A world without retirement? | Hacker News Reader

A world without retirement?

theguardian.com

131 pointsDiabloD3162 comments

I'm currently writing a list of things to consider when creating a UBI scheme (concerns that I often don't see addressed), and this is an easy way to illustrate one of them.

One simple way to implement "single payer" healthcare in the US would be to slowly expand the medicare (US program for people 65 and older) coverage by moving the age lower every year.

Very similarly, a simple way to incrementally implement UBI would be to lower the "retirement age" every year.

But precisely the opposite is happening. Per the article:

> In 2010, British women got their state pension at 60 and men got theirs at 65. By October 2020, both sexes will have to wait until they are 66. By 2028, the age will rise again, to 67.

How do people who think a feasible UBI future is possible square with this?

> How do people who think a feasible UBI future is possible square with this?

That's backwards. How do the people that run todays pension funds expect to own up to the fact that they've been technically bankrupt for quite a while?

The only reason the pension age is pushed upwards is to mask the fact that the money in the funds required to fulfill their obligations simply isn't there. The easiest way to do that is to start paying out later, a number of folks that would have otherwise been eligible will simply die in the intermediary and those that don't will pay into the pot for a couple more years.

UBI is a scheme that does not involve pension funds at all.

It's worth noting that the above doesn't relate to pension funds but the state pension.

These aren't paid out from a pot but comes from general taxation, the same as presumably a UBI system would.

State pensions are often paid out of a special pot, and not general government funds; in the US, for instance the Social Security Old Age and Survivors (OAS) Trust Fund.

Yes. The problem is that the government tends to take money out of that 'special pot' for general budget shortfalls. It doesn't help that projections for future pension payouts tend to be overly optimistic as well.

This and the fact that when state pensions were getting good returns - they setup guarantees which became liabilities of the state. However, when investments went the other way - the guarantees were still in place. So they get to have their cake and eat it too.

"Very similarly, a simple way to incrementally implement UBI would be to lower the "retirement age" every year."

I suspect when many (not all) of the supporters of UBI consider it to be the most basic of subsistence payments, not something we would want seniors to retire with.

Think of the difference in amounts between SS and unemployment insurance currently.

Then couple the lowering of the retirement age with a lowering of the amount paid out in the early years of retirement, gradually plateauing down to a base UBI level for 40-somethings and increasing to plateau out to a social-security level for 60-somethings.

Well a) SS is barely livable and b) unemployment insurance would actually be a much better proposition if people paid into it.

    > the most basic of subsistence
    > payments, not something we would
    > want seniors to retire with

The full UK pension is £119.30 per week, unemployment benefit (JSA) is: £73.10.

Wow that's nothing. We have state government workers in California getting 90% of their highest salary as long as they live. And some even double dip.

State pension is not the same as the Civil Service pension, which would be equivalent to what you're talking about, and can be very good indeed.

> How do people who think a feasible UBI future is possible square with this?

You have to address the revenue to pay for it, which in most places means ending preferential tax treatment of capital income. Right now, pretty much the whole world has, at any income level, heavier taxation of labor than capital (in the US, higher direct taxes coupled with employer mandates that act as additional taxes; as well as addressing direct taxes those mandates need replaced with public social programs so they aren't burdens on employing labor.)

The problem is that capital is mobile, and that mobility is arguably increasing due to digitisation. In other words, if a country raises tax rates on returns to capital, capital simply relocates somewhere else. I've suggested a solution above (or it might be below by now), but it's complex...

> In other words, if a country raises tax rates on returns to capital, capital simply relocates somewhere else.

So, you need to tax value extraction as a condition of allowing firms to do business, ideally rebating that against taxes on locally-realized capital gains so that local capital owners aren't unfairly penalized compared to foreign extractors.

USA already has worldwide tax jurisdiction. The more difficult problem with capital taxation is how to accurately value an asset.

The USA tries to have a worldwide tax jurisdiction, and fails at it

The Large global companies spend millions on ultra complex business structures to avoid US (and EU) taxes.

See GE and Apple as the most publicized examples but they all do it

Oh, certainly. However, if the US political climate ever reaches the point where a wealth tax is seriously considered (something which would require a constitutional amendment), I very much doubt these loopholes would still exist.

That's a problem with ad valorem property taxation, but not a problem with taxing capital income.

    > In other words, if a country raises
    > tax rates on returns to capital, capital
    > simply relocates somewhere else.

Certainly in the UK, money earned abroad is taxed; this is normal, rather than unusual (like, say, in Thailand, where you're only taxed on money you then bring back to Thailand). Although you can do some dodgy dealing with Non-Domicile status, this puts a kink in any simple capital flight.

Even here in the supposedly socialist paradise of Norway capital gains are more lightly taxed than earnings. My marginal tax rate on earnings is 50% but interest or income from mutual funds is taxed at 27%. At least it was last time I looked, not much I can do about either of those numbers so I don't think about them any more.

This is probably wayy off topic, but not having met real life earning Norwegians (traveling students don't count): how does it feel to be giving away half of what you earn to the government? I'm trying to phrase this question as blandly as possible; don't mean to be snarky or anything. My own political philosophy has been migrating from something far-right to more center, but this is one issue that does bother me very much...Specifically, the feeling I have is: I worked pretty damn hard to get to a situation where I can make the kind of money I make now, and almost 20% goes away in taxes to the US federal govt. (not including Social Security and Medicare). I was born into a poor family so it seems rather egregious that my hard work, my blood and sweat is ultimately to be used for the benefit of people who are not, well, me.

Answering as a fellow Norwegian: I gladly pay my taxes - the beneficiaries of these taxes are the community as a whole, including myself. I don't have to worry about going bankrupt if I ever get any serious health issues, for instance. There's also the issue of social security, which not everyone is a fan of. But giving people a decent economic baseline / safety net should mean they e.g. won't have to resort to crime to stay afloat. It may also reduce tensions, although I can't say that for sure (some of my old friends get social security, and they're feeling disenfranchised due to a lack of real opportunities). I get the impression that some people think that taxation is basically money being stolen from them and being given to someone else - isn't that a somewhat gross misunderstanding?

