Why $1 Million Won't Cut It In Retirement

[RDS]

That is too pessimistic at $1 million I guess. Your thoughts?

Let's face it — a million bucks isn't what it used to be. You know it. We know it. Even millionaires themselves know it. In a recent UBS survey, well-heeled investors said they won't actually relax about retirement savings until they hit the $5 million mark.
We're not opposed the idea of miracles happening, but the reality is that most Americans are far (far, far) away from that kind of milestone.
The average 401(k) balance for pre-retirees (55 years and up) has nearly doubled since the depths of the downturn, but still sits at just$255,000.
In what might be one of the most sobering assessments of America's retirement crisis this year, The New York Times' Jeff Summer threw a proverbial cold bucket of water on anyone who still thinks $1 million is all it takes to retire well.


Read more: Why $1 Million Won't Cut It In Retirement - Business Insider

 

[cpwill]

Yup. The Boomers have had more wealth flow through their hands than any generation in human history. And they blew all of it. Hey, if it feels good, do it, right?

:roll: and the rest of us are going to have to eat the bitter fruits of those crappy decisions.

I reiterate and plug and plug again turning Social Security into a forced savings / investment vehicle so that even our low-income populace can retire with financial independence.

As for the article...... yields are low? That is a surprise?

 

[Crosscheck]

Yup. The Boomers have had more wealth flow through their hands than any generation in human history. And they blew all of it. Hey, if it feels good, do it, right?

:roll: and the rest of us are going to have to eat the bitter fruits of those crappy decisions.

I reiterate and plug and plug again turning Social Security into a forced savings / investment vehicle so that even our low-income populace can retire with financial independence.

As for the article...... yields are low? That is a surprise?

As a member of the Boomers I agree to a certain extent. But if you think your generation is doing any better you better think again. Everybody has to have the newest vehicle to drive and the newest toys it seems. Found this site about credit debt and quite interesting.

From the article:

The states with the highest amount of average credit card debt in 2012 were Alaska ($7,045), Colorado ($5,728), North Carolina ($5,619) and Connecticut ($5,532).[SUP]32[/SUP]
The states with the lowest amount of average credit card debt in 2012 were Iowa ($3,874), North Dakota ($4,006), Wisconsin ($4,252) and South Dakota ($4,257).[SUP]32[/SUP]

Alaskans at one time per capita were one of the biggest suckers on the teat of the government plus entitled to state oil money. To the residents of Iowa a big high five.


Credit card statistics, debt statistics, industry facts

 

[Visbek]

Yup. The Boomers have had more wealth flow through their hands than any generation in human history. And they blew all of it. Hey, if it feels good, do it, right?

This isn't only about spending habits or savings rates. It's also about:

• Inflation, which increases the actual amount you need on hand to retire
• Cost of living
• Expectations about the standard of living in retirement
• Life expectancy, which is nearly 20 years greater than when "collect Social Security at 65" was set into law
• Bonds, which are touted as a safe investment, have had low payouts for several years now, and are not as stable as in the past

I'm not aware of any solid data which indicates that younger generations have a higher savings rate than the Boomers.

But don't let any of this get in the way of a rant about the allegedly degraded morals of a large demographic cohort, with nothing in common except the years they were born.

 

[CanadaJohn]

In my view, your needs in retirement are not related to a fixed or identified number but to the age at which you retire and what you intend to do in retirement. If you plan on retiring early and continuing your lifestyle of conspicuous consumption well into old age, it's possible no reasonable amount of money is going to last for you. If, however, retirement means more than just not going to work every day or means that you get to do things you enjoy that don't cost lots, then you can easily survive your retirement years with a less but stable income in those years.

I retired 3 years ago, at 54, and I'm living on 60% of my former income. I don't eat out as much - I'm a good cook - I like to spend time reading and I'm not looking to buy all the latest toys or electronics etc. I've never been too much of a traveller, so that's not a concern, but there are some people who save all their travelling urges for when they're retired so that has to be factored in. I'm driving an older car - 2000 - and since I don't do nearly as much driving I'm not really worried about it but will have to splurge in the next few years for something new, but it will be a pretty simple people mover and not an entertainment system on wheels.

