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I realize this probably won't be the most popular of opinions around places like this one, but the more I think about it, the more I conclude that leaving everyone to individually save for their own retirement is not the best of ideas.

There are far too many variables in the system for most people to navigate successfully for 40 years straight, even if they are earnestly trying. You could have an extemely well diversified portfolio and still lose money when The Market as a whole tanks as a result of bad decisions of other people. You could have money saved up in multiple savings accounts or bonds and be out of luck when a government you didn't vote for fucks up and causes a period of hyperinflation. I'm not even mentioning things utterly out of individual control like a war resulting from an invasion by an aggressive, more powerful neighbour.

Implementation details such as retirement age are very important, of course, but a from mile-high view, providing a decent if not extraordinary living standard to millions of people seems exactly like the type of infrastructure and public good projects governments are normally the best option for.

/jarek, who nevertheless has more private savings right now than "a quarter of those surveyed"

That's basically why Social Security was first introduced, and I think it still makes some sense. Looking at it in the other direction, it's more or less a fact that a large proportion of people won't save for retirement. Therefore, you have three choices: 1) a bunch of destitute and possibly homeless old people; 2) some sort of after-the-fact spending to provide emergency services/shelter/care for destitute elderly; or 3) some sort of mandatory pension system to make sure elderly don't become destitute in the first place.

People generally find #1 unpalatable, so the practical choices are #2 versus #3: do we set up some sort of general pension system to make sure elderly make at least a bare minimum income to stay off the streets (currently $20k/yr or so), or do we instead set aside money to spend on housing and caring for destitute elderly, e.g. through government-run nursing homes?

I'm curious why you'd be eager to trust the government with this big responsibility when you used a government-caused period of hyperinflation as an example of why this is hard for people to succeed at on their own.
The problem with having the government do it is that they can be collectively less responsible. Think about it: instead of having a system you trust, you need to have a system that 51% of the voting public trusts. When that voting public consists disproportionately of old people, that means a system that pays out more than it can afford to, and redistributes income from young to old.

In other words, you get what we've got, which doesn't even work.

But many of those same factors affect public pensions. The existence of defined benefit schemes, as opposed to defined contribution schemes, itself causes economic problems, including the bankruptcy of large firms. While there is risk in any investment, defined benefit simply imagines that it doesn't exist. Even traditional Ponzi scheme style public pensions are susceptible to drops in population growth.
We'll the alternative to personal responsibility (that is, being personally responsible for your own retirement funds) is a massive ponzi scheme.

There is no chance that people could be "forced to save" as that has always turned into another tax in every place it's been implemented.

And who wants to retire? I'll retire when I'm dead, until then I'm gonna be busy doing stuff(work or otherwise). And I'm saying this as someone who's got no money.

And governments are not good at this sort of thing. Take the Irish government for example(my home country), ran a massive surplus for years during the boom, saved a nice little nest egg. It was supposed to be for public pensions(actually not supposed to, it WAS).

Then in 2008 they gave it to the banks. THEY GAVE IT TO THE BANKS!!!!!

edit: I concede that not everyone wants to work until they're in the grave.

While it may not be the best of ideas, you have to balance it with freedom and the value of self-reliance. Social Security as it is only helps further the growth of the nanny state while also limiting our freedom to do with our own money as we see fit.

As a side note, Government should never be in the business of "Public Good" projects. Time and time again, government has shown that it cannot be trusted.

Basically, if you're not either a Wall St trader, or in a government retirement plan, or a company owner, then you're screwed.

Quote from the article:

"In other words, if you have saved just $25,000 -- and remember, that describes about half of all workers -- you are less than 2 percent of the way toward your goal. Your future definitely doesn't include cable."

My situation is that I have diligently saved 12-14% of everything I've ever earned, in the 12 years I've been in the US, into a 401K.

Sadly in those twelve years, I've endured 2% mutual fund fees and two market crashes, all of which hit my savings pretty hard. In fact, I lost money after inflation is taken into account.

So at 42, I basically need to build something I can sell and assure myself of some income over a reasonable time period. In my case as an engineer, I need to build a software company.

I also need to stay healthy, live as cheaply as possible, and shed as many expenses as possible once I get nearer to retirement. Boat or RV living looks like a great way to do that. Certainly paying the fixed costs of a house or apartment is going to be a killer for those on a small income.

