhone or be smoked before something productive is done with it even if it is mandated for education or essentials to get someone out of a hole they are in. People are stupid and irresponsible.

intAligned• 9 years ago

Me neither, and I'm Italian. I'll also add that minimum age for retirement is being pushed farther and farther (I probably won't be able to retire until I'm 67 or something like that).

patrickaljord10• 9 years ago

French here.

It's also a cultural problem: enjoying ourself have been more important that savings.

It looks like the reason you have 0 saving is because you... simply refuse to save money and spend it all on leisure instead? (after necessities are met).

But there is also another issue: individualism. The thing is, most of us could probably find 500 € to give away. But the solidarity is not strong enough for this effort.

What do you mean by individualism? That one should value individual rights such as freedom of speech, respect of individual property etc? Sounds to me like many freedoms are going away in France and civil liberties are always at risk. On the other hand, collective rights keep expending and these are extremely costly. When it comes to coerced solidarity, France sure is one of the world's champion. It seems to me that the reason you and your friends refuse to give to your friend is not because of too much individualism but because of too much collectivism, you are already paying so much in tax to support these solidarity policies that you are left with little money for your own leisure, let alone for your friends and you feel like you've already paid "your fair share" by outsourcing charity and solidarity to the State. But of course, as usual all problems in France are blamed on individualism and capitalism instead of the elephant in the room: the unfettered collectivism going on.

sametmax13• 9 years ago

simply refuse to save money and spend it all on leisure instead

Yes, I clearly said it's part of the problem. Now "all" is exaggerated, as it's I don't see my friends living a wasteful life. They do get out a little, but no more than my parents did.

What do you mean by individualism?

I mean that everybody is cool to do fun things together, but grouping efforts to help one-another does not come easily.

As for the rest, it's a very different debate I'm not in the mood to have.

icu4• 9 years ago

Your situation is extremely scary but not uncommon. Please see a financial adviser as soon as you can, it can make a world of difference (disclaimer, I am a financial adviser). If you can't, I humbly suggest:

1. Save up a 1000 € in an 'Extreme Emergency Fund' LIKE YOUR LIFE DEPENDED ON IT

2. Work out exactly where each euro goes each month and start cutting down your unnecessary expenses and keep to a strict budget

3. Pay off all debts (except your home mortgage) LIKE YOUR LIFE DEPENDED ON IT using the money you would have frivolously spent

4. Fully fund a 'Proper Emergency Fund' to the value of between 3 to 6 months worth of expenses (depending on how much sick pay/unemployment insurance you have from your employer/country)

5: Invest at least 15% of your household income into retirement

6: Start paying off your home mortgage early

7: Use the excess money to build wealth

Do not skip over a step. If you need help let me know.

sametmax13• 9 years ago

I would not make it extremely scary. As you said, we know enough causes, consequences and solution to act. It's just interesting to have a picture of what's going on.

The thing is, most of the things you describe, I already do, in France, through taxes for health care, social aid and retirements. Then also insurances (for cars, flat, etc). Doing it myself would mean paying twice.

And since education is free and I don't have a car, I don't have a mortgage.

So my situation is not that bad. It can become bad if:

- the system fails. It will for retirements. It does for some health care / insurance / social aid situation.

- your issue arise outside of what the system takes in consideration.

Knowing that, setting up an automatic emergency saving wire is a good thing to do.

I don't believe saving for my retirement will help in anyway. I'll have to find something better, which I'm working on.

But again, remember than most people don't read HN or anything else than FB streams. They live their life as-is. Like my parents did.

The question is, why could they afford children, pleasures, and saving, while my friend can't. Neither my parents nor my friends are very good planners, but clearly their situation is vastly different.

ryandrake2• 9 years ago

This is a great list, but most will never get through all the way to #7. People have major fixed costs that they simply cannot cut out. Hell, I struggle to get past #4, and I've cut expenses to the bone. Yes, I could drop my mobile phone and Internet. I can move 3 hours away from work (I'm currently 2 hours away) to save on housing costs. I can stop going out with friends once a week and live life as a hermit. I can collect rainwater to drink. Maybe after all that I can get up to #5. But at what point are you sacrificing your certain life today for a possible future life?

kamaal12• 9 years ago

>enjoying ourself have been more important that savings.

