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Comment by ajsnigrutin | Hacker News Reader

I also live in europe.

My retirement is based on paying ~25% of my gross income into a retirement fund, which is then spent on current retirees, and hoping that in many years, there will be enough people working to be able to pay my retirement.

If you gave europeans those 25% as an extra net pay, there would be a lot more new cars on the road, a bit more savings/investments, and a lot more problems when people get old. "Smart" people would save and invest, and have better "pensions" than they'd have in the current system, and "stupid" people would work until 85yo, and die of hunger.

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> If you gave europeans those 25% as an extra net pay, there would be a lot more new cars on the road, a bit more savings/investments, and a lot more problems when people get old. "Smart" people would save and invest, and have better "pensions" than they'd have in the current system, and "stupid" people would work until 85yo, and die of hunger.

Exactly, there is an ideology of pushing this kind of issue completely into "personal responsibility" territory which, for me, is frankly a total lack of empathy.

The way it works here in Sweden seems pretty decent to me so far: you get a public pension that you and your employer have paid into the system (of course, it pays the current pensioners) and another part of my pension is put into a pension investment account, that I can operate/manage however I want.

So you get both, a minimum pension sustained by the system paid by current working people and an investment account that I can manage and grow as a portfolio to use during my retirement.

The problem (atleast in slovenia) is, that you don't get back the amount that you paid in. Eg. you work 40 years, and expect 20 years on pensions (made up numbers, just an example).

If you get an average paycheck, pay 25% of it into the pension for 40 years, you expect to get approximately 50% of the average paycheck at the time of retirement. Well.. you don't (atleast not here). This also presumes, that there are 2x as many workers that pay into the fund, as there are retirees taking out of the fund... which sadly is not the case anymore, and the situation will get worse and worse.

Also, due to many laws and changes, every few years, you get average-paid people retired in eg. 1991 that receive more than the average paycheck in retirement, and newly retired people getting 400eur of retirement (=not enough to survive).

I know nothing about Slovenia, but my hypothesis is that this is (kind of) by design. Those with good incomes subsidize those with low incomes, and everyone subsidizes those with no income.

The only way to 'earn more' is through a positive return on investment, but pension schemes necessarily must err on the 'safe side'. And currently 'safe' interest rates are negative.

> Those with good incomes subsidize those with low incomes,

This keeps the average values the same (that's why I used the average example)

> and everyone subsidizes those with no income.

This seems to be an ongoing problem, where we on one side need workers, and on the other side pay unemployment benefits to people who don't want to work. This is then translated to pensions, where people who work only eg. 10 years (instead of 40) get a small pension, but still more than the share they paid into the fund.

I consider the subsidization of poor and no-income as the cheapest alternative. Pay them enough to live and the external cost won't be more. Theft, property damage, judicial system and incarceration get lot more expensive than just paying them something. And all the money going to them is anyway spend so on large scale it might not even be net negative.

A sate pension that pays 50% lol that's a big ask. I assume you have your employers pensions as well.

We don't have separate pensions. You pay into the state (~25% of gross income, part is taken from your gross, part is paid by the employer, to get a 'gross-gross' value), and that's your pension.

We have separate saving schemes for pension, where your income tax is deferred until you take the money out (due to progressive tax brackets, your tax percentage will be lower when you're retired, than it is now), but usually employers have nothing to do with that, and with interest lower than inflation, it's just not worth it.

> The problem (atleast in slovenia) is, that you don't get back the amount that you paid in. Eg. you work 40 years, and expect 20 years on pensions (made up numbers, just an example).

I don't know you but I never, ever, had the impression I'd get what I paid into any social security system. Neither here in Sweden or even less in Brazil. My salary is just too high compared to the median so I never had the thought that everything I paid into I'd get back as benefits.

And to me, that's ok. I earn quite above the average, I don't mind that I can help fund some part of society with my work if this society is functional and well managed, so in Sweden I'm perfectly fine with this arrangement. In Brazil it was the complete opposite, even though I don't care about paying taxes, I do care about taxes always being stolen by a multitude of corrupt actors in Brazil.

You're talking about a different issue (or indeed a non-issue). It's not that high income Slovenians get a lot less out of Slovenian state pensions than they pay in. It's that _everybody_, including low income Slovenians gets a lot less out of it than they contributed. In fact, if Slovenia is anything like Romania, the percentages often work out a lot better for high income contributors.

^yes, this.

I chose the average on purpuse, to do just that. Poor people pay less, and are "subsidized" by the rich, who pay more, but an average person should get as much as they paid in.

