I'm a big proponent of retirement savings. I read Bogleheads, know the rules and limits around IRAs, 401(k)s, capital gains taxes, backdoor and mega-backdoor Roth, Roth 401(k)s, and so on. Not an expert by any means but squarely a retirement savings nerd. A lot of the problem is nobody in their 20s and 30s wants to hear about it. Even here on HN, when you bring the topic up, people's reactions range from "La la, I can't hear you!" to "Bro take that vacation and live in the moment, don't save for a day that might not come!" I think my highest-downvoted post ever here was something like "Maybe it's not financially wise to spend your 20s backpacking and finding yourself."
I know a lot of people in my age cohort who don't have even a dime saved up. And these are not the average struggling American like in the article. They're privileged well-to-do techies. They don't have the very critical "pay yourself first before paying your bills" mindset. I don't know what their plan is if they get critically sick to the point where they can't work, or when their health inevitably deteriorates in their old age. They just kind of shrug and say I'll cross that bridge when it comes. Trading in the Tesla is not going to pay for assisted living.
So, perhaps the problem is that proper retirement planning requires you to "know the rules and limits around IRAs, 401(k)s, capital gains taxes, backdoor and mega-backdoor Roth, Roth 401(k)s, and so on", which is beyond most folks ability - or available time.
It also requires a non-trivial amount of slack between your income and expenses, especially if you want to invest enough to beat inflation for your savings period and up to 35 years after. The value of $1 in 1985 (~35 years ago) is equivalent to $2.78 now.
With as many folks as are living paycheck to paycheck (and usually they aren't backpacking), not having that slack - or time to manage that slack "properly - is not really all that surprising.
I also feel it's worth calling out that the fact that your target cohort is 20-something backpackers shows a cognitive bias on who is actually having issues with their retirement funds. The reality is that most folks who are having issues right now are older Gen X, not young Gen Z.
I don't think Bogleheads applies for the vast majority of americans. The article in question is about a 66-year-old single mother of three, working two jobs. She's most certainly not figuring out capital gains tax.
Bogleheads isn't about capital gains tax. It's about steadily investing in a passive portfolio, dollar cost averaging in, and taking advantage of compounding returns. It's also about living frugally below your means, but not everyone wants that second part :)
Yeah, like I said, the article is about a 66-year-old single mother of three working two jobs to stay afloat. She already had to move in with two roomates because she can't afford otherwise. Let's not blind ourselves to our own privilege, lest we become "let them eat cake" people. Many Americans cannot afford to steadily invest in a passive portfolio and don't have a realistic avenue to live any more frugally than they already to to any meaningful, life-improving extent.
The mother of three part is where she went beyond her means. Children are a luxury, and they're one of the more expensive ones people widely indulge in.
By all means, if they're a major value in your life, spend your money where you choose to. But don't be surprised if that means it comes from another part.
That said, at some point demographics are going to result in a need to incentivize child rearing politically, particularly in developed countries. It may be wise to look to how difficult this process is going in China and Japan and get out ahead of it before it is the emergency it's growing into over there. We may take an ever present labor pool for granted thanks to immigration over our Southern border here in the US, but not every job can be filled by a migrant worker with little formal education.
We don't know the context though. Some people are responsible and have kids when they're doing fine financially, but then unexpected hardships happen. They don't deserve to be blamed in hindsight.
I'm gonna be the asshole here, the article clearly states she adopted 3 children. Now because it isn't a particularly good article we don't know if maybe she adopted her nieces or nephew or whatever, but probably not(based on the video).
That decision alone is a very big red flag that (coupled with the ominous "I have a live-for-now philosophy") that we are looking at a person that made some questionable decisions in her life.
We don't know if she had a husband with 3 kids she legally adopted when they married and then the husband died. There are plenty of ways someone ends up with three children without some questionable decisions. There's no way she would be able to adopt a child from an agency due to the huge monetary constraints. Please consider being a little less of an asshole, because occam's razor is that she very likely adopted these children via family or marriage, as it is the only way to do so without being upper-middle class. This is precisely the amount of blind privilege I'm advising against.