I don't pay 50% tax in Germany but I probably pay more than you.

I don't mind it because:

1. I get great services for my tax money (health services practically free, good transit, good schools, higher education is free to cheap, daycare/kindergarten is so cheap as to be basically free). I was paying a bit less taxes when we lived in Israel but ALL public services were worse in a greater margin than the difference in taxes.

I recently had to go through some fairly major health related treatment and both the treatment and substantial hospital stay were practically free of charge, I didn't have to think about the financial aspect of it at all (despite being self-employed).

2. even tho i worked hard to get to where I am I still enjoyed a great deal of privilege: i grew up to middle-class parents who taught me that education is important, my family helped support me through college, I had role models of succesful people around me as a child, I grew up in a relatively safe and nurturing environment, etc.

I am sure an ethnic minority growing up to working-poor parents in a backwater periphery would have a much harder time achieving what I did or even knowing what to achieve, and yet it is no fault of their own that they were born to such circumstances. So I don't mind funding public schools/healthcare/infrastructure/welfare to make sure these kids get at least the basics at a level closer to mine, and are more likely to get ahead in life instead of being trapped in generational-poverty.

maybe the issue is that you don't feel your government is spending tax money wisely? IMO the solution there is to replace the government not reduce taxes.

having experienced both systems for many years it's obvious to me the welfare state gave me much better quality of life & safety, despite being a well-earning software developer who pay a lot more into the system than what I (explicitly) take out of it.

Remember, though, that 50% is the marginal tax rate. I don't know the tax brackets in Norway, but only income over X amount will be taxed at that rate, the first X will have a different (series of) lower rates, and generally the first Y amount has 0% tax, for some small-ish Y. This means that his amortized tax rate is less that 50%, maybe even much less if income is only a small amount over the X threshold for 50% tax.

Actually now, 46,72% is the highest marginal rate, see http://www.smartepenger.no/faktabank/skatt/635-marginalskatt....

You have earn over NOK900k to pay that, about USD105k.

Tax on capital gains is now down to 24%.

I should have looked those numbers up earlier.

As a Canadian I can safely say I pay about 50% of my earnings in various taxes.

I don't mind too much because I never really see the money, and I get useful government services out of it for the most part. Would I like my taxes to be lower? Sure. But I see the benefit to society my taxes bring.

> Very similarly, a simple way to incrementally implement UBI would be to lower the "retirement age" every year

Why would you first give UBI to the richest people (old people at the peak of their careers with a lifetime of savings)?

Sounds backwards to me.

You'd give UBI to those least able to work and generate an income.

Then it's not "UBI". The "U" stands for "Universal", and the lack of conditionalities is the most important factor in not creating the perverse incentives of existing benefits systems -- eg., rewarding people for not working.

They don't need an income; they have paid-off houses worth $1.2m that they picked up in 1972 for $100k.

But now who can buy that house for $1.2m, and in 30 years will it have increased in value by 10x again? I feel like this is why an increasing number of people are locked out of the housing market. But as we learned, prices don't increase forever...

>who can but the houses?

Rich people from other countries. Especially places where money isn't made cleanly?

Not sure why this was downvoted.

This is a gross generalization. Not everyone was a solidly middle class worker for their entire lifetime, and not everyone thought to save for retirement. Before you studied it, did you have any idea at all how expensive retirement would be?

Think about it: If someone didn't save their whole life because they assumed social security would provide for a good life, but then they discover that SS hasn't been increasing much at all and the quality of life SS provides is terrible, what are they supposed to do? Suffer? Just because a portion of their generation saved?

All those retirees living off investments will be paying more in capital gains to subsidize the UBI, way in excess of the amount paid out to them to maintain the universality.

In Canada there is no capital gains tax on primary residences. In the US, $500k is exempt. I imagine the laws are similar in most parts of the world, no?

If we were to get rid of the capital gains exemption, housing might become more affordable.

> By 2028, the age will rise again, to 67.

They could just set the age at 80 and be done with it. Funding problem solved! /s

>> In 2010, British women got their state pension at 60 and men got theirs at 65. By October 2020, both sexes will have to wait until they are 66. By 2028, the age will rise again, to 67.

>How do people who think a feasible UBI future is possible square with this?

Because this was done to calm down the markets. The debt is approaching 100%.

UBI is very simple if you allow the state to acquire capital and cultivate it in a sovereign wealth fund. Imagine, for example, public ownership of 50% of the most valuable real estate in the country, which is then rented as usual.

You don't need sky-high taxes when there's income from capital to distribute.

Using taxes to crowd out investment markets...can't go wrong there.

In Norway, apart from the well known sovereign investment fund investing abroad, the state also owns shares equivalent to about 1/3 of the total value of all companies listed on the Oslo Stock Exchange. I'm sure you can go wrong there, but it clearly is also possible not to, as this model has worked quite well so far.

At least a state investment fund is in for the long term. This is better for the company than a bunch of short-term hedge funds which only seek to bleed the company dry.

Taxes, with preferably much more progressive rates.

The pension age depends on the number of people of working age and their tax rate. Population growth is slowing down, so the options are to increase taxes or the retirement age.

And not even try to think to tax business! Tax constantly shrinking in % working population. /s

The biggest problem, one where the trend is running in the wrong direction, is how to fund UBI. If we assume that labour will be increasingly replaced by capital in the future, then I think this ultimately comes down to the following question: how do we tax increasingly mobile capital? I'm reposting here, but it seems particularly relevant. Because of the relative (and increasing) mobility of capital, countries have incentive to undercut each others' taxes on capital, to attract that capital into their country. There seem to be two directions we can go in:

1) Give up on corporate tax and shift the tax burden on to less mobile bases (e.g. land, consumption). This scenario seems to be slowly playing out across the developed world. I'm not sure this could fund UBI, and does little to mitigate the negative effects of capital accumulating in fewer and fewer hands.