Considering that some people die young (before they retire), an average person should get even more than they paid into the system, because the heirs of the dead usually don't get the dead persons pension (with some exceptions, eg. underage kids)

I guess there's another issue with this equation: avgOUT = avgIN + L

The L(osses) ... the pension/social/levy system - no matter which country we're looking at - appears to have been hijacked by an ever growing parasitic group of financial institutions that milk whatever they can into their private pockets (and their shareholders').

Every penny in fees they receive for "working out" specialized retirement plans is in a way a L(oss) for society. Why? Because no matter what ingenious system a state devises, it all comes back to the fact that the current working/healthy part of the population has to provide for tho elderly and the sick and whoever can't provide for themselves. Every kind of juggling around with the money adding unnecessary steps in between is just milking the system for private gains.

In Poland, by design, now people are paid on average >60% of paycheck while retiring at age 60-65, not taking into account some specific priviledges like for miners.

Meanwhile, people in 20s-30s are projected to get 25% while retiring at close to 70. The system does not make any sense to me.

It's the system that favors the voting majority.

> The way it works here in Sweden seems pretty decent to me so far: you get a public pension that you and your employer have paid into the system (of course, it pays the current pensioners) and another part of my pension is put into a pension investment account, that I can operate/manage however I want. > So you get both, a minimum pension sustained by the system paid by current working people and an investment account that I can manage and grow as a portfolio to use during my retirement.

I think the word 'minimum' is going to have totally different implications for those of us working and saving now, compared to the previous generation, that are living on pretty generous pension plans that were wholly publicly-funded, and which our current payments are maintaining.

Also the privatized pension plans in Sweden have been prey both to fraud and high fees. So even though they may give the illusion of future prosperity to those who are trying to save now, that's in no way a guarantee.

Yup. On a new defunct blog someone laid out in the comments that here in The Netherlands, if €300 of your wage went to pensions, sometjing like €200 would go to fund current pensioners and of that €200, €60 went to a very select group that got two very beneficial pension arrangements stacked.

Technically all €300 of your contribution goes to fund current pensioners, regardless of how the pension is structured. The idea that you are setting aside money to pay for your own retirement is an illusion. Money is just a proxy for labor, and you cannot transport your own labor into the future to take care of yourself when you are too old to work. In reality, young people must always take care of the elderly, and population decline will be a problem regardless of how much the pension funds have saved up. The question of savings is actually a question of monetary policy: if the flow into the pension fund is greater than the flow out, this creates deflationary pressure (except in whatever assets the fund invests in) and vice versa.

> In reality, young people must always take care of the elderly.

this in and of itself is not a problem in my opinion. The problem is the financial and economic allocation is not going to those in need in society, but those who have amassed massive amount of wealth and use it to create massive hoards of wealth, with a govermental system that makes them to big to fail.

Having massive wealth changes the rules of the game completely. You can legaly dodge taxes if you are wealthy, which creates even more wealth.

People seem to think the labour market and capitalism is like chess, in which makes the right choices can lead to a wealthy life, but for the vast majority this is not the case. Most people are stuck playing poker with very bad bets instead.

>Exactly, there is an ideology of pushing this kind of issue completely into "personal responsibility" territory which, for me, is frankly a total lack of empathy.

It's not a lack of empathy, it's an understanding of the pernicious incentives you are creating with such a system.

I'm being forced to pay over half of my income into a ponzi scheme that i am and will never get anything worthwhile out of. This isn't good for anyone, and it certainly isn't good for the people who are working and providing value and having that value thrown into a raging fire.

This is nothing more than theft from the responsible to the irresponsible, with the associated long term issues.

When you have support these policies you need to understand that they will not and cannot help the people you seek to help.

All that happens is remove the need for people to be responsible and make good financial decisions, for the fact that "the state will save me".

But of course, the state can't, because social security in most countries is no more than very large ponzi schemes, supported by ever growing tax revenues and increasingly high retirement ages. But even that is not enough, in Portugal retirement benefits are expected to fall by half in the next 20 years.

And don't think these pernicious incentives don't exist and that peoples reliance on social security doesn't happen. That quote of "The state will save me" is almost word for word out of the mouth of friends and colleagues, with children and families, who despite being very well paid refuse to save and invest for their retirement, choosing instead to spend what they have today and only rely on social security for their retirement.

These are terrible incentives, and they will and have had predictable results.

> And don't think these pernicious incentives don't exist and that peoples reliance on social security doesn't happen. That quote of "The state will save me" is almost word for word out of the mouth of friends and colleagues, with children and families, who despite being very well paid refuse to save and invest for their retirement, choosing instead to spend what they have today and only rely on social security for their retirement.