That depends on your values. I definitely know some people who have and would make a sacrifice like "Adopt 3 people and potentially change their life outcome for the positive, at my own personal expense"
In society broadly, you're absolutely right. For most of the folks reading these comments, we do (though that's obviously changing given the downturn).
you realize most audience here is first time emigrants who make much less than Americans on the same job and have zero network to navigate the intentionally opaque 401k et al hacks? not to mention most come from places with actual humane retirement and working law safeguards so they fail to negotiate a buffer for the complete lack of those in the us.
so yeah, you're out of touch with both the topic in the article and the audience here.
There's another group of people like me who _hates_ dealing with retirement shit.
It's not that I don't feel it's important--I do. It's that the entire infrastructure for dealing with 401Ks and retirement, I think, sucks. Moving money from one place to another is terrifying--so many different steps along with the fear you'll accidentally pull the money "out" and have to pay taxes and penalties on it...
I can hear everyone saying, "It's easy--I had no problem with it". So it's not rational. But I'll bet I'm not alone.
(For the record, I'm doing OK in the retirement department. Well above average for my age and well-well-well above median. I still goddamn hate it. I'd rather have paid more tax in exchange for more Social Security payout any day.)
I agree. I had a friend who told me that he had to spent less in months when my companies stock was down, because he was literally using his base + equity in full nearly every month. He also told me he hadn't opened a 401k. He is in his early 30s working in tech and just his base would facilitate a comfortable lifestyle. It really shocked me
Yeah, that nuclear winter when Russia launches nukes isn't much of a retirement, and savings won't help much unless you saved in non-perishable canned goods.
Actually, wait. Sorry, that was the reason the previous generation didn't bother to save.
Essentially, we're looking at serous ecological collapses by 2040 or 2050. An awful lot of misery and pain is going to come from that. Maybe not the apocalypse, but it's not insane to question if the "tomorrow never comes" approach we're taking will last.
Going long on ammo, salt, and water purification might be a better deal. Knowing whatever new flavor of JS is great, but do you know how to grow rye in marginal conditions, or how to handload?
(I do think the climate is changing, but I do not know the actual outcome.)
While yes you should be concerned about potential climate change, don't buy into this 'world is going to end due to global warming/cooling in 204x' stuff. That is just mostly said by guys that make money trading carbon credits.
In the 70's they said the world was going to end in a few decades because of a new ice age. Tuns of people said the polar ice caps would have completely melted by now. Most of the alarmists have an agenda that is more about power/control/money than "saving the world."
Also don't forget the folks selling you stuff want you stressed. A stressed consumer overspends. You are falling into the marketing trap they want you in. A lot of those gun and survival seed companies feed into that paranoia. If they seriously thought the end was coming why would they sell you that stuff? They would hoard it and keep quiet.
Turns out that it's easier to store and transport a few hundred thousand dollars worth of gold than it is to store a few decades worth of salt and farming equipment.
Even if you're prepping for a disaster you see as inevitable, having a means of exchange set aside helps maintain some mobility and flexibility.
Money lasted from pre-Sumerian days through some pretty cataclysmic scenarios in the past. Hollywood notwithstanding, I don't think anything coming down the pike is going to leave anyone saying "darn, I have all this gold."
Now, sure, fiat may go worthless, its backing tied to the economic output and taxation of systems that may well crumble. And yes, things like salt, water purification tablets, even seeds, could well become currency (tobacco was currency in colonial era Virginia). But it's worth considering why you're saving what you're saving, and whether you're leaving yourself open to be blindsided.
"Essentially, we're looking at serous ecological collapses by 2040 or 2050."
Citation needed. I think it wilk rather be that the young people who are too afraid to live because "something something climate apocalypse" will collapse mentally when the expected doom has not materialized and they have wasted their lives.
I _thought_ I knew a lot about capital gains taxes until filing my own taxes this year.
