Undiagnosed Cognitive Decline Eats into Seniors' Retirement Savings
wsj.com
wsj.com
I've also got elderly relatives, and even with their pensions secure (European-style pension system), there's lots of people going after their money. Trying to prepare them for encounters with online and real world scammers is an ongoing process, e.g. by recounting the cases that I read in the news to foster mistrust.
I've lost count how often an elderly family member (who is still sharp as a tack fortunately) told me that the "police", "your beloved niece", or "Microsoft" called them.
It's very sobering when we realize that we too will one day be just like them.
(my parents are notably different in this default)
There is an existing scam that goes something like that. I probably got some of the details wrong.
Bottom line: do not trust any incoming calls.
And if scammer spoofs my friend's number, I should be able to recognize it's not my friend, or at least understand thar my friend won't need my bank code.
(Sadly modern phones don't make it easy to tell if the label is from your address book or from external syatem. Adding personal prefixes to end of names, like "John (from NY2020 party)" helps a lot with this.)
I don't take calls from "unknown or unexpected caller id". I had someone call me recently that I was actually expecting to call me. But their caller id had their personal name instead of the company I expected it from so I didn't take it. They can leave a message. And they did.
If "my bank" calls me but I don't expect it, the caller id can have my bank's name all it wants. They can leave a message and I'll call them back at a number I find on my card / online.
What might work is if I was expecting my bank to call me and then a scammer calls me with bank caller id. But they'd also need to know what it's about. I've also found that if you're already in contact with large companies and they call you back they very much don't user caller id at all. All their outbound calls say "unknown number". Had this while troubleshooting a phone number transfer.
If I do expect a call from an unknown number and thus take them, I still don't take phone calls with my name. I say things like "Hello". That's it. Then they many times ask "Is this so and so" without explaining who they are, which I find pretty rude and dumb. So my answer to that is: "The question is who you are and what you want". I've had many encounters where the answer from them then makes it clear they are legitimate and they probably thought I was rude but I'd rather be rude than out of my savings. Training for when I'm 80.
It might be a brain interface pushing intrusive thoughts. Our grandkids will quietly ignore these thoughts like zen masters because they recognized spam. It might be a perfect video chat from your spouse, all spoofed by AI. People will adapt but not us because it'll be new and emerging when we're already crystalized in our patterns.
We will become the vulnerable generation somehow.
Local attorneys / solicitors already provide such services but one has no way of knowing whether they are trustworthy or will remain trustworthy (think Lionel Hutz from the Simpsons) whereas a larger scale business can afford to do internal auditing and integrity checks and make them public to ensure trustworthiness. A large enough scale business can also afford to maintain specialists on hand to handle things like managing online social media accounts that a local operation wouldn't be able to afford.
You either need strong societal values that can stop this (and a business structure that keeps reasonable people in control) or a government that legislates to stop it. We currently have neither in the US, which is one of the reasons we’re in this jam.
Secondly, there can be institutions that are trustworthy enough. There are nationwide scale banks in the US that I could name that have an unsavory past reputation but there are also ones I could name that don't. It's not impossible to make an end of life management business that the public can feel safe in hiring.
I’ve pitched a similar idea to dang maybe a month ago, he said it’s probably best left for humans. (Personally, I still think it would be useful tho!)
https://archive.today/20241103152858/https://www.wsj.com/per...
relying on private savings to finance retirement is highly risky, and this is the crux of the article in question.
pension systems should be administered through public programs, not turned into moralistic contests in which individuals are penalized if their investments fail for any reason (and it's only their fault... while it's clear it's a social failure).
basic solidarity is essential in ensuring both the health of retirees and the fulfillment of reasonable expectations for a secure retirement.
US social security and Medicare are a great example of this but you'll find similar examples throughout the western world.
In contrast private retirement plans put the individual in charge of their own retirement (why should the government be telling you when to retire?) and doesn't put a financial burden on unborn generations.
The money always has to come from the labour of the future somehow. So you get the same burden laundered through the private sector, such as young people having to pay extortionate rents to retired landlords.
in case of crisis the gov routinely starts bailouts and save the financial markets with interest rate operations or open market operations. those operations have deep re-distributive implications. don't think they are free.