This is the main thing. People seem to always have money for gadgets, eating out, vacations and garden variety never-to-return expenditure. Yet savings are always dwindling and in many cases most people are in debt.

Marketing has done a good job of convincing people to spend money in the present. Even the money they don't have.

>People care about _their_ retirement, not about everybody's retirement, not how society will find a balance or how their neighbor is going to survive.

There have to be consequence for bad habits. Free money hasn't done well to anybody around.

Also expecting some one hardworking to part their savings to pay for somebody who has partied all life is not just unfair, its theft.

sametmax13• 9 years ago

I agree, as mentioned in all my other comments.

hkmurakami9• 9 years ago

Put that way, the recent dogma of spending on experiences, not things is a great trope. You can literally never have too many experiences and the consumption shall be limitless.

knorker3• 9 years ago

they eat well, they have clothes and can afford pleasures.

Then they/you can save. Don't blame external things on your lack of savings.

Say after me: If you are in the position you describe and aren't saving then you are choosing to live beyond your means.

sametmax13• 9 years ago

I don't blame anything, I'm just describing.

I clearly mentioned there is a cultural/educational problem.

seszett2• 9 years ago

Not just in America. I don't have any saving at all, and a lot of people around me neither, and I'm in France.

The situation is fundamentally different though.

Unlike what happens in America, in France you are already paying the pensions of currently retired people. Which means you aren't supposed to save yourself, as future workers will (in theory) pay for your pension once you retire.

In practice, we know that it might not happen this way, which is why you might want to have savings, of course. But the current system means saving for your own retirement ends up representing twice what an American would need to save, since you have to 1. fund current pensioners 2. fund your own future pension. Americans only have to take point 2 into account.

In theory, according to the French system's design, not having any retirement savings is completely fine and is even the intended situation. Transitioning from our general contribution system to a personal savings system might be good in our period of stagnating population growth, but the transition itself is hard precisely because it means one generation will have to both contribute for others and save for itself. And it looks like it might be going to be ours. But it's a very different situation from what happens in the US where people just can't save, but they have no other way of getting a pension anyway.

ryanwaggoner• 9 years ago

Unlike what happens in America, in France you are already paying the pensions of currently retired people.

Actually, that's exactly how Social Security works in the US. You and your employer collectively pay 12.4% on your first ~$130k of salary, which goes to support all the current recipients of Social Security.

headmelted2• 9 years ago

Maybe you shouldn't save for a retirement then. Maybe no-one should.

I think about this quite a bit. I'm quite frugal in my personal life (although certainly I could be more so), so I actively save for the future as a matter of course.

I'm also aware of the statistics around personal debt levels and net assets in the public at large and while it's clear there's a rude awakening to be had, I'm less and less convinced over time that the "awakening" is going to be of those who have no savings in place when they need them.

It seems pretty apparent to me that if the majority of people have no assets in a couple of years/decades (regardless of why that might be) and wealth inequality peaks to such extremes, then it's very likely the first political candidate to offer hard socialism (debt-driven basic income guarantee coupled with ultra taxation of higher net worth individuals) will sweep in an election, and the money problem will correct itself at an individual level.

Of course this isn't a solution to the living-beyond-your-means problem, and causes it's own problems (inflate the currency with QE, capital flight of high net worth individuals to friendlier jurisdictions), but I don't think that will matter in this scenario.

If the nature of people now is to be relatively short-sighted with regards to money, then what reason is there to expect that people in general are going to be any different in the future?