2) Engineer some kind of grand international agreement on corporate tax rates: a 'Bretton Woods areement for corporate tax', if you will. This would be necessary because there's such a strong incentive for countries to 'undercut' each others' corporate tax rates (to attract foreign capital investment, tax havens being the extreme example of this). Such an agreement would require: a specific agreement on minimum corporate/capital tax rates, the participation of countries representing the bulk of the world's production output, and provisions that levy punitive tariffs on non-complying, and non-participating, countries that go below the minimum rate.

I've long thought option 2 to be basically impossible. But I've begun to wonder about this. In a strange way, Trump's presidency might be the golden opportunity. He seems to be just the right amount of crazy to do it. I couldn't imagine an 'establishment' president going near something like this. And I think only the US could lead such a process, maybe with some quietly pre-agreed support from China. Given the capital flight China is currently plagued with, their precarious public finances and their main central banker publicly stating support for some kind of international agreement on capital controls (he explicitly invoked Bretton Woods), it seems like a few stars are aligning. I imagine the Chinese communist party is also acutely aware that if the music stops, their Bastille will get stormed.

It's a tricky proposition though. It would have to be 'sold' skillfully. Essentially, we would need to convince the (marginally) most powerful in society (government) that they are about to be eclipsed by another group (capital owners). Perhaps our 'automated future' is the narrative to go with. Something like: As labour is replaced with algos/robots, then by definition production becomes more capital intensive. So more and more of the gains from production and trade accrue to a fairly small group of capital owners.

It's conceivable that, in the not too distant future, some of these mega-corporations will have net incomes that rival that of even large, first-world governments. At this point, they will pose an existential threat to liberal democracy as they will have the means to overcome the will of the majority and even the most co-ordinated resistance (i.e. by employing a large 'private security force'). Not to mention the immense soft-power they will wield given they will control most of the world's means of production.

So, although this may all sound crazy, it would be unwise and dangerous to allow things to reach a stage where liberal democracy is imperilled by this concentration of wealth. Therefore, we must tax corporations/capital in a way that leaves them nowhere to run (i.e. via an enforced international agreement on rates). A fair chunk of this revenue should be redistributed to (former) workers in the form of basic income in the interest of public welfare and social stability.

It's good populist policy too, something that Trump seems well suited to selling (although he'll face significant opposition from those suckling on the corporate teat i.e. mostly everyone, including the 'mainstream' media).

Note: I'm not really keen on emotive arguments like the above, but I think some version of the above is what it would take to sell a radical proposal like an international agreement on corporate tax rates to sustainably fund basic income. Although not exactly a 'glorious revolution', it probably beats the hell out of living in a world that has become a giant company town.

Trump will not engineer any international agreement on corporate tax, or increase taxes on capital in general.

I am expecting a deal later this year or early next year for US corporations to be able to repatriate their overseas cash piles in exchange for significantly reduced taxes on that cash. I'm guessing a majority chunk will end up in share repurchasing and M&A activity rather than job creation.

https://www.forbes.com/sites/joeharpaz/2017/02/06/inside-tru...

UBI does not work mathematically. I posted this a while back, so I'm just copying and pasting from an older response:

Simple back of the napkin math is that based on the 2013 census, we have 242,470,820 adults living in the US. If we pay each of them $12,000 per year, that's $2,909,649,840,000 in additional mandatory spending every single year. That's more than Medicare and Social security combined, and that has no cost of living adjustments built in. The basic math shows that this idea is simply unrealistic as far as I can tell.

UBI in the amount that could be considered a basic living income is infeasible with the current state of the world even if you were to double the tax rates as I would imagine most people in the US can't live on 12K and still be able to have the day to day basics required for living.

UBI is a redistribution expense, that means, the government takes taxes from richer people, and distribute it to everybody.

Retirement is an entitlement pyramid, that means, people pay the government for it to take care of older participants, and by doing so they get entitled into receiving something in proportion to what they paid.

Besides it being a pyramid, a UBI scheme where total received is proportional to total paid wouldn't work either. Yet, none of that means that UBI wouldn't work, those are completely different.

>UBI is a redistribution expense, that means, the government takes taxes from richer people, and distribute it to everybody.

It does not have to be. I take a Georgist view of the topic which when applied to UBI can create system based on Commons Rent.

Commons Rent would be fees on Natural Occurring Resources things like Extraction of Minerals, Forests, Fish. Fees on EM Spectrum (our current model of "selling" the EM Spectrum needs to end), geosynchronous orbits, air corridor usage (which can be very profitable in the coming age of Autonomous Drones). Pollution fees aka carbon taxes or other such fees.

Included in that would be Land Use Fees, and many other things not listed herein

It does not have to be a "take from rich, give to the poor" situation, it however does change the traditional attitude of natural resources as the marketable private property of the first person to discover them.

>Retirement is an entitlement pyramid, that means, people pay the government for it to take care of older participants, and by doing so they get entitled into receiving something in proportion to what they paid.

No it isn't. Retirement benefits have nothing to do with 'paying in' or 'investing' or some sort of 'fund'.

> Retirement is an entitlement pyramid, that means, people pay the government for it to take care of older participants

This is news to those who retire and live on investment income.

In the US at least, almost half of elderly would be living in poverty but for social security. Most are not retiring and living off of investment income.

That does not detract from the truthfulness of my statement.

Investment income depends on a functioning, growing economy.

Even just maintaining stored retirement wealth depends on this. Think about prices for services when there are large numbers of rich retired people with needs, but few young people willing to provide them.

The answer, of course, is automation. Granted, a ton of thing may just not be possible with robots. But I expect that, just like Oil was the resource that boosted humanity, AI (and modern medicine) will be the resource that comes to aid the elderly as demographics rapidly change.

It does not depend on a functioning, growing economy at all. TIPS and Series I savings bonds require the U.S. Govt to not default on its obligations. They preserve purchasing power.