This is simply Marxist crap and outright untrue.
> in case of crisis the gov routinely starts bailouts and save the financial markets with interest rate operations or open market operations. those operations have deep re-distributive implications
This is a rather new phenomenon and not at all necessary for profitable private investment.
It's really completely irrelevant to the discussion.
Not only but also. Adam Smith counted labour this way, along with capital and natural resources.
Until we're all rendered unemployable by AI[0], there's still human labour doing stuff in the system — the bedrock foundation for all the rest.
[0] 2^(1 + roll a D4) years? I expect it to be relevant on the timescale of me reaching pension age, but between Scylla[1] and Charybdis[2] I'm not at all certain.
[1] smoke-and-mirrors marketing
[2] exponential growth
There are other investment vehicles besides equity and other ways to take value from past into future that are neither garnishing the wages of children and grandchildren (most current state systems) nor investing in artificially inflated markets.
Just as a thought experiment, consider if all state pension contributions were just used to immediately purchase gold on the open market that was then put into a vault labelled with the year of birth of the contributor. Please explain how this (obviously naive) strategy is dependent on future labor. As far as I can tell, this system would be completely market-based and future labor would likely benefit as their “gold” might be cheaper as there would be less demographic demand.
"Alone" seems to be an unnecessary addition for the problem to exist.
And until the AI really can take all our jobs, it's not a redefinition, labour is one of several pillars alongside capital, though specifics vary depending on your school of economics: https://en.wikipedia.org/wiki/Factors_of_production
> Just as a thought experiment, consider if all state pension contributions were just used to immediately purchase gold on the open market that was then put into a vault labelled with the year of birth of the contributor. Please explain how this (obviously naive) strategy is dependent on future labor. As far as I can tell, this system would be completely market-based and future labor would likely benefit as their “gold” might be cheaper as there would be less demographic demand.
Consider this experiment on an island with just yourself.
You bury the gold. You reach pension age, and stop working. You dig up the gold. You now have gold. What do you spend it on? There's nobody offering services, regardless of how much you offer, therefore cost of goods, services, and other assets has a divide by zero error and inflation is asymptotically infinite.
Similar arguments work when the working population shrinks even if not becoming literally zero: unless technological improvements happen faster than the workforce shrinks, which is complex because tech affects different products at different rates, shrinking populations cause your model to get inflation even with gold as a currency.
Edit: you’ve revised history and now added a bit about “similar arguments” and inflation. The answer is simple: yes, you might get back less real value than you put in. Yes, there might be inflation. This is fine and normal and would be preferable to the present system and is not dependent on future labor in the same way as direct redistribution. There are no guarantees. ‘Enforcing’ guarantees is a recipe for disaster as we are now seeing unfold.
Incorrect, I'm definitely including demand in there.
I'm saying there's no supply.
It's n/0, not 0/0.
> Instead, you should have invested in a farm and some robots. Sorry, there’s no free lunch if you can’t steal it from younger generations.
(1) OK, but that's not what you were saying before
(2) (a) The AI to control those robots does not yet exist, (b) when that AI does exist, we can set the pension age to zero — doing so is called "UBI", and AI is often suggested as both a mechanism to enable it and as an economic transition requiring it.
> Edit: you’ve revised history and now added a bit about “similar arguments” and inflation.
It was intended for clarification, not to "revise history"; FWIW, the para in which you wrote this edit was not present when I clicked "reply".
> This is fine and normal and would be preferable to the present system and is not dependent on future labor in the same way as direct redistribution.
You asked "Please explain how this (obviously naive) strategy is dependent on future labor." — I believe I have demonstrated that it is.
I did this by showing that your own suggested commodity asymptotically approaches buying zero of the available zero goods, services, and assets as the production of those also becomes zero.
You can buy all of the nothing being made.
The question is how the future value is priced. The original assertion was that future value must come from labor and there is no difference between direct redistribution and private transactions (of which only rent extraction was given as an example). My counter is that there are alternatives that are neither taxation nor rent-seeking. In particular, the holding of assets to be later sold is a store of value that notably does not depend on future labor any more than any functioning economy depends on labor as an input.