Tbh, in the current system (which is bad!), they are the "smart ones".

You have Alice, Bob and Charlie. They all earn the same amount of money.

Alice decides to take a loan and buy a 200k house. Bob stays at home and invests in stocks. Charlie stays at home, and puts the money in a savings account.

10 years go by, alice paid off 100k of the 200k loan, house is still worth 200k, bob has 100k of stocks and Charlie has 100k in the savings account (let's forget about the interest for this example).

They are technically all worth the same, just that their money is in a different form. And then one day, they all lose their jobs.

Alice gets social benefits, one time extra monetary help, loan refinancing and/or even a loan freeze in some cases, Bob gets nothing and is told to sell the stock (even if it's a bad moment to sell), and Charlie gets laughed at the social benefits office, because he has 100k in his account.

This might be our (slovenian) speciality, but the system is made to fuck with people who live responsibly and to always 'save' the people who spend all their money. Also houses are almost literally untouchable, even if you're a single person in a ~1mio city center apartment, and could move to a smaller one a bit further from the center for 150k.

> Also houses are almost literally untouchable,

Often, (in the US) retirement accounts are also sacrosanct, depending on the claim.

The issue of houses reminds me of how much of the US tax system is regressive. Electric car subsidies, special treatment for capital gains, mortgage deductions.

Private retirement accounts are far from untouchable in the EU, though: e.g. Hungary straight-up nationalized private pension funds in 2010 [1].

[1] https://www.ipe.com/nightmare-in-hungary-as-government-natio...

The US tax system isn't regressive; I'm against legislating behavior through tax breaks, but calling them subsidies isn't really fair either.

The comment was only about parts of the us tax system. Regressive is a technical term and means that the effective rate decreases as one’s means increase. A simple example is a flat poll tax: richer people feel a much lower burden than poorer people. Mortgage contribution deductions are regressive because poorer people don’t have mortgages on average.

It's also worth noting that the mortgage contribution benefit is capped at a few thousand bucks. It primarily benefits the middle class but is an after thought to millionaires and above. It really doesn't move the needle for them.

The US tax system is designed by people who in theory represent the will of the people, but in reality that are advocating for special interests.

You have things like SALT tax deduction and mortgage interest tax deduction which are directly designed to benefit rich liberals in blue states by subsidizing their oversized government. Take these away and people get mad or move to TX/FL/NV because they actually have to pay their full taxes.

Also having a high state sales tax is much more logical if you don’t want to pay tax just don’t spend money.

It would make much more sense to just do a federal sales tax, totally eliminate the corporate tax as people are paying taxes anyway and it is just a disadvantage to us-domiciled corporations competitiveness, and also totally eliminate fed and state income taxes. Like purge them with fire, there’s way too much complexity and corruption built up over the last hundred years.

Then if you still care about people at the end just institute UBI and Medicare for all to eliminate the billing complexity and potential for discrimination. This policy would also be compatible with open borders and free movement of labor if we as a society decided we want that.

>they are the "smart ones"

In the U.S. this is often referred to as the "moral hazard". True they may be the 'smart' ones, but I can't help but think there's got to be a system that prioritizes the area of the Venn diagram where "smart" and "moral" overlap.

I find the concept of "moral hazard" foul when applied to things like retirement provision, social healthcare and social security. It is used a justification to let others rot and starve.

I know that's a common feeling, but I tend to view it as an acknowledgement that we need to understand the behavior being incentivized rather than an actual statement about morals which can be endlessly debated.

There's some irony in the phrasing used to decry the term "moral hazard" though in that it seems to hint of morals itself.

I think perhaps that's part of my issue with it - "moral hazard" appears to be backwards, it is often used to justify what appear to be very immoral policies and outcomes.

> 10 years go by, alice paid off 100k of the 200k loan, house is still worth 200k, bob has 100k of stocks and Charlie has 100k

If we're talking dollars, then it would be incredibly unwise to save them. The very fact that the fed targets some level of inflation at all makes this incredibly unwise.

Housing would never be worth just 200k 10 years later as long as population is increasing and the dollar inflating.

Stonks are stonks. They're fine, but they don't provide the (at least) two fold benefit of buying a house in American society.

1). You pay a high cost for housing either way--might as well have _some_ of it go toward principal.

2). A mortgage allows you to highly leverage an appreciating asset against a depreciating dollar.

The reliance on the state's pension scheme is also terrifying as the schemes tend to increase (if at all) under the inflation of true cost of living.

All that said, I have a mortgage and stonks and crypto (metals soon), but I'll never hold more dollars than I need for a month (I have credit cards if it really came to it.)

Edit: Why downvote? If you disagree, please say why.