And lets not forget that you can also save in retirement too - you don't have to spend all your income - so you can also practice saving for things you want and have a little patience along the way. Also, don't forget that a lower income in retirement also has the benefit of lower tax rates, no social security or unemployment insurance payments, etc. etc. so your lower income goes a lot further without the taxman's claws so much on it.

Retiring was the best thing for me - the stress was lifted almost immediately and not being able to do some things I perhaps could afford before isn't a concern - I don't miss most of the things I'd waste money on.

If you don't suffer from the "I want it and I want it now" syndrome of the boomers and today's youth, you can quite reasonably live on the income generated by $1 million.

 

[Gipper]

Real problem is that people are living longer. Used to be where people didn't work the last 5-7% of their lives. Now they're retiring for the last 25% of it.

 

[imagep]

Yup. The Boomers have had more wealth flow through their hands than any generation in human history. And they blew all of it. Hey, if it feels good, do it, right?

:roll: and the rest of us are going to have to eat the bitter fruits of those crappy decisions.

I reiterate and plug and plug again turning Social Security into a forced savings / investment vehicle so that even our low-income populace can retire with financial independence.



As for the article...... yields are low? That is a surprise?

If most baby boomers didn't "blow" most of their wealth, we wouldn't have had enough demand, and thus jobs, to supply everyone with a job, and we would have thus been even more poor of a country in aggregate.

 

[cpwill]

If most baby boomers didn't "blow" most of their wealth, we wouldn't have had enough demand, and thus jobs, to supply everyone with a job, and we would have thus been even more poor of a country in aggregate.

Demand Side economics is a backwards equation that presumes production and savings. If Boomers hadn't blown most of their wealth unemployment would have been just fine and we would have been a wealthier country in aggregate, not least because we would not now be on the hook for their complete failure to take basic responsibility for themselves.

 

[imagep]

...

If you don't suffer from the "I want it and I want it now" syndrome of the boomers and today's youth, you can quite reasonably live on the income generated by $1 million.

I would think that a typical "safe, well diversified" investment portfolio would maybe have an ROI of 2% over the inflation rate (so around 5% on average, when you include in for inflation). So if you plan on never dipping into the principle, and allowing the principle to grow at about the same rate as inflation, a million dollar investment would likely yield an income of around $20k/yr.

I really couldn't see me trying to live off of just $20k/yr, although it is certainly possible, assuming that you don't have any debts, and you have a paid off home in an area with low property taxes and low insurance rates. In the US, one might have to forgo health insurance to make it on that though.

I think I would prefer to work for the rest of my life than to try to live off of just $20k/yr, particularly in the US where we don't have socialized medicine.

 

[imagep]

Demand Side economics is a backwards equation that presumes production and savings. If Boomers hadn't blown most of their wealth unemployment would have been just fine and we would have been a wealthier country in aggregate, not least because we would not now be on the hook for their complete failure to take basic responsibility for themselves.

Where would the demand for the goods and products that most baby boomers produced come from then?

The guberment?

Seriously, if we all quit consuming half of what we consume, then there would only be half as many jobs, and with a 55% unemployment rate, jobs wouldn't pay crap because employers wouldn't have to compete very hard for employees.

 

[cpwill]

This isn't only about spending habits or savings rates.

Actually it is - had the boomers saved like they should have, they would have been fine, even through the 2008/2009 crash. As I demonstrated in detail and ad nauseum in the above-linked thread.

Inflation, which increases the actual amount you need on hand to retire

Inflation is at historic lows.

Cost of living

We pay less for the necessities today than we have in American history.

Expectations about the standard of living in retirement

That is true. Boomers expected to retire like their parents did, but without saving like their parents did.

Life expectancy, which is nearly 20 years greater than when "collect Social Security at 65" was set into law

Also true, though that belongs in a discussion of Social Security, as people do not today save for retirement assuming they will likely drop dead when they hit SS retirement age.

Bonds, which are touted as a safe investment, have had low payouts for several years now, and are not as stable as in the past

That would indeed be the OP. Which is why you shouldn't be wholly in Bonds - interest rates at this point have almost nowhere to go but up.

I'm not aware of any solid data which indicates that younger generations have a higher savings rate than the Boomers.

There isn't any. By and large, the millenials are completely financially illiterate - it turns out that their parents didn't teach them.

But don't let any of this get in the way of a rant about the allegedly degraded morals of a large demographic cohort, with nothing in common except the years they were born.