Ubi is going to depend on a mass uprising of the have nots vs the haves. But there is plenty of resources to go around. The problem is the wealth is concentrated in the hands of very few people.

How much is the monthly UBI in your plan?

Where do the jobs for the elderly come from, if even young, healthy people are gradually priced out of their jobs by technology and automation? Right now, good jobs are replaced by bad, underpaid ones. Desperate people are serving burritos to a smaller group of people who are lucky to have the skills necessary in this time of transition. All of them work to aggregate productive capital in the hands of the very few.

If there's only a handful of people left who own everything, supermarkets, datacenters, robots, software, machines, farmland.. to whom will these people sell all the stuff they produce? How do those who have no jobs pay for this stuff?

I think whoever projects 40 years into the future, and sees no need to mention the words "UBI" or "property tax", is in for a surprise. Will it be a nice surprise? That depends on how fast our society realizes what is currently heading our way.

Your question is based on a false premise. There is plenty of work, we just haven't figured out how to monetize most of it yet. Mental health, filmmaking, video games, quality food, cultural maintenance events, general caretaking, career development... we're not producing anywhere near the quantity of those things that we actually need.

There are lots of reasons why the markets are currently failing to monetize the demand in those areas (there are incentives for corporations to leave demand on the table), but there's no reason why those incentives should be seen as permanent.

If you think the selection of products and services we buy should be locked in the 1950s then it will look like there's not enough work, and automation will eat what work there is. But the catalog of services that people are purchasing is growing rapidly as we learn how to hack the market blockages, and it will grow exponentially as we approach the complete information liquidity event which is coming in the next decades.

We're just starting to achieve widespread realization that you can offer a service and pay your bills using only Instagram. We're coming from a world where there were only mass-market channels for advertising (newspapapers, broadcast TV, etc), so there was only a limited information space for a small number of brands. That's why we think there are only a handful of job categories, the number of brands was tiny and a brand can only support a finite number of job categories. A decentralized system like Instagram can support infinite job categories.

Maybe I did not phrase it clearly enough, but I know that there is plenty of work, just not paid work. That's why I used the word "jobs".

Companies leave the demand for mental health on the table, because the metally ill don't have anything to offer to them in exchange.

But I certainly hope that the future is so bright as you describe it.

It's already paid work for some fraction of forward thinking people - a friend has three income-generating houses, the first of which was financed by virtual coal trading in RuneScape in the early 00's.

A microeconomic reply to a macroeconomic problem.

What bank will finance the mortgage on his incoming generating properties via 30 year mortgages when almost everyone is unemployed? Does the existing massively overgrown and under automated FIRE sector downscale to only 1% of the population having all the income and wealth? If it doesn't downscale, perhaps it doesn't operate at all, then how will he finance his real estate purchases via loans? He will have to pay cash and instead of 1/3 down on each income generating property he'll have to pay 100% for one property. Or prices will have to collapse by a minimum of 2/3 to clear the market.

His properties are not income generating if the renters have no income. The purpose of the discussion is what do we do when essentially no one has income or net wealth anymore? The phrase incoming generating property means nothing if there's no rent to collect because no one has jobs or income or wealth anymore.

Someone without power today can trust the courts and cops to protect his three properties because "everyone owns property or at least half of us or so". How does that break down when no one has any money? If there's only one landlord in the city who owns almost all property and he asks the cops to lean on him to sell his three houses, or squatters take over and there's no government support, because private property as we know it today is obsolete when no one owns anything, what does he do?

Assuming the above is somehow fixed, lets see if its sustainable via replication. How do you get money from trading runescape coal in 2040 if no one playing games has any money? My kids have no money because they're little kids. Assuming they continue to have no money, how many games of tic tac toe do they need to play to afford three houses each if the net profit off each game played is $0 because no one playing has any money to lose?

The future being unevenly distributed, being a slumlord today in Detroit is kinda like being a suburban landlord in 2030 perhaps, or an urbanite landlord in 2040, assuming you believe in new urbanism which is very popular here. The 50th percentile landlord will impact reality like a bug hitting a windshield long before the 90%th percentile landlord, which is a whole nother topic. Eventually only the top 1% of landlords will be in on the game much like only 1% of the population will have old fashioned jobs or participate in the old fashioned economy via pay and wealth, which brings us back to the original macroeconomic problem. Surely you can't be implying that 99 landlords will rent their 297 houses to the one guy who still has an old fashioned job?

(Forced) unemployment won't go over 20% so your question is based on a false premise.

But regardless, rent-seeking can't support the economy. People won't be "employed" as landlords, they'll be employed as property managers. There could easily be a billion property managers added to the global economy. Just imagine everyone starts expecting their homes to be professionally taken care of, every window frame refinished, every outdoor space professionally managed as a farm or native ecology. We could literally employ the entire human race doing only that work.

Because the details of property management are different in every culture, and every neighborhood, and those details are based in vague cultural norms, AIs will never be able to do the long tail. A robot could manage the 50% default "I don't care what my house looks like so long as it's nice-ish" market, but not the other half, "I want home to feel like home" market.

Unemployment has gone over 20% before. No reason it can't go over 20% again.

> the first of which was financed by virtual coal trading in RuneScape in the early 00's.

Sure, but this is not work that is useful or necessary to society. It is only possible for some people to get rich by skimming off the top of useless activity given that other people are producing food, electricity, maintaining infrastructure, providing healthcare etc.

Related, dystopian prediction: https://www.wired.com/2017/02/clive-thompson-future-of-work-...

> Companies leave the demand for mental health on the table, because the metally ill don't have anything to offer to them in exchange.

No, companies leave mental health on the table because a CEO can only manage a handful of labor categories, and there are plenty of healthy people to fill those roles. Mentally ill people could profitably fill other roles but the CEO doesn't have the bandwidth to manage a system of the level of complexity that would be required to support those roles. We need a decentralized system (contractors fulfilling stock HR microcontracts) to release that economic value.