This is correct. Ever since the US allowed consumer banks and commercial banks to merge, savings rate is usually less than a point, if that.

Putting money in a savings account is actually losing value at the rate of inflation - interest. Inflation is usually around 2-3%, interest is a point or less. (last time I checked).

I think the downvote was the comment wasn't entirely relevant to what the OP was trying to demonstrate and might have gotten into the weeds a bit, but I don't know why people downvote. Who knows, it could have been a mis-click. Just say what you want to say, downvotes be damned.

And a typical 30yr mortgage rate is ~3% right now.

https://www.zillow.com/refinance/

> gotten into the weeds a bit

Fair

> downvotes be damned.

Good advice.

The US has unusually high incentives & subsidies for home ownership, so it is a pretty strong contender. More generally though, home ownership vs. renting is not always a clear win. Agree savings accounts are useless these days.

The general point about cash losing money to inflation is spot on, but:

> Why downvote? If you disagree, please say why.

Sure, so

> Stonks are stonks. They're fine, but they don't provide the (at least) two fold benefit of buying a house in American society.

If you look at averages (across multiple areas, over many decades), you get:

* stonks yield somewhere around 6% above inflation (so 9-10% before inflation).

* houses yield somewhere around 1% above inflation, after including all the other random incentives plus taxes and upkeep costs, (not including multi family rental properties, which is a different matter)

There are localities in which houses do much better (say the bay area), and there are localities in which houses do much worse (Detroit).

But on average, it's a massive opportunity cost vs investing in equities. Which is fine, because there's other benefits to owning a house, like not having to move if someone jacks up your rent.

While we're at it, other reasons for downvotes may include:

> metals soon

These yield also ~1% above inflation

> I'll never hold more dollars than I need for a month (I have credit cards if it really came to it.)

In 2008, the banks slashed my credit to <10% of what it was in 2007. Don't rely on credit cards for emergencies.

Please hold more than 1 month in savings.

> * houses yield somewhere around 1% above inflation

But buying a house is the only way I can leverage such a massive amount and I have to have housing anyway. It also fixes my housing costs in contrast to renting.

Further, I can sell my house and take gains without paying taxes on the gains. I can't do that with stocks.

> Don't rely on credit cards for emergencies.

I'll also be able to sell metals/stonks/cryptos if need be, but overall I'm just not risk adverse. If I end up selling to get by and lose some, I see that as just making up for what I would have already lost by holding too much cash.

I should note that the 90% credit drop also coincided at a time when my investments crashed by 50%+, which would have been an extremely suboptimal time to pull out money. That would have wiped out like 10 years of growth.

I strongly, strongly encourage you to put aside at least 3 to 6 months' worth of expenses outside of risky investments.

To add on to your point, the core issue is that you need to take into account correlated risk when deciding on your investment strategy/risk tolerance.

If you're at the point where you need to dip into an emergency fund, it's possible (maybe even likely) that the entire financial market is burning. You will need access to capital when nobody has access to capital, which will make borrowing very expensive or impossible.

Because an example was given to illustrate a point and you are picking on it in a direction that has nothing to do with the discussion and the example. You took the spirit out of the example and made an analysis of the letters, colors and font - borderline trolling.

Sure, I was just saying to work the system as best you can and describing what I do in the US.

> > And don't think these pernicious incentives don't exist and that peoples reliance on social security doesn't happen. That quote of "The state will save me" is almost word for word out of the mouth of friends and colleagues, with children and families, who despite being very well paid refuse to save and invest for their retirement, choosing instead to spend what they have today and only rely on social security for their retirement.

> Tbh, in the current system (which is bad!), they are the "smart ones".

I've had people tell me I'm a fool for saving for retirement, because when the time comes, the people who haven't saved will massively outnumber the people who have, and they will simply vote to fix it. Spend it now on BMWs and fancy vacations because "Our future government will not let 90% of their population starve on the street because they didn't save."

Alice was about to be made homeless, the others have liquid assets, and clearly have made other arrangements for housing.

I think your example is not really a full picture, and I don't necessarily agree that the state encouraging home-ownership, and helping out home-owners who might be about to lose their home, is wrong.

To my eyes, Alice was living responsibly.

Yup, both Bob and Charlie "stay at home." Who's home? How is it paid for?

Bob and Charlie are living rent-free in their parents' basements. Alice could have done the same—and will, if she has to sell the house to avoid bankruptcy—but she wanted to appear more independent. Alternatively, she could sell the house, pay off the remaining mortgage, and use the other $100k for rent until conditions improve.