After firmly boarding the tax-loss harvesting hype train, I had fallen prey to the intuitively appealing idea that short-term capital losses could offset gains from the sale of a rental property held for less than one year. It turns out that short-term gains from the sale of business property flow (Form 4797) directly to your Schedule 1, without an opportunity for Schedule D losses to offset them.
Now as a result I'm sitting on a 5-figure tax bill and 6-figure capital loss carryforward.
"Retirement" amounts to giving up control of your Capital to a bunch of companies, who may perpetuate God knows what in terms of social ills as a business model. In short; companies have found a way to screw workers out of even their wages by convincing us that "we have to invest in them to make our living for later".
When you realize that the entire system is basically set up so that as an employer, you're siphoning off funds from your employees for witholding that by default are conservatively invested (read: in whoever has managed to become the too big to fail company from convincing institutional investors to foot the bill)... Ot really starts to make a bit more sense why sweeping change has a hard time happening except in tech circles.
This concern is why ESG investing has picked up, though personally I'd call that more of an opportunistic way to convince people they can have their cake and eat it too (and take a nice fat cut of the profit in the meantime), given how much of this trend has been characterized by gaming scores, rather than a renaissance of people actually digging into the companies they invest in to ensure their money is doing good in the world.
I don't have a great solution to apply to the masses. Personally I enjoy researching my investments, but am well aware people don't all feel this way.
Not investing for the future, however, feels like rather than finding a solution, it is just the "throwing one's hands up in the air and giving up" option. And the results are, well, what you might expect.
Perhaps the best solution is for people to find what DOES interest them to invest in. The options aren't limited to company stocks, or real estate, debt, or even commodities. A larger and larger portion of the market has been opening up to retail investors with increasingly minimal costs. Perhaps no solace to the 50+ crowd that hasn't started yet, but at least hope for younger generations to have better options to avoid the same fate.
Also, for what it's worth, money in the bank = that bank having more bank reserves = that bank effectively having greater leverage to do gods know what with.
If your goal is not to give anyone else your capital to do anything with, you'd better at least have it in hard cash, if not outright hard commodities.
Otherwise, don't fool yourself into getting a smaller return while still doing what you thought you were avoiding.
> I think my highest-downvoted post ever here was something like "Maybe it's not financially wise to spend your 20s backpacking and finding yourself."
People backpacking know this, so it pretty much falls on deaf ears.
I've also found these types of people tend to live an incredibly frugal lifestyle. Saving in their 30's becomes far easier because they tend to not have the lifestyle bloat.
While their overall income will be lower, they need less to retire and generally seem to remain surprisingly financially independent.
The way people handle money is a cultural problem. Not only is it a lack of savings, many people have a lot of debt that's growing. The way many view money is to spend more than they take in. Driven by consumerism.
Consider how often people see ads trying to influence them to spend. They work and it's shaping our culture.
When inflation > interest rates, saving is a loss making activity. That's the environment we've been in from 2008 until about 2022. You're not wrong and I am the same as you, but we can't blame people for adapting to their circumstances...
Retirement accounts aren't in high-yield savings accounts. Using S&P 500, $1 in 2008 would be $2.61 at the end of 2023. Average APR is 8.45%, while bank savings is 3.5% right now.
Just a few hundred a month could have made you a millionare today through dollar-cost averaging. Deciding not to invest because you think our economy isn't as great as before is a terrible reason not to invest. If you are trying to "time the market" with your retirement account and believing that no time in the past 12 years is a good time, rather than dollar-cost averaging and investing all throughout, you're really screwing yourself over
This is not correct. Not saving will leave you with nothing. Some saving will leave you with something, regardless of the inflationary and interest-rate environment.
What inflation > interest implies is that you should try to place your savings in in real assets, i.e., assets that are inflation protected, rather than in assets that just pay interest, such as bonds.
In an inflationary environment, saving up to purchase a house can be an enormous, life-altering financial windfall for those who can do it.
Retirement savings means investments, not FDIC insured savings accounts. However, it has not been that long that it has been as easy as opening a Vanguard/Fidelity/Schwab account and buying an index ETF or target retirement date ETF, so I cannot blame someone in their 50s and 60s today for not following advice that has only been easily accessible for 15 or 20 years.