Most CEOs are not even able to intelligently manage the 10-20 stock labor categories they currently staff, let alone the millions of categories we need. I think most managers max out at 5-10 roles.

What is money, really?

Money, today, is not in sync with a world made of matter and with the needs of a changing world. Your city needs to build a new bridge, a subway station or a new hospital? It has the engineers, the architects, the workers, the machines and the materials needed, you can begin construction right now, but if there is no "money", nothing will get done.

How absurd is that?

I just came back from the dollar store and the amount of energy, time and resources that went into the production of useless crap is absolutely mind boggling.

UBI is inevitable, but for something like this to be possible, our use of money will have to change. It will need to be in sync with the real world and right now, the resources of this world are diminishing and its environment is being degraded. Meanwhile, real human needs are not met.

We cannot artificially maintain a life style of over-consumption and wastefulness with a UBI. Things have to change. The population growth will need to be controlled. We have to stop wasting resources. No more planned obsolescence.

Exactly. As another user in this thread pointed out, people tend to apply microeconomic thinking to macroeconomic problems. They think in monetary terms, but money is irrelevant in this context. What matters is produce, the capital to produce, and the power to enjoy produce (which money represents, currently).

There is no way to "save" money for the retirement, without also making sure the economy fares well as you age. If your country's economy does not produce anything at the point of retirement (and no other country is sending you their products, either forced, because your society projects military power, or freely, because their society thinks it's inhuman for your population to suffer), your saved currency is worthless.

I'm curious how exactly you would go about controlling population growth.

Access to better education and opportunities, especially for women, in developing countries. Promoting the use of contraception, too.

> I think whoever projects 40 years into the future, and sees no need to mention the words "UBI" or "property tax", is in for a surprise

Sorry, but robbing Peter to pay Paul does not strike me as a viable long term strategy either. Much like the current brain drain from other countries to the West, the reverse could easily occur; the talented and wealthy could leave for other countries and find success there.

A saner approach would be re-defining full-time employment to 35 hours or even 30 hours and vigorously enforcing overtime pay requirements, to spread out employment among more people, and taking strong measures to get the cost of living under control enough that single-income households become viable again, so that people can take care of their families and have more time to rebuild the social bonds of their community.

>the talented and wealthy could leave for other countries and find success there.

And those governments could suddenly realize there is nothing really protecting these people and then tax the hell out of them or just take their stuff. America and the world would be too busy dealing with the mass unemployment of its middle class, no one's going to notice some rich kids getting robbed on an island country.

> Sorry, but robbing Peter to pay Paul does not strike me as a viable long term strategy either.

Of course that's not a viable long term strategy. The viable long term strategy is Peter giving away decent food and shelter to Paul freely.

The smart Peters of the world do that already, because they know: if we ever reach the point where a majority of Pauls need to rob Peters for food and shelter, they might not stop at food and shelter alone.

> ...to spread out employment among more people

I'm with you here. Whatever is left in terms of human employment, it better be distributed as wide as possible.

> full-time employment to 35 hour

Never going to happen, how are you going to make fun of the French otherwise for having a life ? :/

Technology has made maintaining a job infinitely easier for the elderly compared to physical labor jobs.

The problem is that many who approach old age are not trained in technology

For those who perceive such issues as likely in their future, for whatever reason, I would recommend an alternate strategy of becoming familiar with the social, cultural and legal ramifications of living in or retiring to a developing country. This can be a very effective means to mitigate costs and is widely used by the French (eg. large numbers move to Tunisia for months of the year), and in South and Southeast Asia everyone from old hippies and alcoholics to bitter divorcees and religious retirees.

The point is, think outside the national box. This is easier to do if you properly comprehend the challenges and limitations while younger. For US citizens, just leaving the country pretty much guarantees cheaper access to medical care.

I wouldn't want to retire in a developing country where I can expect worse healthcare and more crime.

What happens to those people if the dollar plummets in value compared to native currency?

If you're retiring to another country, it makes sense to open a local bank account and have a fairly substantial amount denominated in the local currency. Some retirement visas even require that. That should protect you against a temporary drop in the USD. A long-term drop in the dollar means something really bad happened in the US, which would likely be bad for people retired here too. Worst case scenario, if the USD drops, you come back having spent less of your retirement nest egg than you would have if you'd retired at home.

Plus, having spent a good deal of last year in Southeast Asia, the dollar would have to drop precipitously for it to become a problem. It's very easy for two people to live on under $1000/mo there. Even with ridiculously conservative investments, you only need a few hundred thousand dollars to support that kind of lifestyle. Most people who own their own houses could make that happen.

Mind if I ask where in in SE Asia? I'm having a hard time coming up with a place where a couple of retirees could live reasonably on less than about $2k monthly (when factoring in age-related healthcare costs).

Which is still probably close to a 40% savings over living stateside -- mostly due to medical expenses, of course.

I suppose a follow-on question would be do these countries also provide for assisted living, once our retirees get to that age?

I also spent time in Malaysia, Philippines and Indonesia and all were pretty cheap, but I had Thailand in mind when I wrote my previous comment. They have a retirement visa that means you only need to do visa runs every six months. The only requirements are age (IIRC it was above 50) and a bank account in with, IIRC, around $20K in Baht. I had a medical procedure performed there for which I had been quoted close to $1500 in out of pocket costs beyond what my insurance would cover here in the US. Without insurance, it cost just over $100 there. Dunno if that kind of savings would apply to all medical care, but that's my only data point. Other costs would depend on where you chose to live. Bangkok was more expensive and one of my least favorite places I visited. $2k/mo might be hard there. The islands and south coasts are a lot nicer and $2k/mo is a pretty reasonable target. Chiang Mai was among my favorite cities I visited. $2k/mo is more than you'd need there. Rent is ~$400 and a meal for two is $2-$6. There's a reason why it has a huge expat community...the combination of pretty, comfortable and cheap is hard to beat. For obvious reasons, I can't comment on the cost of an assisted living facility.