:shrug: you don't have to like it, but the pattern of behavior is pretty clear. Boomers by and large did not save, preferring to spend on crap they didn't need because they wanted it.

 

[cpwill]

Where would the demand for the goods and products that most baby boomers produced come from then?

The same. Your confusion is that you think that savings is incompatible from consumption - but savings is merely delayed consumption, usually put into investment. Where would the money come from to start new businesses, build new houses, make loans, etc, if people did not save? The Gubment? All the goods we sell are dependent upon excess supply that can be traded for it - all the theoretical demand in the world is useless if the people who would like to purchase our goods do not have the excess supply to trade for them.

Hell, I have theoretical demand for my own island, complete with McMansion, boat dock, sattelite communications, helipad, hangar, the works. Do I have the excess supply to trade for one? Nope? Well then, I guess no one will be able to sell me one.

Seriously, if we all quit consuming half of what we consume, then there would only be half as many jobs, and with a 55% unemployment rate, jobs wouldn't pay crap because employers wouldn't have to compete very hard for employees.

:shrug: no one said half. In order to be set up for retirement Baby Boomers would have only had to have saved 10-15% of their income.

Now, however, we are going to see a 55% drop in their consumption. Because they won't have the income or the savings to support continued consumption. That is the problem with the short-term demand-driven model: it is the equivalent of trying to get stronger by ingesting caffeine rather than by exercising and eating healthy. Sure, it might even work in the short term - but then there is an energy crash, and you are as weak as you were when you started, if not weaker because now you are dependent.

 

[imagep]

The same. Your confusion is that you think that savings is incompatible from consumption - but savings is merely delayed consumption, usually put into investment.

I'm not confused, and I agree that we need a balance of savings and consumption. Where you are confused is that you don't realize that we had that balance. Since we had the greatest growth in history during the time that the babyboomers were (and still are) working, obviously there was never a lack of savings.

If we would have had more savings, then that would have mean we would have had to have consumed less, and thus there wouldn't have been ample jobs. The fewer jobs we have, the less that is produced, and thus the less wealthy we are.

Where would the money come from to start new businesses, build new houses, make loans, etc, if people did not save? The Gubment? All the goods we sell are dependent upon excess supply that can be traded for it - all the theoretical demand in the world is useless if the people who would like to purchase our goods do not have the excess supply to trade for them.

Again, you seem to have missed the fact that we did have money to start new businesses, build new houses, and to make loans. Lots of new businesses, new houses, and certainly lots of loans. Why can't you understand that?

Hell, I have theoretical demand for my own island, complete with McMansion, boat dock, sattelite communications, helipad, hangar, the works. Do I have the excess supply to trade for one? Nope? Well then, I guess no one will be able to sell me one.

You don't seem to understand the difference between "desire" and "demand". Desire is your wants, which may or may not become demand. Demand is when you actually pay for a product or service. Demand equals business sales (revenue). Desire equals whatever your dreams are worth, which the last time I checked, no one was willing to pay for dreams.

:shrug: no one said half. In order to be set up for retirement Baby Boomers would have only had to have saved 10-15% of their income.

They actually did. It's called "Social Security". Sure, I just made up that "half" figure, but if it would have been 90% or 10% less consumption, we would have still had fewer jobs, less production, and less wealth creation. The amount of wealth that we create in any given span of time is equal to demand, although some of that wealth is consumed during the same period or shortly after it is created.

Now, however, we are going to see a 55% drop in their consumption. Because they won't have the income or the savings to support continued consumption. That is the problem with the short-term demand-driven model: it is the equivalent of trying to get stronger by ingesting caffeine rather than by exercising and eating healthy. Sure, it might even work in the short term - but then there is an energy crash, and you are as weak as you were when you started, if not weaker because now you are dependent.

Bull****!

 

[cpwill]

I'm not confused, and I agree that we need a balance of savings and consumption. Where you are confused is that you don't realize that we had that balance. Since we had the greatest growth in history during the time that the babyboomers were (and still are) working, obviously there was never a lack of savings.

That is false, as is demonstrated by the fact that now there are not enough savings. Clearly there was not a savings balance as the money was not actually put into savings. If there had been[/i] saving, then there would be savings. If the average baby-boomer had taken the basic step to show the minimum responsibility necessary to save 10-15% of their income, the average boomer would be retiring with a million or so, not $255,000.