No one in this scenario likely to end up homeless in the near term, as they all have roughly equivalent net worths over $100k. The system just favors those with their assets tied up in housing rather than more diversified investments or liquid savings.

Again, not seeing why it shouldn’t.

By subsidizing home ownership the government is encouraging people to go into debt and funnel whatever savings they manage to scrape together after paying interest into a single depreciating asset rather than a safer, more diversified portfolio. The policy is beneficial to moneylenders and people selling houses, but these things hardly need to be subsidized.

Bob and Charlie are the responsible ones.

Alice can sell her house for 200k and have 100k to pay for rent and live off.

The fact that you need to make up such a farcical example to prove your point should tell you something. The fact that you need to hand-wave a decade of wildly different asset classes' appreciation (or depreciation) in order to prove your point should tell you something.

1. Houses aren't particularly liquid, and in a debate about what is "smart" vs. "moral," and the fact that they don't always overlap, you're going to have a hard time arguing for forced eviction from one's primary (only) residence.

2. The 200k house ten years ago is going to be worth a lot more than 200k today. On average you're looking at 290k in a decade.

3. Bob's 100k in stocks would be 217k if he bought it one lump sum and got average returns, so let's say he purchased over time and is sitting around 175k.

4. Charlie's lost money because his 100k is somewhere between 105k and 110k now but he's lost 2-3 times that in purchasing power.

So they are emphatically not worth the same.

Alice owns an illiquid 290k asset for which she's only liable another 100k, so she's +190. She can refinance and lower her payment. She can get loan forbearance because we as a society have decided that it's immoral to immediately kick people out of their homes because they can't pay.

Bob is +75k and there are plenty of ways to make money off of a stock portfolio without liquidating it. You can even get a traditional loan using the portfolio as collateral but you're unlikely to get more than 40-50% of the value given the potential for volatility.

Charlie's lost money and yes, he's going to get laughed out of any assistance office because he's using a savings account - a vehicle designed mainly for emergency funds and short-term savings - for his life savings.

To your last point about the city center apartment, there is a huge difference between a reasonably intelligent person who just lost their job selling their apartment and moving somewhere cheaper, and a bank or government forcing them to do so.

For example, in my country, Argentina, the public pension fund is used to give loans to the Treasury at ridiculous lower interest rates. The government then expends that funds in a lot of short-term public policies.

Are we not all generating income using the work products of our elders?

None of this happens in a vacuum. Their contributions multiply our income.

If we work with someone on a project, we don't expect them to work for free do we?

Well, look around. The machinery of society was not, and is not free. "Your income" is the product of many people over a sustained amount of time.

Doing it all on your own looks very different.

That said, the only reason pensions are under discussion is the very wealthy take too much value and are not required to help fund the system.

In the US, the cap is something over 100k. Raise that and the funding problem goes away. That cap should be raised because everyone benefits from the labor products and fertile society we live in today.

Those of us who end up with huge benefit and who do not contribute in like kind are literally diluting the future for those to come for arguably self serving in the now. I have no problem with self serving choices either. Work hard, play hard, change the world.

All good.

This is about net good, and talk of ending retirement is talk that completely ignores why we have Social Security and work until we drop is as negative as child labor is.

Some of us may choose to do that. I might!

But to make excuses for what is basically unbridled greed and largess impacting so many other people unnecessarily?

Not all good.

Don't get distracted by money. Money isn't real. Money does't feed you, or wash your back in hospital. Saving "money" doesn't make anything happen in the future. It only lets you bid on future (then current) labour/production.

The deep problem is we developed expectations and made promises when there were 6 people of working age for every retiree, and the ratio is going to fall to 2-to-1 or worse. Money can't bridge that unless we invent magic ai robots in a hurry.

Robots are nowhere close to being any practical replacement for the many basic labors we all depend on.

Just caring for one another is one of those labors and it is significant. Enabling our elders to have income lifted a heavy burden off the middle class. Having enough buying power to support the whole family, whether cohabiting or not was and remains a big deal.

We did that for our parents and their Social Security made a huge difference in how our kids grew up and our overall quality of life.

On a side note, universal health care would have a similar, positive impact on all but very large business.

We are going to need to value things differently.

We can pay people more, have them work fewer hours, allow flex in work time, place, manner.

It simply is not necessary to force everyone to work until they drop.

Again, taking the value out of everything has skewed things toward an artificial scarcity of time. Does not have to be that way.

I do not believe it should be that way.

If we somehow insist, fail to value things in ways that help us live better, the ripple impacts will just cost more.

A whole lot boils down to what we value and why.

Right now, for example, we do not value taking care of our own, instead focusing on money. We do not value basic labors well either.