This is actually the same question as "what happens if inflation?". Fundamentally it's a big problem with defined-contribution systems: what you want is a life denominated in "2040 dollars", paid for in "2017 dollars", but in the absence of a time arbitrage machine all you can do is pay in and wait.

(Note that $ collapse is much less likely than local currency collapse for pretty much everything except the Swiss Franc)

Invest where you think you might end up. Or just invest everywhere; as a youngish American my (very small) future retirement stash is 50% broad-market US and 50% international (Vanguard VXUS). I think this is a reasonably prudent allocation for someone who isn't totally sure where they'll end up, which describes me.

The answer is the same to a number of circumstances- diversify your investments so you can ride through short term market fluctuations and the more long term losses give you less of a hit.

That seems extraordinarily unfair to the developing countries, especially if it becomes something that people do en masse.

Unfair in which way? Generally these people bring cash and education and support the development of local infrastructure. Many such countries actually offer specific retirement or resettlement visas to attract such migration.

We're talking about an aging population. There are a lot of costs associated with that.

In developing countries you are generally dealing with a user pays medical system. So they don't care if you require extensive medical care as you pay for it.

"Generally these people bring cash"

It's the opposite, rather. People retiring to those countries go there with lots of cash, spend it, then die. It's like tourism for the rest of your life.

Developing countries generally have very strict immigration requirements. It's not like Western Europe where you can literally walk in with no papers and get welfare.

Trust me, they're not going to end up paying for anything old retired westerners need.

> literally walk in with no papers and get welfare

This isn't true of course, unless you're referring to the tiny amount given to asylum seekers?

If you think it is true, name the country and the specific benefits available to people with no residence and no visa.

True. The Newly industrialized world, (India, Thailand, Sri Lanka etc), have strict rules for non-business/tourism related immigration.

E.g. It's nearly impossible to emigrate to India as a retiree, unless you can obtain OCI/PIO status.

Getting into Western Europe needs a lot of paperwork and funds. You can't get welfare unless you are a citizen, or permanent resident either.

Agreed. While welfare programs do exist in developing countries, most of them are nominal; though there is a exception - kind of.

I'm projected to be able to retire in about 40 years, according to the NZ government, but I'm well aware of the fact that pension will never come. Still I'm forced to support baby boomers retiring in their 60s - people who were able to attend university for free and afford houses even on low-skilled jobs.

We should end the madness now.

Or, alternatively, build the power to try to prevent special interests from raiding the public treasury, be they pampered millionaires or public sector unions. Equal prosperity, instead of equal misery.

And it is entirely your fault - or so victims will be blamed.

On the bright side, 40 years is plenty to solve, or at least workaround the problem.

Unfortunately this is economic bullshit. They are taking a description of an economy that requires a constantly increasing workforce and increasing productivity and then apply the most obvious, ill-thought out short-term fix, and actually expect it to work despite violating the basic assumptions.

Population growth stopped 15 years ago. Normally those people that weren't born would be entering the workforce in about 5 years. So with quite a bit of variability, the new people coming into the workforce will drop of a cliff. Extending the age of retirement has already (if "temporarily") stopped the outflows out of the workforce that are going to stop.

This means that the total workforce will drop anyway. Even if people don't retire.

Second they assume productivity will keep rising. But productivity (amount of $ per hour of work) has been dropping for 30 years, initially still compensated by rapid workforce increase, but not anymore since 1995 or so.

The government has spent a ridiculous amount of money (~100% of GDP) to increase the money supply to make it seem like this hasn't happened, but of course the change has in fact happened. The question is how long can we keep spending like this. 100% GDP is a worldwide stat and roughly means that for every dollar anyone, anywhere spends, the government lent and spends 0.08 dollar yearly to, firstly, pretend the economy is not shrinking, secondly, keep the local social welfare going (for the US that partially includes the military, which is in some ways a social welfare program). Every year. Since about 2000. And of course, this has been on an exponentially rising trajectory, with 2 huge growing peaks. One right after 2000. One right after 2008.

> But productivity (amount of $ per hour of work) has been dropping for 30 years,

What, what? Except for some years during the 2008~ financial crisis, productivity has been rising steadily all over the developed world.

https://stats.oecd.org/Index.aspx?DataSetCode=PDYGTH

In fact it would be very odd if it wasn't rising; it would mean all of the aggregate investment in machinery and office automation during the last 30 years was useless.

Of course, productivity's rate of growth itself isn't always rising, but that's a different story.

If you take a 1980s inflation measure, or the big mac index, and extend it out, it turns negative in 1984 (87 for big mac) and stays negative. If you take government figures for inflation, yes it stays positive.

But unless you agree that since 1990 people "deserve" less housing (and therefore don't see the less square footage for their rental/mortgage dollar as any kind of loss), less fuel, a lot less education. Then in 2000 it gets lowered again. We've gotten to the point that they call the current measure "PCE deflator". So unless you agree people now deserve less of essentially any and all capital goods, ...

This is the issue with government measures. Their claim is that they're just adjusting to what they're seeing, and the "underlying value" is the same. Yet when I offer an economist to provide him with a 10 year supply of tobacco if he pays for my PhD ... no takers (and that's generous, in 1980 it was just 6.8 years of tobacco for a PhD, and I think that included housing for 5 years). That's an investment yielding over 5% ! No takers. But ... I thought the underlying value was the same ? So I'm offering you something of what you claim is greater value for something of less value, and yet you don't take the deal ? Obviously something is wrong here.

They have an excuse, obviously. The reasoning goes like this: more inflation, without higher wages - people spend less measured in goods (in a few years even in dollars) - therefore the inflation measure must be broken (doesn't represent a realistic basket of goods anymore type argument) - inflation measure gets replaced with something with less of whatever got expensive, and less in general - goto 1. Result: inflation measure gets deflated by ~5% every 5 years. Substract that and productivity growth has been negative for decades. This matches people's experiences much better than the figures, so I'm not really willing to accept the PCE deflator.