We have pretty robust systems for deciding what (most) things are worth via supply and demand. Claiming that future value must be extracted from future labor is just false — a system with some backpressure on the payouts to retirees is much more sustainable than one without backpressure. In your simplified thought experiment, you must agree that there is no dependence on future labor as none exists! The pension is also not effective, of course, but that is to be expected — essentially no pension is effective when stranded on a desert island.
(To be clear, I don’t advocate storing gold by birth year as a practical way to run a pension scheme.)
The value of gold is it makes the holder indistinguishable from someone who had enough resources to procure yea much gold. A useful signal in a healthy economy. But it was asking for the literal on-an-island example where there was no otherwise healthy economy. Since your argument depends on productive investment of capital IMO you should have hammered on that a bit more rather than trying to bring gold into the picture.
I'm seeing a lot of misconceptions about debt in this thread. It isn't possible to "burden" "unborn generations" with debt, they can always just renege on paying. The problem is what we see in the US, where the debt in financial markets is reflected in the real world by ... massive capital formation overseas in China. So the damage has already been done, unborn generations won't have access to the capital needed to live the lifestyle of their debtor parents. This is because the parents never built the capital to sustain their own lifestyle and eventually the capitalists will stop donating free stuff to debtors. IE, debt isn't a future problem to be paid back. The problem is always in the capital formation of the present and past. It is the future consequence of what capital got invested in, where & why. In that sense high debt can be good or bad depending on how much went in to capital formation and whether the capital is productive. But typically high debt matches to poor choices deploying capital.
The problem with productive assets or non-inert commodities in this thought experiment is that they are much more dynamic — inert commodity prices are much easier to reason about.
You are fundamentally correct about capital accumulation, though. If you want future value, you should accumulate something (dynamic or static) that is valuable in the future — extracting rents or expropriating labor via force in the future are not pro-social behaviors.
It could be that as labour is constrained the inflation in price of labour is higher than investment gains.
Maybe you should stop reading Marxist economists.
>such as young people having to pay extortionate rents to retired landlords.
There is a pathological case here when it comes to rent, but we are far from that. Rent is only extortion when there is widespread collusion to fix the prices. Otherwise it is supply and demand. If inflation and high demand have made prices unaffordable, it's not your landlord's fault. Landlords also provide a service (strange as that may sound), and aren't stealing from anyone.
If you had a profitable business, you could compete with the property sector for investment. Unfortunately we have outsourced many profitable things in the West, because we're competing with slave labor.
after three major financial crises in the past 20 years, it’s hard to call private finance “safe” from ponzi-like risks. more than a quarter of Americans have no retirement savings at all, and the 401(k) balance for near-retirees often falls well below $100,000.
but it's the logic of the argument that is faulty: declining birthrates also hurt private markets, which rely on a growing workforce just as public pensions do. do you think finance is somewhat magical? if there is no growth also the financial markets won't grow. pensions shouldn't be about growth, but they are mainly about redistribution.
if we dismiss public pensions as a ponzi scheme, then by the same logic, private plans—completely at the mercy of market swings—could be called ponzi too, except they often leave those who earn less with nowhere to turn when things collapse.
Right, it's well known that the US' demographics are the foundation for its strong economy, not advancements in productivity and technology. /s
> if there is no growth also the financial markets won't grow.
Financial markets don't need to grow for your investments to pay off. Investing into growth stocks is very popular now a days but value stocks (which might not grow at all but have profitable operations) and fixed income are perfectly good options too.
> if we dismiss public pensions as a ponzi scheme, then by the same logic, private plans—completely at the mercy of market swings
Some of them can be, the difference is that public pensions are a Ponzi scheme I'm legally forced to contribute to and have little say in. Not so for private plans.
What countries let you do this? I thought 401ks, for example, do not generally allow tax free early withdrawals.
If there's an approach to model imho it's the Norwegian one: Actually backed by stocks, but managed and distributed by a central investment fund. It's far easier if the country is smart enough to centralize oil profits as well though...