These two have a serious, negative impact on things like social security, our general ability to compete with other nations and more.

Those basic labors save us doing not so basic labor a ton of time, for example, yet we pay a pittance, shame those performing them, and somehow expect the some 40 some Trillion those people did not take home to pass unnoticed?

We can run the nation leaner than we do, and we should. And those lower numbers mean those doing the labor should live well, seeing as how there is plenty to do.

If we do that, their buying power will grow our economy nicely. Liquid dollars and high demand are good things.

If we raise and or had raised our contribution caps, the program would be running just fine.

If we need to run a deficit on that for a time, so what?

Maybe we can cut back on endless war.

There are enough people, is enough technology to do just fine.

All of this is a priority problem and our priority at present is not well aligned with our people's needs and that can amd should change.

Say we do need more labor.

Fine, make being an American easy again. Plenty of people will step right up and do it.

Bring us your tired, your poor...

>Robots are nowhere close to being any practical replacement for the many basic labors we all depend on.

That's why I won't be retiring.

Yeah, I may not either. But, whether we have that tech or not is simply not germane.

This is all a priority discussion.

It is not for some real constraint or other.

And simply making that choice for everyone is not necessary, and is poor policy that will cost us a whole lot more than getting our priorities right would.

Put another way: we've built all this nice stuff, and we enjoy society and all the things that go with it.

Either we are willing to accept the full cost of that, which means taking care of our own, or we're going to pay hard because of what happens when we don't take care of our own.

So which is it?

What will happen is that inflation will cause these promises to be meaningless and throw many elderly into poverty or menial jobs in their old age, hello Walmart greeters...

Getting 1x social security is not going to work when you get rent that is going up 2x as fast. But somehow the market basket of goods will still stay at 2%yoy…

Or we could just start having large families again like some groups (Hasidic Jews, Amish, some Evangelicals) do but I don’t think there’s much political will for that.

Where do you think you got your income from? By standing on the shoulders of everyone before you.

> I'm being forced to pay over half of my income into a ponzi scheme

You are making shit up - where in the world does 50% go towards retirement funds?

Unless you are talking about real estate, which is a Ponzi scheme where children pay some of their ancestors for the privilege to own their own land and a home.

> where children pay some of their ancestors

I mean other people’s ancestors (not their own where the wealth is often passed from ancestor to child).

> you get a public pension that you and your employer have paid into the system (of course, it pays the current pensioners)

In the US we call that Social Security.

Part of the problem with giving everyone more money and expecting them to invest it is that it frees up that money for competition for things like better schools (housing in better school districts, private school tuition). You can sacrifice your retirement to give your kids a serious advantage. Tons of people do this, in part because once some start doing it, everyone has to a little or their lives actually get worse than if the money were taken out for retirement before they ever saw it. Then there's the "keeping up with the Joneses" effect which is very hard to entirely resist when the spending-norms for your income-peers are set by people who aren't putting away enough for retirement.

I'm curious about the net societal effect of a large fraction of successful people investing in their children's education. From an evolutionary perspective, it makes sense that previous selection would lead to this type of psychology (i.e., selection favors parental investment when it increases fitness, which is particularly true when humans are near carrying capacity, see K-selection). However, this pattern leads to increasing inequity and, historically, societal instability (which would favor R-selection).

I have zero faith the European pension schemes will exist by the time I’m 65 (~30 years). I basically don’t count it towards my retirement planning.

Nobody should have any faith in anything in life that far in advance. You hedge your bets and save anyway even though you can't know if you will live that long, nor if the political reality will allow what currently looks like the best choice will work out that way.

Today in the US the Roth IRA looks like a great investment. I remember when they first came out my dad transfering everything to one even thoguh as he said then "I have to believe they will change the laws and so by the time I retire the tax savings won't happen". So far the laws still make it a good deal, but there is always the risk that the promise gets broken.

It's simple maths. The pension fund works similar to a ponzi scheme in that it can only sustain itself if there are enough new workers paying in. We have an aging population with massively declining birthrates (inverted population pyramid [1]). Unless the next gen are unbelievably high earning there is no way it can continue.

[1] https://www.worldlifeexpectancy.com/germany-population-pyram...

The simple math is wrong because it doesn't account for the future which might or might not have some other consideration that you don't even know of.

Well yes I kind of eluded to that. It's basically gambling either way but looking at the political situation in Europe I fear any response to changing environments will be reactionary and too little too late.

> The pension fund works similar to a ponzi scheme in that it can only sustain itself if there are enough new workers paying in.