So these official figures neglect to state that "real" is calculated using about a different inflation measurement every 2 columns. Not totally non-overlapping, perhaps, but different. And despite the repeated claims that they're just changing it to reflect what people buy it always changes in the same way ...

Needless to say, for specific inflation measures, productivity is disastrous. For instance, take square footage real estate per hour worked. Gold in kg per hour worked. Those sorts of measures. They look really, really, really bad.

And for what should be the real inflation measure, the total amount of money, which is total credit + M1 supply, and calculate what portion of "the world economy" you get for an hour of work and see it evolve over time ... blimey.

If your retirement is not self-funded, you likey don't have one. Your future is your responsibility, if you are able. Do it while you can, or grow old without.

This certainly seems to be the trend in America today. Looking at history, clearly we are moving toward the individual being the pinnacle of importance. Gone are the days of family, unity, knowing neighbors, big social gatherings. Even interactions with others today are not as community-oriented, barely anyone knows their neighbors, people rarely communicate in public scenarios (subways), everyone wants their own sovereignty without having to lend a helping hand. I can only mention these opinions from things I've read on the past and my own experiences but it seems that the individual is the importance in today's society. Not sure if that's a good thing either. The individual must be precise and unfailing if there is no safety net. A group can better handle risk and mitigate negative consequences. The only benefit I see from focusing more on the individual is freedom. Freedom at what cost?

Oh yes and everybody should set up their sewage systems and raise their own crops in their own backyards. Society doesn't function like that.

That is a good illistration of specialization of labor, but I'm not sure how that related to the OP.

I think his point is that civilization is based on the principle of not letting people fend for themselves (e.g.: through public works like sewage systems), and that this naturally extends to retirement pensions.

The point is that civilisation is nothing else than working together as a society. The retirement system is not philantrophy, it's retributions for those who spent a good part of their life as a cog in the machine. And it's not like the retired receive their pensions ex nihilo, they pay in advance through the social security cuts (1). We teach our children to become a part of the civilisation and take care of them until they actually do so. And we should equally take care of the elderly because they've already took their part in the civilised society, and now they have the right to enjoy their last hours in peace. But we always like receiving, and giving always torments us. That's no civilisation, though, but just a bad likeness thereof.

(1) That's, at least, how it functions here in Turkey: every month, a certain amount of your wage goes to your retirement fund, and when you retire, you receive your pension, an amount that depends on your past contributions to your fund and on the height of your position.

Indeed, but that's beside the immediate point I was clarifying.

I hate to see so bleak a future, however two years ago I quit my job and started freelancing at 38. That has made me much, much more aware of the need to save money. It's not hard to make a simple spreadsheet and see when you're able to retire. I suggest everyone does so. It's very interesting to see your retirement date move up when you change your savings rate.

We have an interesting dichotomy today which was very apparent in a discussion last night. A friend goes to an annual management seminar where last year's focus was on this topic of expecting employees to work until later in life. This year's topic was the end of work as many positions will be replaced or augmented by machines.

Which is it? There won't be jobs, so we have to figure out Guaranteed Income or other alternatives, or there will be jobs and we'll continue working later. I'm tempted to suggest the first is more likely, but be prepared for the 2nd.

Why not both? A possible timeline...

Machines replace lots of humans meaning the permanent disappearance of a large number of jobs.

Wages fall as competition for the available jobs increases.

Social services are slashed to reduce government expenditure.

Those still able to find work cling to their job despite falling salaries virtually until death for fear of having to join the vast sea of unemployed people struggling to survive.

----------

I am not necessarily suggesting that this is probable however mass unemployment due to automation and people working well into old age are in no way mutually exclusive.

When visiting the US, I was struck by how many elderly workers there were in restaurants, subways etc. Japan was similar. In Australia, I never see this.

The reasons are presumably:

1. Australia has ok free healthcare 2. The baby boomers have generated massive wealth over the last 50 years because of the property market.

Point 2 certainly won't be repeated for the next generation.

Australia has high immigration levels, and so a larger pool of younger workers to do menial jobs. Japan does not - quite deliberately.

In the UK, I never see this, but I saw it and found it a little shocking in Amsterdam.

Could Australians continue to work into old age if they chose to? Your post implies they're being forced to work in the US and Japan, but it may be the opposite: that they have less options in Australia to keep working despite wishing to do so.

I don't think that is very plausible, nothing to stop Australians working as long as they like.

The retirees in Australia seem to be playing a lot of golf, travelling and looking after their grand children, to make a gross generalisation.

> but according to research, we will all need to keep working into our 80s if we want to enjoy the same standard of retirement as our parents.

No stable job, no retirement, the future looks great. Or very prone to a revolution.

I look forward to the grey haired revolution.

Good writeup but it talks about a symptom, not the cause.

Governments and people have been living on credit for decades. Governments borrow from retirement funds to meet current obligations. Many people have failed to save enough, or even worse have large debt.

I've come to terms with the fact that I'll work until I can't, possibly because of an illness or just sheer exhaustion.

the older you get the less realistic it feels, unless you're ok with being homeless or suicide. you just dont have the same health and energy at 60. or 40. if you make it that far that is.

Opposite viewpoint: http://www.mrmoneymustache.com/

I stil don't understand how this guy did it. Can someone explain in a few words?

If you can live on $1500/month, you only need to save up $450K-$600K and live off the 3-4% real returns in perpetuity. This quantity of savings is easily reachable within a decade by tech workers paid $100K+/yr.

In general, just take (monthly spending) * 12 * [25 or 33] to get bounds on required savings. The only other useful observation is that reducing spending is much more effective for reaching financial independence than increasing earnings, and that most spending is staggeringly wasteful and easy to forgo.

Oh, and if you manage to find a life partner with the same values and earnings - congrats, you can easily retire within five years.

Make sure you take into account taxes.

Retirement investment plans such as 401ks and IRAs have significant tax benefits. The catch is that they can't be withdrawn from before age 59 without huge penalties.