If we would have had more savings, then that would have mean we would have had to have consumed less, and thus there wouldn't have been ample jobs.

That is a false direct correlation. Since consumption would continue to exist, we would have continued to be fine - in fact we would be better off, because now we would not be facing the kind of crises that we are.

The fewer jobs we have, the less that is produced, and thus the less wealthy we are.

You cannot consume yourself wealthy - nor would increased savings have meant fewer jobs. On the contrary - increased savings would have meant more money for things like new businesses, which create the vast majority of new jobs. Increased savings over the course of baby boomers lives would have meant more start-ups, more creative destruction, more (believe it or not) aggregate consumption. But you can't put the cart before the horse and expect it to perform up to par.

Again, you seem to have missed the fact that we did have money to start new businesses, build new houses, and to make loans. Lots of new businesses, new houses, and certainly lots of loans. Why can't you understand that?

We did indeed - and we would have had more. Why can't you understand that money that goes into savings does not disappear from the economy?

You don't seem to understand the difference between "desire" and "demand". Desire is your wants, which may or may not become demand. Demand is when you actually pay for a product or service. Demand equals business sales (revenue). Desire equals whatever your dreams are worth, which the last time I checked, no one was willing to pay for dreams.

:shrug: what I am labeling theoretical demand you are labling desire. Semantics isn't going to win you much.

They actually did. It's called "Social Security".

Well, that's fantastic! So all these baby boomers have accounts with Social Security which are flush with cash?

Because there are some nasty rumors going around that in fact that money was then immediately sent to current recipients, and that any surpluses were immediately "lent" to congress who immediately spent it, meaning that there is, in fact, no savings in the SS Trust fund outside of a bunch of IOU's, and certainly no actual individual savings..... which would be silly, of course, because, as you said, the baby boomers saved inside of Social Security. Certainly a government elected by boomers would never be so foolishly self-destructive as to socialize their savings and then immediately spend it.

Sure, I just made up that "half" figure, but if it would have been 90% or 10% less consumption, we would have still had fewer jobs, less production, and less wealth creation.

No it would not have - the money would have remained in the economy itself. "Savings" does not equal "money that is put in a giant silo a'la Scrooge McDuck", Savings equals bank deposits, new businesses, new houses, investments in older businesses allowing them to raise cash to add on new projects, greater creative destruction, greater growth, greater wealth creation.

The amount of wealth that we create in any given span of time is equal to demand, although some of that wealth is consumed during the same period or shortly after it is created.

That is false, as indicated by the fact that we do, in fact, have savings, misallocation of resources, hoarding, and even wealth destruction. Broken windows do not increase aggregate wealth.

Bull****!

What a well thought-out and sourced counterargument. You have convinced me. I am now assured that the fact that Baby Boomers will have no money in retirement outside of a paltry $255K and a pitiful Social Security Check will have no effect whatsoever on their consumption. Surely their magical money trees will in fact come through, and they will be able to continue to support their current consumption rates despite their lack of income or savings through the power of Hope. :roll:

 

[Grand Mal]

If you don't suffer from the "I want it and I want it now" syndrome of the boomers and today's youth, you can quite reasonably live on the income generated by $1 million.

(giggle!)

 

[SBu]

As a member of the Boomers I agree to a certain extent. But if you think your generation is doing any better you better think again. Everybody has to have the newest vehicle to drive and the newest toys it seems. Found this site about credit debt and quite interesting.

From the article:
Alaskans at one time per capita were one of the biggest suckers on the teat of the government plus entitled to state oil money. To the residents of Iowa a big high five.


Credit card statistics, debt statistics, industry facts

Actually, I would say our generation is in the "grab as much of it while you can because it won't last" phase of socialization. We are slowly being "locked in" to our respective social economic classes. If you aren't saving, you aren't smart at this point.

 

[imagep]

That is false, as is demonstrated by the fact that now there are not enough savings. Clearly there was not a savings balance as the money was not actually put into savings. If there had been[/i] saving, then there would be savings. If the average baby-boomer had taken the basic step to show the minimum responsibility necessary to save 10-15% of their income, the average boomer would be retiring with a million or so, not $255,000.



That is a false direct correlation. Since consumption would continue to exist, we would have continued to be fine - in fact we would be better off, because now we would not be facing the kind of crises that we are.