The problem is the baby boomer generation transformed it to the point retirement was "when you started living your real life". People being retired perfectly healthy for more time than what they worked is not an exception for them.
And that generation managed to pile more shit on the next generations: regulations to make housing more expensive, requiring more education for every job meaning people start working later, outsourcing has much as possible. And not having replacement level children.
So now people have to pay a lot more for those privileged generations. Meaning they have less available money to get a stable situation, meaning even less children so the problem will go worse and worse. At least one generation will have to be sacrificed to have a chance for ones after them. Will the Millenials accept to be it, or will they pull a boomer?
You just need to have a tiny population and be the 3rd biggest gas and 5th biggest oil exporter, easy peasy
PAYGO-style is definitly the more sustainable approach.
That's the part that causes friction, because (soon to be) pensioners don't want to accept lower pensions, and they still have voting rights, voting in politicians that cater to pensioners over workers.
That's what Norway does too, just less directly. The $1.75T that Norway has in their sovereign wealth fund is just a claim on future output. Germany's taxes are a claim on future output.
Or to look at it at a micro perspective. Suppose you have $10M saved for retirement, but need to hire a personal care nurse. But there aren't any and you get in a bidding war with someone who has saved $100M.
Wealth creation requires work. Retirees don't work, but still require a portion of the wealth that workers create to live.
It doesn't matter if it's a government pension or a 401K investment, a declining worker population will mean that you'll have the exact same retirement problem. Government pension require people working and being productive and paying taxes. Your investments will only produce returns if people are working and being productive (in which case they are also probably paying taxes).
Unless, you know, you do some wealth redistribution, away from people who own all the means of production, to the people who don't. Then they former will be the ones with a problem. It won't generate more net wealth, but it would certainly prevent a large portion of it from being locked up in the hands of a small elite.
Or, alternatively, more automation and high taxes on robots.
Privatizing the problem of pensions is just an accounting trick. It doesn't actually solve the problem.
What wealth will your index fund produce when nobody is working, and nobody has the money to buy stuff?
However you answer that question, I'll retort with - 'And exactly what will stop the government from taxing that wealth, to keep pensions working?'
> At the least it will hedge against the very real chance governments will not be able to deliver on their promises.
That's a fair point, there's the very real possibility that governments will refuse to take the steps necessary to deliver on those promises.
A good way to ensure that they won't shirk from that is continuing to elect the kind of government that will. Don't vote for people who seek to destroy public systems.
Unless you actively elect a government that pursues such a policy. Or unless someone somehow puts all that money in a large bag, and flies off to Cyprus (If that's a real concern in your society, there is no guarantee that your brokerage or bank won't do something similar). Bad governance and theft can ruin anything, just ask anyone who has lived in 90s Russia - where the government could not hold up it's end of the social contract, but neither could any of the thousands of thieves and fraudsters that spun up in the privatized financial sector.
As it turns out, when the economy collapses to the point that a government can't[1] pay it's bills, everything else goes to shit, too.
---
[1] The budget brinkmanship the Republican party practices every year isn't a matter of 'cant' - it's a matter of 'politically expedient to pretend that they wont'. But that cycles back to not electing people who govern poorly...
Demographic shifts in particular are something that hurts both.
AI (the robot kind) may be our main hope.
The worst-case scenario that comes to mind are all the Enron employees who focused their 401ks onto their own employer's hot stock, and then the implosion wiped out both their regular earnings and their reserves.
Do private pensions solve the “I hope I have money in old-age” problem better in a fundamental way? No.
Do they solve the “I want to pay more now to have more later” problem better? Probably in most systems.
Do they solve the “what is the fair value of grandpa’s pension this month” problem? Definitely yes.
If you want guarantees, the state can pull tricks to make you believe that the world is static… for a while. Eventually, reality will force the state to price pensions in line with demographics or suffer increasingly severe budget crises.
In the past, your children were your pension. This is a private system. When responsibility for old-age is distributed without accounting for monetary or demographic contribution, politicians can promise the moon. Stop eating the young.