I fully expect it will be people who are saving their income that will pay to fund those who are not in the future if the latter is the majority.

icelancer10• 9 years ago

I fully expect it will be people who are saving their income that will pay to fund those who are not in the future if the latter is the majority.

Absolutely. I expect the government to renege on most tax-advantaged programs for retirement they instituted in the 1960s and on (Roth IRA etc). I expect Social Security to stop being paid to higher net-worth individuals or for them to be pushed into a later age where they can collect it.

The crisis we face isn't one that is going to be fixed easily. Government receipt shortfalls project to be massive in a few decades.

kamaal12• 9 years ago

>it's very likely the first political candidate to offer hard socialism (debt-driven basic income guarantee coupled with ultra taxation of higher net worth individuals) will sweep in an election, and the money problem will correct itself at an individual level.

As someone who has had experience living in that system let me tell you the moment something like that can even happen. Most rich people from whom you could take significant for your socialist schemes will leave the country. Leaving behind a very very small part of usable money for your schemes. It will be over before it begins.

You have also now scared away almost every single economic prime mover individual from the economy to a point almost any body smart will only have one option for a good future- To leave the country and immigrate to else where. And there will always be some capitalist heaven which will welcome all this smart people with open arms.

With this set up your common pool of money from which you wished to pay for your Basic income will shrink year after year, until bankruptcy and total investor loss stares you in the face.

>I fully expect it will be people who are saving their income that will pay to fund those who are not in the future if the latter is the majority.

They won't(rightly so) and that is what will be the biggest problem in the times to come.

The only way in the future is to make good decisions for the future or suffer.

hkmurakami9• 9 years ago

The United States has an exit tax to prevent such "problems" of capital exodus.

headmelted2• 9 years ago

What I believe should happen and what I believe will happen are two different things.

I've described the latter above, as the former is irrelevant.

oliyoung2• 9 years ago

All of this is thankfully foreign to the average Australian, an employer in mandated to pay +9% of an employee's salary into a superannuation account that cannot be withdrawn from unless you retire (or suffer “severe financial hardship").

The average 39 year old man will retire with AU$300k, while Women retire on AU$180k.

https://en.wikipedia.org/wiki/Superannuation_in_Australia

apexalpha6• 9 years ago

Same here in the Netherlands. Everyone has to pay into a pension fund (entrepeneurs and some fields excluded).

In total, the Dutch pension system now has almost 2 trillion USD saved up and invested for 17 million people.

This was implemented to prevent the dystopia that the article predicts: people who save money having to pay for people who didn't.

xxxxxxxx• 9 years ago

Unless you get divorced and lose half. Divorce twice? Now you 're in really big trouble.

What if you die before retirement? You have made the mandatory payments, but got nothing for it.

What if the stock market crashes the day you retire?

The Australian system is not perfect - it's a compromise.

oliyoung2• 9 years ago

I've been divorced, it's not included, if I die, it's my estate, and it survived 2007's crash

maruhan2• 9 years ago

ok so if we assume that the average life expectancy is 90 years old with equal distribution. 1/3 of Americans are 30 years and younger. Most people saving starting then. Looking at it that way, 1/3 seems like a high number.

askvictor• 9 years ago

Clickbait-y title, or at the very least a sensationalist and simplistic interpretation of the data. That 1 in 3 is mostly young people; they have neither the ability to save (due to low wages, student debt, being priced out of the market) nor the incentive (retirement is too far away, perhaps also concerns the stock market is not a safe place). Probably not much trust in the system overall either, given how the older folks seem to keep pulling the levers to maintain things for their own benefit.

mschuster91• 9 years ago

Doesn't surprise me, and the problem exists also in countries like Germany.

Common point seems to be that "millennials" (and low-earning people) in cities suffer from extremely high rents which take away their ability to save anything, especially for downpayments on an owned flat/house, and those on the countryside have low costs of living but often enough nothing more than Social Security to pay the bills. Trump didn't get elected in the flyover states without reason, and the AfD in Germany has their stronghold in the poorer parts of Germany.