You cannot consume yourself wealthy - nor would increased savings have meant fewer jobs. On the contrary - increased savings would have meant more money for things like new businesses, which create the vast majority of new jobs. Increased savings over the course of baby boomers lives would have meant more start-ups, more creative destruction, more (believe it or not) aggregate consumption. But you can't put the cart before the horse and expect it to perform up to par.



We did indeed - and we would have had more. Why can't you understand that money that goes into savings does not disappear from the economy?



:shrug: what I am labeling theoretical demand you are labling desire. Semantics isn't going to win you much.



Well, that's fantastic! So all these baby boomers have accounts with Social Security which are flush with cash?

Because there are some nasty rumors going around that in fact that money was then immediately sent to current recipients, and that any surpluses were immediately "lent" to congress who immediately spent it, meaning that there is, in fact, no savings in the SS Trust fund outside of a bunch of IOU's, and certainly no actual individual savings..... which would be silly, of course, because, as you said, the baby boomers saved inside of Social Security. Certainly a government elected by boomers would never be so foolishly self-destructive as to socialize their savings and then immediately spend it.



No it would not have - the money would have remained in the economy itself. "Savings" does not equal "money that is put in a giant silo a'la Scrooge McDuck", Savings equals bank deposits, new businesses, new houses, investments in older businesses allowing them to raise cash to add on new projects, greater creative destruction, greater growth, greater wealth creation.



That is false, as indicated by the fact that we do, in fact, have savings, misallocation of resources, hoarding, and even wealth destruction. Broken windows do not increase aggregate wealth.



What a well thought-out and sourced counterargument. You have convinced me. I am now assured that the fact that Baby Boomers will have no money in retirement outside of a paltry $255K and a pitiful Social Security Check will have no effect whatsoever on their consumption. Surely their magical money trees will in fact come through, and they will be able to continue to support their current consumption rates despite their lack of income or savings through the power of Hope. :roll:

You are falling into the "Fallacy of Composition", and you need to learn about the "Paradox of Thrift".

If some savings is good, that doesn't mean that more savings is better. Also what is good for the individual, is not always good for the aggregate, if you take what is good for the individual to an extreme, it becomes so harmful to the aggregate, that even on an individual level it is bad.

What we need is a balance between savings and consumption, we have had that balance, and you have done absolutely nothing to indicate otherwise. Technically, I'm one of the last baby boomers, and while I don't have what most people consider an investment portfolio of a million dollars, I still have 20 or more years of work left in me, plus I own "stuff" of value, like my home and my business, that I wouldn't have owned if I were more thrifty. If the average babyboomer has a quarter million bucks in a retirement account, I'd suggest that is pretty darned good, and far more than their parents ever had - plus they have "invested" around 13% of their income into social security, which will provide them with an additional income for life.

More savings in the past 50 years would not have likely created more production, because it would have subtracted from the need for production.

 

[Visbek]

Actually it is - had the boomers saved like they should have, they would have been fine, even through the 2008/2009 crash....

I'm not saying that savings is not a factor at all. I'm saying it is one of many.

Let's not forget, though, that a pair of retired adults with a large nest egg will not only see that value deteriorate during a crash, and take 5 years to recover, they may also have to supply financial assistance to their children during that time. Or: If you develop a serious medical condition (e.g. cardiac issues or cancer, two very common conditions), your nest egg can shrink or evaporate. Or: In a broad recession, lots of assets can suffer -- stocks, bonds, home values and income from work. It can take years to recover from a recession.

It is far too simplistic to say "it's all savings."

Inflation is at historic lows.

Sure. But inflation still erodes savings and asset gains. E.g. with 3.5% inflation, the value of a dollar is cut in half in about 20 years.

Thus, if the recommendation in 1990 was "you should have $1 million saved when you retire," then today the recommended amount should be $2 million.

We pay less for the necessities today than we have in American history.

That's a rather glib assertion. And it apparently isn't the case for 2000-2010: Study: Costs for Basic Needs Climbing Faster than Income - US News and World Report

At a minimum, you need to specify:
• The time periods to compare
• What qualifies as "necessities"
• How do you handle changes in "necessities" over time
• Determine the various wages at various times

E.g. what was "necessary" in 1913 might be regarded as insufficient in 2013, since at that time medical care was primitive, there were no refrigerators or frozen foods, few people owned cars and so forth.

