[1] https://taxfoundation.org/comparing-returns-tax-favored-reti...
Saving/Investing has become harder as time goes on. I heard about how my grand parents' parents could put their money in the bank or something and compound interest would take care of things. Now with 0% interest everywhere, people rush to gamble in stocks or real-estate. As time goes on, it becomes harder to even hold the values of what you have.
Yeah that’s for sure. All these stories about people who were cashiers or factory workers and who bought their houses… Not happening anymore.
You can invest in index funds and it seems to be the only way to keep up, unless you know what you’re doing and can pick stocks (you and 99.99% of the people on the planet can’t)
I put some money into my vanguard Roth IRA and I can not pay almost double for an index fund this year than what I paid last year.
Am I irrational?
Time will tell. But over the last 100 years you would not have come out ahead unless you are close to retirement already.
But I’d you’re looking for a shirt term gain then it’s very different.
WRT the market doubling, there has been a lot of different reasons for it, QE increasing money supply that has been plowed into the stock market inflating values, top performers generally doing better relatively to society, and higher income individuals and families generally weathering the pandemic much better than low-income individuals and families.
This is all to say that market performance is not tied to the pandemic in any particular way (in this case). Back to your other statement of not being able to purchase the same # of shares (if that was your point), it doesn't matter the # of shares you can buy per year, only the value of shares purchasable. The thread above you isn't calculating the # of shares increasing by 5% year, just the value of total shares . I care that the total value of my investments increases because that's what eventually matters when I start withdrawing, the # of shares I have could increase, but that wouldn't matter if the total value stays the same or decreases.
i also don't think that situation was a realistic mean to begin with. The one time in history where this was possible was in the US straight after world war two. A period when th e rest of the industrial world was blown to smithereens.
For most of the world, that period did not happen. For instance, my grandparents had substantial less wealth then my parents (who where born in the late 60's)
On the flip side, my Grandpa made a decent living as a press-brake operator. My grandma was incredibly frugal as well, reusing the same transformers themed ziplock bags for almost twenty years and hanging her paper towels under the sink to re-use for later.
The change in attitude is due to the fact that older people are more likely to vote and that politicians and their friends also tend to be in the past-middle age-but-not-retired-yet age bracket.
The unquestioned assumption that the stock market is a source of infinite growth is both foolish and, for anyone that thinks about it honestly, very likely to be wrong.
Even if we completely disregard the fact that limitless growth is impossible on a finite planet, and that we are daily seeing more and more cases where we are brushing against our limits, the very nature of 401ks is a pretty ridiculous way to build a retirement for a society.
Putting your retirement into a 401k means that your retirement is based on the future success of the economy. Typically what you would want for retirement would be some sort of investment structure where the economy doing worse when you are older will not impact your quality of life.
But instead we have set it up so that if the economy does poorly then, aside from all the normal problems of a bad economy, suddenly an entire generation of people will lose their safety net right away.
Like so many aspects of our society, we've let irrational optimism allow us to be highly leveraged in many ways, such that small bumps along the way have the potential to drive the entire system into utter catastrophe. The fact that we respond to these small bumps today by even further leveraging ourselves means this disastrous end becomes increasingly likely.
If we've reached that point, then I'm pretty sure retirements won't matter.
the current pension system in most of the world is just not scalable because people getting older and the birth rate declining, but this does not mean that money couldn't be sourced from elsewhere. in most countries today, workers contribute the majority of the pension for the current retired generation.
mind you the free market also does not have a solution for this problem, except to tell poor people or disabled people to be poor or keep working until they drop dead.
Is does scale in this situation: simply increase the retirement ages properly such that always at least roughly "inflow of money = outflow of money" holds. The problem rather is that there is no political will to do that.
By the way, the changes have been going on for much longer. When I was young we were called "Generation X" and newspapers told us that we were going to be the first generation much poorer than their parents, with "patchwork CVs" and a "decline of traditional work opportunities." Overall, these predictions turned out to be true. So I guess we could call our parents the "entitled generation." After all, the Club of Rome warned in 1972 that economic growth was not sustainable but the warnings did not lead to major changes of the socio-economic systems, although many smaller positive changes were made.
Also, it is good to remember that the "boomer generation" is a mainly american phenomenon. Most other western countries had a period of rebuilding after world war 2, which was not a time of economic prosperity.
A good example of this is the late 1940'and 50's. American's wealth grew quite a bit during this time. Most (western) european countries had wage freezes, a corve system or even rationing during that time.
Western european economic power started to increase in the late 1950's and early 1960's. (wirtschaftswunder etc)
Ofcourse, eastern europe was far worse off considering the lack of marshall aid and heavy restructuring of the economy to a soviet style command economy.
Single persons unemployment benefit
Most of this happened after thatcherism ofcourse.
Yes, it can be. It’s not on average the case if they had invested the money in a 401K, but social security is not designed as a primary retirment system but as a safety net one.
Funny how democracy works.
The existence of 401ks have a lot of unintended consequences, and is ultimately not guaranteed.
Furthermore it's a little bit of an oversimplification to say that the market is just gambling. It allows the innovators to realize a gain from the value they generate, which gives them the capital to innovate again, while non-innovative investors take over during the capitalization phase (when the business actually generates profit). The entrepreneurs have no interest in that phase since it offers the least amount of growth and their expertise is in the innovation phase.
So yes, in aggregate... it has been good for society. It provides a quicker turnaround for innovators to innovate. And since innovation leads to growth, it's also a good way to secure people's retirement future.