I am not a financial advisor, but don't put everything into a 401k. Only put the minimum required to get your employer's matching contribution (if anything). But the rest of your intended retirement savings into an IRA, where you can completely control what your money is invested in.

Hell you are probably better off putting a bunch of money into an index fund that tracks the S&P500 and paying less expenses than the 401k funds do, for the same or better performance.

Make sure you are still saving a sizeable amount of money in a traditional, FDIC backed savings account, for emergencies.

similar experience, similar thoughts, same age, same background and I made the move beginning this year
My startup is working on exactly this problem. Our customer development reinforces that people - of all ages - know intellectually that they're supposed to save. But they have no idea how to start, or if they've started, if they're actually on track to have a decent retirement.

You can request an invite for our preview at http://www.blueleaf.com and shoot me an e-mail to sachin@blueleaf.com with HN in the subject and I'll make sure you get in before we launch. If there are any pony requests - "someone should really do [x]" - I'd love those too, even if you're not interested in our preview.

So this is cool, looks like a great app. Will it be as a service only, or will you offer customers the chance to buy the software and run it on their own hardware? I for one am leery of giving out all of my financial data.
Does your service work with Non-American (Canadian in my case) financial institutions?
I told the financial adviser that administers my 401K at my current job that "it's clear that putting money in a 401K makes Wall Street rich, it's not clear that it's making me rich."

There's a serious breakdown of trust between Main Street and Wall Street, and it's got (at least) three angles: (i) I'm not confident that money I invest in retirement plans is going to grow, or even keep it's value, (ii) I'm not sure that the "system" currently knows how to distribute capital to places where it will promote prosperous business (if it did, investment funds would be making money...) and (iii) I'm worried that giving money to Wall Street is like giving it to an enemy that's going to actively make my life worse: it's going to go into lobbying to keep Washington D.C. corrupt an ineffective and it's going to be used as a club to force businesses to eliminate jobs in the U.S. and ship them out elsewhere.

Given that business, government and such doesn't have a vision that makes sense five years down the road, never mind 25 or so when I retire, it's hard to avoid a "carpe diem" attitude and to simply try to minimize your use of financial services: spend what you make, don't borrow or save.

I've noticed some people here are enthusiastic about index funds; now, "seldom is heard a disparaging word" about index funds, but personally I think they're a lot more harmful than hedge funds could ever be.

I mean, index funds just spray money indiscriminantly at companies that are lucky enough to be on some list. It gives the big shareholders a great opportunity to collect rents, but it means that investors aren't doing there job -- why does an investor deserve to get a return on capital? Because they do some thinking about where they can put their capital to get a good return. If you don't do that thinking, you don't deserve any return... Just as if if you've got some job and you don't do your job... You don't deserve a paycheck.

"Bubblenomics" made index funds look brilliant from 1980-1999, but in the long term, I think mass investement in index funds is one of the major reasons why Wall Street doesn't work...

The interesting thing about index funds is that the better they work, the worse they work. If everybody put their money into an index fund, then nobody would be actively researching stocks, and the valuations reflected in the index would be wildly out of whack with respect to the true values of the stock. But if nobody puts money into an index fund, then we have a lot of people chasing high returns, a very efficient price-discovery system, and index funds that should return the exact mean of all your actively-managed funds.

As a very broad heuristic, I take the size of the financial industry to be a pretty good indicator of the efficiency of index funds. When the financial industry is large, you have many eyes actively looking over stocks, an efficient market, and index funds that should track the performance of the underlying assets well. When the financial industry is small, you have fewer eyes keeping an active watch on stocks, and so you're often better off becoming one of them than sticking everything into a dumb index fund. Right now, the financial industry is still pretty large.

As another interesting heuristic, I've found that oftentimes the best asset class to invest in is the one that everybody is certain is a bad investment. In the early 2000s, that was probably precious metals; in 2007, it was cash. Both asset classes have zoomed up since then. You don't want to invest in asset classes that people are actively looking at and decide are bad investments, though (eg. penny stocks). You want asset classes that people just take on faith to be bad investments.

This article needs to be printed everywhere, at all times.