This. Also, we take 401(k)'s for granted, but even those are only a little more than 40 years old, and widespread use did not happen instantly. That Gen X didn't make hefty use of them is hardly surprising, given the limited access along with the limited education in place.
Their parents had defined benefits pensions. Their children have commission free IRA's, 401(k)'s, variable annuities, and a handful of other lesser known alternatives.
They got the 70s and 80s economies to grow up in, and the dot com bubble, GFC, and now a looming recession after many got sucked into some YOLO moonshot plays in the bull market of 2021, upon realizing how much ground they needed to try to make up rapidly. I don't envy their situation.
That depends if it's fixed rate debt or not. Fixed rate debt that came about over the last decade is often accruing interest at a lower rate than you can reasonably get with some fairly safe instruments, be they treasuries, money markets, or some more exotic fixed income securities. If you're paying down debt financed at 5% and getting a 7% return on your savings, it's a non-trivial decision to pay it down any faster than you absolutely have to.
I'm sure in no rush to pay down my car loan any quicker than is required.
On a similar note, I know >3 individuals with successful businesses, think small construction shop or solo professional suite. They make good money, but everyone I've talked to doesn't have an IRA/401K or anything stashed, its all in their business. They have lots of cashflow, but are an injury, change in business climate away from ruin. Many don't have plans for hitting 60+ when they can't work anymore to keep the business going. They likely assume they will sell their business, but lately the valuations on these small time shops has been very low and many "boomer" businesses are having a hard time finding people interested in purchasing. Think mom/pop grocery store, ice cream shop, stationary store, etc. They own their home most likely, but thats all gonna get sucked in end of life care...
The real problem is when they go from retirement-age-but-with-working-bodies to retirement-age-and-frail-elderly . That will be a real tragedy of poverty, suffering, and neglect.
We had pensions. And then everyone was told to use a 401k. And those previous corporate pension contributions became shareholder profits. And then wages stagnated and many people couldn’t afford to or didn’t save in retirement accounts. And now half of everyone over 55 has no retirement savings per the GAO and will rely on Social Security, Medicare, and whatever income can be scrapped together when you’re elderly.
It’s going to be a shit show. But heh, at least those pesky pensions went away, amirite? Insolvent pensions are the least of your concerns when tens of millions of older Americans have a vote and are collecting an entitlement till death.
There were a lot of negatives about pensions; employee mobility and companies trying everything possible to weasel out of promised benefits being the biggest ones.
The problem isn't retirement accounts, it's a lack of mandatory funding by employers.
A simple solution would be mandatory 401k contributions by employers for all workers.
Even a 2500/year contribution for a worker will yield almost 200k at a 2% annual return on an average and almost 500k at a 5% return over 45 years. While by no means could independently support a lifestyle, it can definitely supplement social security. The burden for workers to save would be significantly lower.
Australia’s Superannuation concept is a reasonable model imho.
Not only must employer contributions be mandated, but it must be very hard to get access to the funds before retirement. Otherwise, they’re just cashed out. You also have to have strong guardrails around fees and fiduciaries so it’s not a big pot of money for finance to leach off of.
At that scale there’s no reason to use 401k style personal investments that’s just pointless overhead and risk. Social Security tracks individual contributions and that’s all that is needed. Just pool everyone’s investment and pool everyone into a single safe asset allocation.
We don’t use that system because individual 401k’s are extremely profitable for the companies running them. Fees can reduce the long term payout by as much as 1/3.
Yeah the worst part is they don't have to clearly/obviously disclose how much they are taking out in fees. It just vanishes from your account unless you actually look into it. 401k's funds sometimes have fees that are multiples of Vanguard....and perform worse.
Best to go into a self directed account and use Vanguard and safe yourself thousands in fees over a lifetime.
I don't know about mandatory, as 401(k)'s aren't mandatory in the first place. But incentivization using tax code would be sensible.
