Sunday, June 22, 2014
Are we saving too much for retirement?
Another graphic novel in the Booth Capital Ideas magazine. This is just page one, click on the link to see all four pages. It's an interesting conversation between an economist (Matt), who thinks about intertemporal choice, and a psychologist (Dan), who thinks about how you imagine your future self. It really works best as a four page spread so you can follow all the arrows as they jump around.
10 comments:
Comments are welcome. Keep it short, polite, and on topic.
Thanks to a few abusers I am now moderating comments. I welcome thoughtful disagreement. I will block comments with insulting or abusive language. I'm also blocking totally inane comments. Try to make some sense. I am much more likely to allow critical comments if you have the honesty and courage to use your real name.
I don't know what the overall statistics show but there is some part of the middle class that will rationally over-save for retirement. Calls for cuts to Social Security run at least some risk that the mere threat of cuts will increase the middle class's savings rate above the optimal level.
ReplyDeleteI expect that there is already a very large pregnant tax liability associated with the baby boomer IRAs and 401(k). We hear those plans described as tax deferred plans for the investors but do not seem to hear much about the fact that they also defer tax receipts for governments.
"Are we saving too much for retirement?"
ReplyDeletePresumably for every person saving, there is another spending, so what does that even mean?
Saved money is not spent if it’s just lodged at the central bank, which is what a fair amount of QE money is doing, I suspect.
DeleteAnd is QE indicative that we are saving too much or not enough - or does QE simply swap green M&M's for red M&M's without affecting the incentive to save versus spend?
DeleteRetirement is an illusion created by cheap energy. Plan on doing something useful for as long as physically possible,like the first million years of our evolution. Save for disability which is not an illusion. Saving is very difficult unless you count virtual savings, computer bytes of doubtful value. The kids know they will never have the biblical granaries or acres of rich land set aside. Storing food(or drink) in each other was one historical approach.
ReplyDeleteFor every person saving there is another person spending?
ReplyDeleteNo. The complement to every is none.
DeleteHaving wrestled with this question for awhile, the biggest unknown factors are life expectancy and cost of living (inflation) over an uncertain duration. much like the "terminal value" of a firm, you have to make your best guess and accept a WIDE confidence interval.
ReplyDeleteUgh. That last image. I haven't been this nauseous (excuse me, nauseated) since the "monkey brains" scene in that horrible sequel to (the great) "Raiders" about thirty years ago. Think I'll skip lunch.
ReplyDeleteWe cannot save for retirement, that is completely impossible. Goods and services do not pop up out of nothing. If we only save and do not have any progeny, we maybe will have money, but definitely nothing what we could buy.
ReplyDeleteSaving for retirement serves for a completely different purpose: to differ from the average in an unequal society. In an equal society, saving for retirement is pointless.
Retirement is living at the expense of the young who produce the goods and services - always. Money only hides this dependency from our eyes, it does not overcome it.