I have no idea how some of the people I see every day are going to save up the $1.5 million (in today's money) they'll need to retire. Half of 'em can't even pay off their credit card bills every month.

My retirement strategy is to die young. If I start making a lot more money or my cost of living magically decreases over the next decade I might reconsider this but otherwise I don't think social security is going to provide any quality standard of living. If I can't continue to work (which I don't mind doing) I plan to check out. (sad but true)
$1.5m is a bit high for the average case. The median household income in the United States today is about $50k, so if you estimate 80% of your income for retirement, that's $40k. The conditional life expectancy of a 65-year-old is ~17 yrs, and inching up very slowly, so maybe will be 20 years in a few decades. So that's $800k in today's money, modulo investments.

And that's assuming zero contribution from social security. Even if social security gets chopped at some point, I don't expect it to go all the way to $0; people working today and paying in will probably get some payout. Even if it's only $10k/yr, that reduces the needed savings to $600k.

Granted, most people don't have anywhere near $600k either, so it might be arguing between whether they need to save infinity or 2*infinity more than they currently are.

But that's sort of the point. I don't have a problem with this article which is largely good advice but I think it's useless. Everyone knows what he's saying is true yet people aren't saving.

As someone whose friends are predominantly in their 20s I can tell you people generally give 2 excuses...

1. "One of these startups will eventually work and I know I'll cash out on at least 1 big IPO before I retire so it doesn't matter"

2. "I don't know anyone whose saved for retirement and the average american household owes 20% more than they make. So the Government will have to do something and even if I don't have enough money I'll be taken care of"

So the bottom line is people are in denial and you can print this article up and tape it to their heads and it still isn't going to fix that problem

suppose everyone did the exact opposite. they saved like crazy and only spent enough to survive.

then the economy collapses for lack of consumption, no!?

something seems deeply wrong here.

does everyone want to retire...ever?

I'd say that especially the types of people who hang out here would get completely bored stiff if they did ever retire.

The work we do (programming etc) can be done into your 80s,90s,etc. Sure, people will probably want to slow down a bit, and when sight starts failing etc but it's not like we're sportsmen or builders or anything strenuous.

A good start is to not live beyond your means. Having consumer debt that you can't pay off every month is going to put you in a deep, deep hole.
I think the basic answer is they won't, which is a sad sad answer.
A lot of things are likely to change over the next few decades, so I wouldn't bank on retiring in the same way that people have done in recent history. The whole notion of retirement is actually quite a modern concept, which really only arose within the last century (http://en.wikipedia.org/wiki/Retirement). There's going to be more automation which will mean that people can work for longer, and I suspect that the whole notion of what it means to "work" will change.
> There's going to be more automation which will mean that people can work for longer, and I suspect that the whole notion of what it means to "work" will change.

why doesn't automation eliminate the need for work?

frankly I think retiring in the U.S. just won't be a viable option for many people...the cost of living is just too high.

I mean think about it....to retire properly, you need to pretty much put away all your spare money for decades.

What I think will happen, is people will just start retiring to other countries where the cost of living is so small, that you can live comfortably on 10-15K a year.

I've heard that Costa Rica has a thriving American retiree community for exactly that reason.
The cost of living in most places outside of the coasts is very reasonable. I currently live in the Metro DC area and most people here retire to PA, WV, or farther to the midwest.
Perhaps in 20 years the US will be that country.
The whole thing gets a bit less scary if you decide to retire at 75, rather than 65, which is not a problem if you take care of yourself, and don't have a physically demanding job (which most of us don't). You need 1/3 less money and have ten years longer to get it.
You might not have a choice, though. Better be prepared for other scenarios (bad health, etc).
$1.5M is a ridiculously high target. If you retire at age 60, you have a 20 year life expectancy (males) and 24 years for females. With $1.5M you can spend $50k a year for thirty years without even factoring in continued earnings on that money or $20k/year in social security payments. Once you do factor those in, you'll die with more than the $1.5M you started with in retirement funds.
Right, and you'd have to save over three thousand dollars, every single month, for forty years, to reach that goal.
Maybe someone needs to start paying those under-40 workers what they're worth. Perhaps salary increases should be considered annually in context of ACTUAL cost of living increases, not fairy tale inflation figures? Well, executives are having no problem hanging onto their savings. Actually, oh - they're hanging on to our savings. Maybe it will start trickling down soon!
the hardest part for me to truly believe, since i'm currently in my 20s and enjoy work, is that i'll have to retire. is it true that when i get old i won't be able to program/manage or find some kind of reasonably enjoyable and sustainable employment? will my flaws, such as physical and possibly memory constraints, out weigh my virtures, such as experience and knowledge? there's so much unknown to getting old and i am so confident and able right now. do i really need to be scared of old age?
It's not about being scared, it's about being prepared. It's about making sure you have the choice as to whether or not you'll be working when you are 70, 80, 90, or whatever age you start to feel old.