You're absolutely right about pensions though; people pining for the days of the fixed benefit pension rarely are all that familiar with the pension plans that simply went bust due to inability to fund their liabilities due to market conditions. At least with a 401(k), you're not running out of money because your retirement is being invested too conservatively so as to pay someone older than you, leaving it empty by the time it's your turn.
I cannot imagine relying on a company to pay me during retirement. I get that that system existed once, but the incentives are so misaligned it terrifies me
Corporate or union-run pensions were terrible. The companies or the unions or both would fail to fund them adequately. Or if they did fund them enough, they would mismanage the investment. Sometimes they would outright steal from the pensions.
Another game was simply redefining the terms, almost always reducing the benefits. This was a common game and it's almost irresistible to the managers. At the highest level, the US government is always doing when they tweak the Social Security formulas for retirement age.
At least with the 401k/IRA/SEP etc, you're in control and you see the assets go up or down.
This was the problem, not lack of defined benefit pensions. With the advent of near zero cost target date retirement funds and equity and bond index funds, there is no need to be beholden to one employer and have to trust the pension plan
trustees with your retirement.
Best case scenario is the trustees invest in the same index funds you would, and worst case is they misappropriate the funds or take wild risks. So why not cut out the unnecessary middleman?
If you really want an annuity, then buy it from an actually regulated insurance company, rather than a DB pension plan that is doing who knows what.
The article focuses on a woman aged 66 who is delaying collection of social security to age 70 in order to maximize the monthly payout. So it's not quite as dire as you make out, as long as you stay healthy until 70.
If you can't retire at 66, do you think you will have enough to cover rocketing health care costs and needs as you turn 70 and then 80? At 66 you should be installing accessible bath tubs and stair railings and lifts. If you don't lay the ground work now, it'll get grim sooner rather than later.
She's getting $0 in social security now and will be likely getting over $1500 a month at age 70. Her medical expenses will be mostly covered by Medicaid.
$1500/month is not sunshine and rainbows, but it's not starving in the streets either.
For many, $1500/mo is living in the streets level of income. I have family that collected early and get like $900/mo. It's grim. Medicare/Medicaid is not free at all. There are lots of things that cost you additional money, that they don't have so they don't get all the medical care they need. Just what they can afford.
Your hands can move around all the money they want, the question is how much that money will buy. This is the issue countries with declining labor force participate rates are facing. Someone actually has to clean those bedpans and do all the dirty work.
Social security pays out at 80% when the trust fund is exhausted in a decade. It’s then a policy change to increase benefits back to 100% (no cap in income exposed to SS taxes).
Math might improve a bit with US treasuries paying almost 4%, as that is what the trust fund invests in (specifically special issue treasuries).
> By the end of 2021, the trust funds had accumulated $2.9 trillion worth of Treasury securities, earning an average interest rate of 1.4 percent during that year. The Social Security Administration provides monthly reports on the investment holdings of the trust funds, their maturities, and interest rates. The trustees project that the trust funds will earn $64.6 billion in interest income in 2022.
It’s sustainable so long as the US economy has productivity and activity to tax. Of course they’d tax everyone more, what else would you expect after all of that wealth in earlier decades was squandered.
If you’re angry about it, be upset about past garbage governance and irresponsibility in not planning for the future by politicians. If you strip mine the economy in the past, you can’t be all surprise pikachu when the bill comes due in the future. Trillions of dollars on useless wars and tax cuts for the wealthy didn’t help.
I think we should only expect this situation to get worse, and apply to a majority of society. This will then perhaps further incentivize the Govt to put in place some sort of a universal basic income type of program. This segment of the population is most likely to vote, so it will not be long before we vote ourselves all the money.
I think this is a symptom of no longer closely knit families. Many people from cultures that value family would never leave their parents to live alone when they reach retirement age. They would have them move in with them to take care of them. Pooling money this way (any retirement accounts, social security, etc.) plus income from the children goes a much longer way.
One of the problems is that many people have a lot of debt when they go to retirement age as well as a lack of savings. For decades, people spend more than they earn and it's a habit.