It does not have to be like this. Canada's used to be this way, but several decades ago they saw the problems coming and changed it:

> By the mid-1990s, the 3.6 per cent contribution rate was not sufficient to keep up with Canada's aging population.[10] and it was concluded that the "pay-as-you-go" structure would lead to excessively high contribution rates within 20 years or so, due to Canada's changing demographics, increased life expectancy of Canadians, a changing economy, benefit improvements, and increased usage of disability benefits (all as referenced in the Chief Actuary's study of April 2007, noted above). The same study reports that the reserve fund was expected to run out by 2015. This impending pension crisis sparked an extensive review by the federal and provincial governments in 1996. As a part of the major review process, the federal government actively conducted consultations with the Canadian public to solicit suggestions, recommendations, and proposals on how the CPP could be restructured to achieve sustainability once again. As a direct result of this public consultation process and internal review of the CPP, the following key changes were proposed and jointly approved by the Federal and provincial governments in 1997: […]

* https://en.wikipedia.org/wiki/Canada_Pension_Plan#1996_refor...

There were a further update in 2017.

It should be noted that the CPP was never meant to be the sole source of income in retirement, even when it was originally set up. There were provisions for pensions and private savings (RRSPs) as well. The combination of all of these was to fund people's retirement.

30 years ago was 1991. In many ways a lot of things have changed since then but if you had put savings then into something reasonably simple like a broad-ranged mutual fund, or a mix of an equity and a fixed income fund, you’d basically be fine. If you had bought a big house it depends on the location. Roth IRAs haven’t been around for 30 years but even if you do have to pay tax, you still get all that compounding happening before this imagined tax. It probably wouldn’t be worse than just having a taxable account and that would be fine anyway.

One other thing to keep in mind is that older people vote more so voting populations skew a lot older than the regular population. I find it hard to imagine such people voting for anything terrible for the old.

> "Smart" people would save and invest, and have better "pensions" than they'd have in the current system

Well, if, and only if, their investments have positive gains.

Also you can (depending on the country) pay today extra money into retirements and pension funds which are a kind of financial investments. But good luck figuring out how much of the money goes actually into administering the funds and is deducted from your payment before any investment is made. If these funds were usually an advantageous deal, their conditions would be a lot more transparent.

My take is more or less: Pension is a kind of insurance (you do not know how long you are going to live), so it should be low-risk. If you have extra money, you can invest that - but there is no investment without real risks, so it has to be money which you can really afford to lose.

> there would be a lot more new cars on the road

The current pensionists wouldn't be spending their pension then, so there would be roughly the same "new cars on the road".

The real problem seems to be that poor people's real job in this economy is to be spending their money, and the actual work is just a meaningless trap.

"Smart" and "stupid" poor people generalization is also a disheartening protofascist sentiment.

Pensioners don't buy new cars in Europe. It's an American perspective that elderly are wealthy.

My grampa in Germany was getting his Golf renewed every few years up until he couldn't drive anymore.

>hoping that in many years, there will be enough people working to be able to pay my retirement.

No problem. You just import more and more people.

Who supports them? Why...simply import more and more people.

A lot (most?) of the problem is that there are a lot more old people than there used to be and EOL medical problems are more of a thing. Solution? I have no clue.

Giving people more money is not going to increase investments, as the experience here in the United States shows. People just increase their quality of life and live from paycheck to [bigger] paycheck.

Even in the field of software engineering where, one assumes, the employees are of above average intelligence, many are completely oblivious to what is happening in their 401Ks or even if they have one.

Well of course, but if you want a pension system, you have to take (in our case) 25% of their money now, to be able to give them something back later (or in our case, to give the current pensioners money now, and hope that you'll have someone to take money from, when the current workers retire).

A lot of people want the retirement money 'later', but don't want to pay 'now'.

Every spare dollar I get goes to investments. But I am atypical in that regard.

Username checks out; but seriously, don't over do it. Someday you'll hit financial independence, and you're going to need to have the non-financial aspects of your life (friends, romantic partners, health, hobbies, etc) squared away before you retire.

If you've been neglecting them all your life, it's harder than you'd imagine to repair them.

A year and a half ago, I would have believed you but I think the data from the stimulus payments in the U.S. shows that a substantial portion of that money went to pay down debt and into savings. I think credit card debt went down something like 14.5% over 2020. Maybe some of this is attributable to the fact there was less availability for experiential spending, but people certainly had availability for buying consumer goods online. And some are expecting the debt to incur faster once the pandemic is fully in the rearview, but it's enough for me to question the strength of my previous conviction that giving people money automatically means they spend it on consumerism.

The jury is still out. Traveling and going out is a massive discretionary spending article, even just from my own experience. There IS a glut of cash on-hand right now, hence all the degenerate gambling in the stock market and crypto, but we will find out how permanent this is, soon enough.