Do you live to work, or do you work to live?

Things change.
doesn't this problem reduce to the availability of labour?

i'd like to see a thorough accounting of how much labour is required to maintain: our food supply, our residential properties, basic services, etc.

and i'd like to see that compared to current price of these things, to see if they make any sense.

it makes no sense to me that as we've progressed technologically, it seems to have become increasingly difficult to survive.

A lot of this has to do with marginal value. The cost of basic survival has gone way down - but in the process, it's freed up a lot of disposable income, so people build bigger, better, and yet less efficient ways of doing things to soak up that extra money.

Health care's perhaps the biggest example. A hundred years ago, millions of children died in infancy from things like measles, whooping cough, polio, etc. Now this has been wiped out by vaccines that cost maybe a day's salary for a parent (and cost the manufacturer probably pennies to make). Same with antibiotics.

The money all gets spent on the other end of life. We now have the technology to keep patients who would've died within the hour alive for months in an ICU. That costs millions, and doesn't work all the time. But when it does - how can you put a price on that? What price is there on a father being able to see his kids grow up, or a grandparent being able to meet their grandchildren?

The same goes for many other areas. We can build 1200-square-feet houses pretty cheaply. But why bother, when there's some family that's willing to pay over $1M for that 5000-square-feet McMansion?

I think a lot of the problem is that American culture is so damned competitive. It's not enough to have enough - you also have to have more than the neighbors. There's really no end to this game - it will always be possible to have something slightly better, it's just that it becomes increasingly expensive the more you try to squeeze out.

What if you don't plan to retire? If you're making money doing something you love (in my case, web development), why would you ever need to retire? To rest? To do all the things you've always meant to do but didn't make time for when you were younger? To see the world?

I'd rather do that stuff while I'm young; learn a new language in my spare time now, start that band now, travel to foreign countries now - hell, I can do my work there if I need to. I think retiring makes sense for people slogging it out 40 hours a week at jobs they hate, but it doesn't make sense for those of us who actually find our work fulfilling.

Web development may not be around in 20-40 years, certainly not in the way it's done today. That said, I'm sure that type of technical ability will be in demand, you may have to learn some new things.
Its great to save up but imagine you get a chronic illness or cancer and you have a 20% deductible on your insurance. Suddenly your life savings are gone or seriously reduced.
First some advice you should take: Check out Bob Brinker (http://www.bobbrinker.com/portfolio.asp)

I don't worry about retirement because when I was 19 years old and working in the valley I happened to catch his radio show when he said to pull out of the market. It saved me $20,000 that's still working for me today.

(The 10 year numbers might look low right now but keep in mind the Dow was DOWN 14% in that same time frame)

Second some advice that's based on my semi-educated opinion: 401(k) is a scam for anyone under 50. Yes your employer might match it but even the risky portfolio of a 401(k) is usually very conservative and the guy running it usually isn't the firm's star (no one ever got rich managing a 401(k) accounts). If you're over 50 and can't afford to lose the money than go with that but if you have some time I personally think it's better to take a little risk and hopefully get a bigger reward.

My grandmother is in her 90s and mentally she is at 100%. She gets around a little slower now.

That is a scary thought for some. She retired in her 50s!

My plan is one mentioned on NPR several years ago: retire, but work part-time at a grocery store that has insurance benefits.
Or migrate to countries that offer free health care.
Yes save that money and watch it disappear down the rat-hole the next time some Too-Big-To-Fail bank decides to raid whatever fund you've put it all in.

He's right, of course, that younger people need to save more because institutions are failing all around us. Too bad he neglects that second part...

I think globalization and internet will saturate http://en.wikipedia.org/wiki/American_dream