So if the goal is to retire early, one needs to use regular investment vehicles, which are subject to capital gains (15%),

You can transfer the money from 401k to IRA to Roth IRA then withdraw it after five years. You have to pay income tax during the IRA to Roth IRA conversion, but if you're retiring early your tax bracket is likely very low. Similarly, you'll be in the 0% bracket for long term capital gains.

for those that are more curious about this, a google-able term is "Roth IRA Conversion Ladder".

An alternative is "substantially equal distributions" if I recall properly.

Or much simpler: Own your property.

Once you own your place, you don't have to pay rent, you can live on $500 a month. That may be covered by the unemployment help, so you don't have to work either and don't pay taxes.

Bonus: if there is a spare room in your place, you can rent it and you'll make enough to cover a lot of expenses and save much money.

Speaking for avg Canadian city, avg property tax about 1.1%. Median home price is 285K, thus you need 261CAD for property taxes alone, add here electricity, basic house maintenance and you need 500CAD only to live in your modest fully paid house.

>Once you own your place, you don't have to pay rent, you can live on $500 a month. That may be covered by the unemployment help, so you don't have to work either and don't pay taxes.

At least in Washington, unemployment is limited to I believe 26 weeks. IIRC, during the big downturn this was doubled in a lot of places (perhaps nationally?) but at least here it is back to 26 weeks.

Young couple both earning a lot, and saving/investing most of it - a turbocharged retirement plan.

> Can someone explain in a few words

Live extremely frugally, invest all savings in the S&P 500, live happily-ever-after on that same budget for the rest of your life.

IMO the key is being happy on a very small budget.

And http://www.whywork.org/action/lifestyle/money.html

> If we can no longer rely on immigration to fill the gaps, employers will have to shed their prejudices, workplaces will have to be adapted, and social services will have to step in to provide the care that ageing people can no longer give their grandchildren, ageing spouses or parents if they remain in the workforce.

But you can still rely on immigration, just not out of control immigration.

> Bismarck did, however, have a further vision that was genuinely too radical for his era: he proposed a pension that could be drawn at any age, if the contributor was judged unfit for work. Those drawing it earlier would receive a lower amount.

I wonder how well this would work in today's society. Pretending disability doesn't exist, and just making it a simple rate decrease for the earlier you withdraw.

This is similar to how my pension will work here in Norway. I will be 62 at the end of the year and I will be able to start taking my pension (regardless of whether I work) but I could also delay taking it indefinitely. The total amount is fixed and predicated on the average age at death. So if I take it early I spread it more thinly. If I take it later I get more per year while taking it but risk missing out altogether by dying early; and it is not inheritable so if I want to give some away it's best to start early.

if I want to give some away it's best to start early

Right, if it's the same net present value why would anyone ever start later? If you're still working just take the money and save or invest it.

Investing it (or even storing it in a bank, if above the insurance limit) comes with an extra risk.

That sort of exists in the US system for Social Security. You can retire as early as age 62, but at a reduced (80%) benefit. If you wait until you're 67, you get the full 100%.

Of course, the payment is a pittance compared to most actual pensions.

>Pretending disability

And what happens to those that are 'genuinely handicap' and have medical costs that unavoidably exceed the 'lower amount'?

Isn't this essentially social security disability?

No. Even though I said let's pretend disability doesn't exist, this is from the SS website:

> Social Security pays benefits to people who can’t work because they have a medical condition that’s expected to last at least one year or result in death.[0]

The program I was talking about would be more something like retirement+disability, proved by the government with a set retire date (say, 65) and any withdrawals before hand would be at a lesser rate (if proven unfit to work, but not only of a medical condition).

Specifically in the U.S.

[0]:https://www.ssa.gov/pubs/EN-05-10029.pdf

Gah. This stuff makes me pessimistic, along with UBI, because it essentially requires the middle class to be hollowed out even more.

all these articles completely disregard technological progress and assume we are in a 60s film. In my view people in their 30s now will be "modified" in many ways and will be capable of work always, if work is needed in the first place.

Step 1: Oh my god we can't pay for retirement!

Step 2: Raise the age of retirement. (Phew!)

Step 3: Oh my god unemployment is raising! (Those no-longer- retirees must find a job, right?)

Step 4: Get rid of unemployment insurance (in part or in whole).

Step 5: things get real ugly real quick.

---

Seriously, raising the age of retirement in the face of raising technological unemployment is nuts. Those who push for this are either stupid or evil. Given the army of counsellors they have at their disposal, I'm not sure stupidity is a valid explanation. Some of them must have some nefarious purpose in mind.

Step 4 was implemented in the USA with SSDI. There's heavy emotional baggage to tag people as permanently totally disabled merely because the economy is too small to let them participate. Also its kinda a mess mixing essentially fake claims (from a medical disease perspective) vs real claims. So the same program takes care of a guy with 100% disability back pain who sells his pain pills (a whole nother problem) and plays video games all day but is actually physically healthy while merely economically dead, with another dude missing some limbs or brain damaged.

Its weird but mostly seems to be working rather than your step #5.

Around 1 in 20 people in the USA are on SSDI. The exact ratio of who's economically damaged vs physically damaged is unclear but you can guess by looking at rate graphs over the last couple decades, since the 80s perhaps.

> Step 4 was implemented in the USA with SSDI.

That's not what I was talking about. I was talking about "no job, no pay" policies. Like, "work or starve". England kinda went down that route, doing their very best to throw people out of their meagre unemployment benefits.

SSDI as you describe it is actually a form of (covert) unemployment insurance: a way to have money even if you can't get a job. While the stigmatization sucks, the money is better than nothing.

If anyone has ever read the Commonwealth Saga by Peter F Hamilton (for those of you who haven't I highly recommend it), in this world there is no such thing as Retirement, your "pension" is actually just a savings bond to pay for your next rejuvenation, rinse and repeat as many times as you like and then when you are bored of it all you can either just die or download your brain into ANA (a post physical "afterlife"). Lets aim for this ;)

Not sure what I did to deserve a downvote on this - relevant sci-fi trivia #asshat

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