UBI in this environment means the gov keeps feeding the consuming beast.
Financial issues are one of the top causes for divorce, having trouble sleeping, and more. UBI doesn't solve for the any of this when people spend more than they earn.
I'm only pointing out the deeper culture problem around money that UBI doesn't solve.
I believe the consuming beast needs to continually be fed, and this will be precisely one of the primary drivers of putting in a program similar to Universal Basic Income. Without this, the business impact will result in layoffs, etc which will need to be stemmed through such "stimulus" programs.
However, since this has become an ingrained habit, this cannot be a short term stimulus, and will need to be continued.
Inflation as a result cannot be ignored obviously, but I suspect this will be ignored, and will cause significant drops in people's standard of living, and create huge divide in the lifestyles of those who rely on UBI like programs, and those who do not.
Money doesn't have to come from anywhere - see the record levels of corporate UBI that have been handed out in the form of quantitative easing for the last few decades, PPP 'loans', and tax hacks formatted to save these entities money. There isn't some bag that money comes out of and once you run out of it it's all gone.
There are certainly consequences to be paid when you do that, but so far we seem fine with those consequences when they benefit the most powerful among us.
Its willed into being by the government, like any other money in a fiat money system.
If you are asking what will be done to offset the monetary effects of the additional government spending, then “increased high-end taxes, starting with taxing long-term capital gains the same as other income”.
If you are appealing to the myth of necessary fiscal balance in government operations, well, that’s a myth, but same answer as the monetary answer, to the extent anything is done.
> “increased high-end taxes, starting with taxing long-term capital gains the same as other income”.
This, plus finding a way to make people update their cost basis (and pay capital gains taxes) on property that they want to use as collateral for debt.
Absolutely. Inflation will be the result (it already is, but will continue) and will likely cause significant drops in people's standard of living, and create huge divide in the lifestyles of those who rely on UBI like programs, and those who do not.
Many countries have good social safety nets. Many other countries have social ties, where the parents support the kids until they get too old, then the kids support the parents. The US doesn't really have either.
Such articles would be more helpful with more details. What career did she have that did not allow her to save for retirement? Was she always single? What social security benefits does she have access to?
One thing I hear about a lot is people attempting to live off social security payments, which is usually not enough. I wish that there was flexibility to contribute more than 6.5% (or whatever the personal contribution is) to social security as well as IRAs, which are capped at $6500 or $7500.
This is a tragedy. In an world of fiat currency and within the Modern Monetary Theory operational paradigm, the US Federal government can meet all its financial obligations because it is an issuer of currency. So, in this regime, the issue should never be about financing a future. Social Security benefits should be adjusted to provide a living income to the retired. The real question, as MMT literati have stated, is will we have the goods and services (ie Production) available to meet the needs of folks retiring ?
What is the rationale MMT provides for why increasing the supply of money available to the elderly would not lead to inflation on all the goods that the elderly purchase with that money?
inflation should be a limiting factor instead funding being a limiting factor as it is today. So the focus should be on providing enough production ( ie supply ) in the economy to meet demand. Not necessarily worrying about balances in federal accounts which is the current narrative.
The problem may be worse than we think. Many Boomers hold a significant portion of their wealth in their homes.This “wealth’ has increased greatly due home asset price appreciation. To exercise this wealth, they must sell their homes. However, due to the same NIMBY politics Boomers have championed, there are few inexpensive downsizing options, leaving Boomers with little excess cash for the expenses of older age. Boomers have hoisted themselves by their own petard.
I keep telling my older relatives this: yeah your house is now 800k, but so is the house you want to move to... It doesn't matter when it goes up since you can only ever move laterally or downgrade.
> I keep telling my older relatives this: yeah your house is now 800k, but so is the house you want to move to...
Well, the nice thing about being retired is that you can live anywhere you choose to live, more or less.
You don't have to pay $2-3k/month to rent a rathole apartment in Silicon Valley when you're retired.