That is true. Boomers expected to retire like their parents did, but without saving like their parents did.

1) This is not about "Boomers." Their parents, who were really the first to live through a big wave of consumerism, were just as materialistic as their kids.
2) People are really, really bad at planning 30+ years in advance.
3) It's not about how they want to retire compared to their parents -- because the parents of the Boomer generation a) likely lived 10-20 years shorter, and b) many worked until they died.

Also true, though that belongs in a discussion of Social Security, as people do not today save for retirement assuming they will likely drop dead when they hit SS retirement age.

No, it belongs right here in this discussion. If life expectancy has changed, then so should the savings recommendations -- and our ideas about the viability of a safety net for senior citizens. And many of the allegedly "financially illiterate" Millenials have low expectations for SS.

That would indeed be the OP. Which is why you shouldn't be wholly in Bonds - interest rates at this point have almost nowhere to go but up.

...and as I'm pointing out, "trusting your savings to bonds" is a) going to impact how much you need to save for retirement, and b) not linked to one's savings rates.

 

[Visbek]

How easy is it to save $1 million today?

Let's simplify things. You work every year, start at age 25, you work until age 67, and we ignore inflation. We start with a household that earns $50,000 a year (current US median household income), and assume they have no major setbacks.

• If your wages increase 2% per year and you save 2% of your income every year, you will accumulate $67,000 by age 67.
• If your wages increase 2% per year and you save 10% of your income every year, you will accumulate $335,000 by age 67.
• Wage increase 4% and you save 10% each year, you will accumulate $550,000 by age 67.
• Wage increase 2%, save 25% of your income every year, and you'll accumulate $839,000 by age 67.

How can we hit the magic number by age 67? One way is to earn $95,000 a year, get raises that outpace inflation every year by 4% and save 10% of your income.

Or, we could just say you need to save $23,000 (in 2013 dollars) for 47 years in a row.

Am I the only one who thinks this is not easy?

 

[cpwill]

How easy is it to save $1 million today?

Let's simplify things. You work every year, start at age 25, you work until age 67, and we ignore inflation. We start with a household that earns $50,000 a year (current US median household income), and assume they have no major setbacks.

• If your wages increase 2% per year and you save 2% of your income every year, you will accumulate $67,000 by age 67.
• If your wages increase 2% per year and you save 10% of your income every year, you will accumulate $335,000 by age 67.
• Wage increase 4% and you save 10% each year, you will accumulate $550,000 by age 67.
• Wage increase 2%, save 25% of your income every year, and you'll accumulate $839,000 by age 67.

How can we hit the magic number by age 67? One way is to earn $95,000 a year, get raises that outpace inflation every year by 4% and save 10% of your income.

Or, we could just say you need to save $23,000 (in 2013 dollars) for 47 years in a row.

Am I the only one who thinks this is not easy?

I have to run to work so I'll respond to this one now and your previous post later.

The Combined Annualized Growth Rate for the SP 500 since 1980, adjusted for inflation, is 7.61% Hell, even if you chop it off at the end of 2008, in the middle of the crash, it's 7%. So we'll take the lower number and say that our worker bee starts at age 25 (and he should have started sooner, but okay), and begins to save $5,000 a year.


When he retires at 67, he has $1,238,882 in the bank. Modified into a slightly more conservative stance so as to generate 5% in real (so inflation is already accounted for) income, that gives him an annual retirement paycheck of $61,944 - and that's before anything else (401K's, pensions, Social Security) comes into play. And if he did it with a Roth IRA, it's tax free. And at this point in his life he probably doesn't have a house payment, meaning that that $62K is going to buy food, whatever part of his medical care that Medicare doesn't cover, regular maintenance items (gasoline for the car, cleaning supplies for the house, etc), and just plain old fun consumption.

Am I the only one who knows about compound interest?

 

[RDS]

Given the current government shutdown and the looming debt default $1 million is a windfall to retirees. If there is a default convert your holdings to cash because cash is king during uncertain times.

 

[Higgins86]

Mer and my wife plan to leave the UK and move to a LEDC where our money will go much further. Working into your 70's is a mugs game.

 

[CRUE CAB]

Yup. The Boomers have had more wealth flow through their hands than any generation in human history. And they blew all of it. Hey, if it feels good, do it, right?