Put another way, retirees who are no longer actively building/operating society, require that someone else does actively build/operate society. If there are fewer people left to do that, retirement will necessitate a decrease in quality of life (for everyone, not just the retiree).
How to solve for this? Not sure but the west will need to figure this out.
What we can't do is continue to use pyramid scheme math. Everyone more or less needs to set aside their own surplus for retirement over the course of their lives. Of course this gets financialized away such that the current workers pay the current retirees and whatnot but the math still holds. Basically at scale average people's entire lives can no longer be run based on net neutral or net debt with reliance upon market growth to have surplus available to spend at the end of it. We'll have to run a surplus and set some aside.
And ye, if the economy shrinks so will pensions. But that would be the case for stock investments too.
Re: Taxation, if you want to make up for the shortfall in people's pensions with an additional tax, you're assuming that someone else is making enough money to make up the difference. That is not the case. People can hardly fund their own pensions to the extent recommended, much less anybody else's. Most businesses are not profitable enough to fund extra pension contributions either, and imposing that cost will stifle them.
These can be delivered on enormous government scale, potentially bringing unit costs down far below what individuals can achieve.
It could be an effective way to create an evergreen economic engine in regions that have had poor development-- dropping a community of 200,000 retirees into a Rust Belt city creates tens of thousands of infrastructure and support jobs.
Private retirement schemes could, of course, deliver additional luxuries, but it would be a huge stabilizing influence to know that nobody is going to have to try to drag themselves back into the workforce at 92 because their 401(k) ran out and they can no longer afford their rent.
Not a single one has a college degree. All life long factory workers. Some alcoholics. All they did was show up to the factory job. I know my father hasn't read a book in at least 50 years and he might not have read any in school either.
They have no real expenses either besides going out to eat, vacations and sports gambling.
Legal structures in place so that the nursing home will be on the tax payer if needed.
Anyone of retirement age right now that is not doing well in America REALLY fucked up in life.
Of course, this is all being paid for on the tab of younger people. It is a brilliant system if your old.
Then you don't really "know" boomers. First, there are tax expenses on the pension/401k/Soc Sec. Rent or homeowner maintenance/taxes/insurance are huge, even without a mortgage. Transportation--how do they get to the eat-out place? Medicare does not cover dental or vision, and you can usually expect several crowns/root canals and eye cataracts during this period. Electric/natural gas/internet utilities, even water and trash collection, are all rising faster than inflation. Add in possible veterinary bills, and financial aid to adult children who need it, and you have plenty of expenses.
>Anyone of retirement age right now that is not doing well in America REALLY fucked up in life.
No need to explain how completely wrong and ignorant this assessment is.
Two key findings were in the report:
Career Military lived (this is from memory but should be very close to accurate) 7-15 years longer than their civilian cohort.
The difference in longevity tracked so strongly with rank they had to run the numbers several times and make sure there weren’t errors. As in, E5 retirees were the shortest lived, while O6+ were the longest.
They identified several possible reasons for the longer lifespans including availability of care and adherence to care. They also identified several possible reasons for the difference between ranks including obesity, smoking, and alcohol use (all had the same trends).
That report likely led to us reducing the military pension, which has had a fairly impressive negative impact on retention.
All of that to say that defined benefits plans are EXPENSIVE and they cut those benefits 20% due to people living ~40 years retired vs the budgeted ~25.
Smoking, alcoholism, poorer medical care, etc. likely meant a much shorter lifespan.
Less likely that your elderly relatives get scammed and more likely they yolo some crazy thing like quantum computing triple levered etfs
The majority of people I know are not planning on having kids. There’s a huge percentage of my generation who are the last of their family and will have nobody to manage their estate when they start declining cognitively. There’s going to be a big opportunity for scammers and even legit businesses to vacuum up all of their wealth.
I wonder what proportion of women would naturally want to have children if there was no social or economic pressure either way. I suspect it's higher than the proportion of professional women who have children because low-income women do so at a higher rate. So we may have a generation of lonely old people sitting on a pile of money and being doubly vulnerable to scams.
(Paywalled unfortunately)