I agree, it remains to be seen how it will play out. But I wonder if the HN lifestyle biases us to the view of how much of an impact it will have. A cursory search showed travel and restaurants are 2.8% and 4.4% of US GDP respectively but I bet if you ask most HN commenters, they'd assume it's much higher.

I have a slightly different view on the stock market piece. I think there's a cohort who are young enough to think the market returns over the last year are the norm, which led them to believe "the market always goes up" and was an easy way to make money. This group tends towards the growth stocks but it seems like they may now be more skittish once they got a taste of a severe market downside

> There IS a glut of cash on-hand right now,

For some people. Others still have very little cash.

https://www.bloomberg.com/news/articles/2020-12-10/how-a-k-s...

But the stimulus payments were 1 off vs increases in annual salary, which makes it a lot harder to use it towards lifestyle inflation.

Is your perspective that a windfall is less likely to lead to discretionary spending resulting in a paycheck-to-paycheck lifestyle than a salary increase?

I may be wrong, but my previous intuition was that if people have a recurring increased income stream they'd be more likely to save and invest than if it was a one-off.

> Giving people more money

Taking less money from people...

You're on a retirement scheme where current contributions directly pay for current pensions? Wow, I thought those were all dead by now, in favour of retirement funds that are invested.

Of course state pensions are funded from current taxes, so there's always an element of pension payments that come from current tax, but at this point all contribution based pensions should really be investment based. That works much better because the money is pumped directly back into the economy, as investment rather than consumption.

> My retirement is based on paying ~25% of my gross income into a retirement fund, which is then spent on current retirees, and hoping that in many years, there will be enough people working to be able to pay my retirement.

This is how most state pensions work, but most supplementary pensions do not (I at least have never heard of them, and I have some experience in different EU countries). They invest your money and grow the amount, and pay you out based on your personal 'investment' or that of your cohort.

Where in Europe do you live if I may ask?

if there are no future people working to pay your retirement, then there is no more economy and no more people to sustain whichever alternative "secure investment" you've made. a down economy completely devalues any alternative securities for any "pension funds" or investments, be it rented buildings or stock or other company shares.

not doing a redistributing pension only serves the investment companies selling the illusion of a better private pension.

Switzerland has understood this 20 years ago.

It's not so simple. The money for the retirees is the income of others and if all invest the interest rates go down and you get less money from your investment. And the current system is safer against a financial crisis. For some few it's worse than keeping the money and invest themselves but for the society it's much better.

They take ~19% of my total comp to pay into a ponzi government pension scheme in Germany that will crash in predictable amounts of time, and they have written it into law that existing pensions must never decrease in real terms (!), meaning that every year pension benefits increase, just to make the voting senior population feel secured. It's all at the expense of my generation which gets their salary taken away with nothing tangible in return. The consequence is that I put 75% of my remaining net into investing accounts (completely unprotected and without any tax benefits, just additional capital gains taxes...) and don't spend it on anything else. And then they keep wondering why purchasing power continues to reach all-time lows, and why Germans are unable to accomulate any assest...

The promise of government pension is worthless in Germany (which is different from the pension system of civil servants, btw). The old generation exploits the young and will continue to do so until the system crashes.

The sane thing to do is exit the mandatory contributions schemes.

More likely what would happen is that employers would take that 25% for themselves, lowering gross pay so that net pay stays the same. Then every working person would be worse off.

people who are poor are usually not stupid. being poor is also a direct result of onces environment and the social and economic status of their parents. should we just accept that capitalism punishes the poor for something they have no control over?

I didn't say poor, I said stupid. Some people earning good wages now, would also buy new cars, and be fscked when they get old, and some people earning low wages now, would still invest the 'extra' 25% into something, that'll last until they need it to retire.

...but we do live in a system, that rewards such behaviour, so yeah...

The poor people's 25% isn't seldom a small small small small fraction of a more wealthy person's 25%.

Low wage workers here (also Europe) can barely save any money (if at all), and have something like at least a 10x increase in disposable income after living expenses from moving in with someone, or getting a well paying senior dev job.

It's not always an individual's actions having this effect, and if you decide to punish or reward based on it you are not rewarding based on morally reasonable metrics.

I live across the street from a homeless camp in California in a house I dont deserve, my parents are amazing people and had no retirement plan and I have no idea whats going on or what Im going to do when Im too old to work and get fired from whatever bs tech company Im working for when Im 35 and Im just realizing it. Its 1:30 in the morning and my babys gonna wake me up in four hours. America is insane.

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