:roll: and the rest of us are going to have to eat the bitter fruits of those crappy decisions.

I reiterate and plug and plug again turning Social Security into a forced savings / investment vehicle so that even our low-income populace can retire with financial independence.

As for the article...... yields are low? That is a surprise?

Define "blowing it". I make good money, live in a relatively low cost of living area, have one small CC bill, rent a mid sized house, drive a 14 year old car.
So, where am I "blowing it", yet saving is hard.

 

[cpwill]

Define "blowing it". I make good money, live in a relatively low cost of living area, have one small CC bill, rent a mid sized house, drive a 14 year old car.
So, where am I "blowing it", yet saving is hard.

Saving is not "hard" in the sense that it is difficult to figure out how to do. It is "hard" in that it requires personal discipline and willingness to put off consumption for another day. The boomers had more chances to save than any other generation in human history, yet they did so less. That is "blowing it".

 

[cpwill]

You are falling into the "Fallacy of Composition", and you need to learn about the "Paradox of Thrift".

I know about the Paradox of Thrift. It is as poorly though-out as much of his other work. All Keynes cared about was the immediate, not the aggregate effects over time (after all, in the future we'll all be dead, right?), and that he would latch onto the PoT is a classic example of that.

If some savings is good, that doesn't mean that more savings is better.

Savings Rates for era's dominated by the WWII generation v that dominated by by the Boomer generation. You will notice that what we have is insufficient savings.

Also what is good for the individual, is not always good for the aggregate, if you take what is good for the individual to an extreme, it becomes so harmful to the aggregate, that even on an individual level it is bad.

Not always, no. That is why we have tragedies of the commons and therefore need government. But in terms of saving 10-15% o ones' income for retirement, yes.

What we need is a balance between savings and consumption, we have had that balance, and you have done absolutely nothing to indicate otherwise.

Precisely. Currently we do not have this balance, because instead we over-consume.

Technically, I'm one of the last baby boomers, and while I don't have what most people consider an investment portfolio of a million dollars, I still have 20 or more years of work left in me, plus I own "stuff" of value, like my home and my business, that I wouldn't have owned if I were more thrifty.

Wait - are you saying that you borrowed money in order to build a house and start a business? Where did you get that money? If you got it from a bank - where do you suppose the bank got the money?

Surely you don't suspect that you were, in fact, leveraging people's savings in order to consume things like a house and build things like a new business?

If the average babyboomer has a quarter million bucks in a retirement account, I'd suggest that is pretty darned good, and far more than their parents ever had

That is flatly mathematically not correct.

1. A quarter of a million bucks in a retirement account is nowhere near "pretty darned good". It is "started way too late, saved too little". And that $255K is one of the highest estimates of what boomers have saved.

2. The Boomers' Parents saved more of their income and retired with greater wealth than the Boomers are set to do (see earlier link from St Louis Fed). Hell, the WWII guys started our culture of retirement - moving to Florida, retiring to retirement communities, playing golf, etc.; all WWII vet inventions. Boomers expected to replicate that without saving their money like their parents did - and it's just not gonna happen.

plus they have "invested" around 13% of their income into social security, which will provide them with an additional income for life.

Social Security is one of the worst "investments" you can make - and it is a tax. You do not "invest" in a tax, boomers "own" nothing in Social Security, and the government is not legally obligated to give them a dime (this is going to surprise some of the middle to upper middle class boomers down the road when we are forced to start changing its' formulas to keep it afloat). That money did not go anywhere to grow - it was immediately spent. If anything, Social Security belongs under "consumption" rather than "savings". Furthermore, the income it offers is crap - the average monthly check is around $1100, or, roughly, 1/4th-1/5th of what the boomer would be getting had he kept and invested the money in the SP500 himself.

More savings in the past 50 years would not have likely created more production, because it would have subtracted from the need for production.

That is simply not correct - more savings in the past 50 years would have caused greater net production not least because it would have increased the ability for creative destruction to bring about superior allocations of resources. The portion of "savings" that is actually taken out of the economy is pitiful and limited to preppers who usually prefer to "save" in terms of physical investment (read: consumption) anyway.




And I can't help but notice that you never described how boomers were going to maintain their current levels of consumption when their income shrinks dramatically upon retirement?