In addition, in the US you can go bankrupt from being injured. Your medical system is... unimaginably bad from German POV.

chank• 9 years ago

It's way worse than that. Less than half of respondents even have more than 10K saved. It's likely that most still won't have enough at retirement age to do so.

throwaway2016a• 9 years ago

To relate this to Hacker News even more...

We are constantly told that we should risk our financial freedom to start a company. Go without pay take massive credit card debt to fund our company, etc. and we glorify people who have done that successfully and write off people who failed.

Or worse, told to go without pay / deferred pay / less pay to work at someone else's company with less than 5% equity. Often less than 0.5%

When someone tells me they felt a $4000+ booth at a conference was so critical to their company that they maxed out their personal cards I cringe.

What this survey doesn't seem to have is how many of those people have negative savings (aka, debt).

Also, it is unclear to me if homeowner equity is in the mix. Where I am the average house is $250k. In my neighborhood that is $400k. If I pay my mortgage diligently for the next 25 years and do basic upkeep (new roof, new furnace, etc) I will be in the $300k+ bracket too.

I know for a huge number of people home ownership isn't an option but I'd point out it could very well explain why a large portion of people sit at $300k+.

ge96• 9 years ago

I know everybody gets old but this idea of "saving for retirement" rather be limber and free than old and free. I realize it would also suck flipping burgers at 70.

So I don't really have an argument, chasing the dream, maybe not see the age of retirement.

scarface74• 9 years ago

I come from a middle class background and I haven't personally seen what retirement based on your own savings looks like. My grandparents lived off of social security, my parents are living off of a combination of pensions, social security, my mom sort of working as a consultant when she gets bored and generous company stock benefits from when my dad was working as are most of my relatives of that generation.

Because of a lot of dumb decisions made earlier in life, my retirement savings are relatively meager. But on the other hand, I don't dream of the day that I can retire. My job as a software developer is not physically demanding and my job was my hobby for 10 years before I started working professionally. In 20 years of working, I've never hated my career. I imagine retirement for me to be doing contracting/consulting/ teaching part of the year instead of working for a full year.

I wouldn't need to retire to enjoy my hobbies -- I enjoy my hobbies everyday and get paid for it. My only other hobby is exercise and I don't need to retire to enjoy that.

codingmyway• 9 years ago

Bring back 'long life' insurance, the one where the money of those 'lucky' enough to not run out of money before they die goes to the survivors who need it.

It became taboo and phased out or banned because of obvious conflicts of interest and incentives but if managed well to not enable those incentives it could make a come back.

micheljansen• 9 years ago

A few months ago, someone gave me a simple piece of financial planning advice that completely changed the way I think about retirement.

Most financial planning advice focuses on regularly putting money away for some returns. Returns are important, but they are only part of the story. Much more important is that putting a portion of your income away every month creates habits that stick by making you get used to having less money available, while at the same time ensuring that in the future, you will have more available. It cuts both ways!

Think of it like this: say you have an income of 5.000 per month. You don't put away anything away and when you retire, you receive a state pension of 1.000, so your income drops by a staggering 3.000 per month.

Or you could pretend that your income is only 4.000 per month and put away the rest. You live a bit more frugally, but now when you retire, your pension is 3.000 per month, so the difference is much smaller.

Of course there are also other ways besides saving for pension that address the amount of money you need in the future, rather than increasing the money that you have available from a pension. Buying a house and paying it off is a good example. The principle is the same: reduce the gap between your income/expenses now and your future income/expenses.

Disclaimer: I am not a financial advisor, so please do not base major life decisions on this.

cbanek• 9 years ago

I also imagine that some of the people with $0 saved toward retirement also have it even worse than that, and may have a negative net worth, especially after the housing crisis. Things like credit card debt and payday loans will bleed you dry before you can even think about retirement as well.

1 in 3 Americans Have $0 Saved for Retirement (2016)

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