The median house price in San Jose, CA is $1.1 million. The median house price in Gulf Shores, AL (a pretty nice resort area) is only $479k. If you went for a less-resorty area, say Biloxi, MS, you could get by for only $207k.
Edit: you could even have a summer place in Maine (median price: $299,000) and a winter place in Biloxi (median price $207k) and still spend less than half what the San Jose house would cost.
Sure, Gulf Shores is nice and has a huge retirement community, but there is a reason that it has lower house prices and drastically lower property taxes than just a few minutes down the road in Pensacola.
There aren't a lot of services. The hospital in Foley isn't super impressive compared to something you'd see in the Bay Area.
The local amenities are way more focused on partying and/or kids, too.
And finally, of course, is the weather. Winter on that part of the gulf isn't as warm as most people are looking for. You certainly aren't going swimming in the ocean, or even an outdoor pool unless it is heated. You'll have plenty of winter nights at or near freezing.
The problem with moving is that one is unlikely to be near relatives — especially adult children with their own children — who can help with needed care at that age.
Combine this with the skyrocketing costs of retirement homes in convenient locations, which NIMBYism has also contributed towards, Boomers have few attractive options.
Elderly people should be downgrading into smaller properties that are easier to take care of, closer to amenities, etc.
The amount of Elderly people living alone in homes large enough for a family is bananas.
And then they have assisted living people come take care of them in their homes because it's too much for them to look after alone, but they refuse to move somewhere smaller.
In the Northeast, even downsized condos in decent locations are outrageously expensive. Many truly have nowhere to go but hundreds of miles away from family, friends, and the larger community they have lived in for decades.
They don't have to sell their homes, instantly anyway. Reverse mortgages absolutely exist.
They're not a cure-all, of course, and the high rate environment isn't exactly ideal. But they are an option that gets out of the situation you describe.
The great wealth transfer, the estate of dying boomers transferring to their grandchildren, is only just starting. It's not going to be a windfall, it's going to completely flood into real estate. It's basically what happened in the more densely populated Western European countries already, a ratchet up. Americans are in for a rude awakening.
Sorta doubt it in already HCOL areas. Many of these grandchildren do not own a home. They will move in. There will be random 'old people' communities in Arizona that will get totally wrecked in value, but the expensive areas will stay expensive.
If they sold those homes they would never be able to buy back in. Nobody is going to sell a South Bay area home they inherited from their boomer parents. They will rent it out or move in. A massive windfall for them.
I think we're saying the same thing, I probably misphrased. Grandchildren will use grandparents estate to cling on to homes in hcol. That boomer wealth is just going to stay locked up in real estate. Any sale of meemaws home will fund downpayment for little Sally. That's the ratchet up.
I'm pretty young, but one of my retirement plans is my children. I can't be the only one. That is an additional incentive for me to treat them right and ensure they have the means to take care of themselves.
I'm highly suspicious of saddling the younger generation, quite literally, to have their parents as dependents. Housing and medicine has only gotten more and more expensive. How are the children supposed to save up if they have to feed, house, and pay for the healthcare of their children and their parents simultaneously? At some point something is going to shatter in that generational chain if the cost of everything continues to go up.
I agree--it's nice if they can help and are willing to, but it's kind of gross and presumptuous to simply assume they will help or obligate them to help. A parent is obligated to care for a child because [in most cases] they chose to have the child. The reverse is not true. Nobody chose to be born.
Part of the answer there is, they're housing their family with their parents' home, cutting out the interest payments to the bank. In return, the parents are saving the cost of assisted living in the various sorts it takes, further adding to the efficiency. And then to boot, the parents, for a time anyway, are available as childcare.
The amount of money that can be saved this way is nothing to shake a stick at. It may not be what most people want to put up with, but it's not without its financial benefits.
> At some point something is going to shatter in that generational chain if the cost of everything continues to go up.
Maybe that's the final push we need to adopt universal health care like the other civilized countries? When the cost of caring for Boomers will become too high for younger generations to bear, it will either solve itself out through policy or lots of misery.
Me too. I am from a south asian background. I choose to take care of my parents when they are old as they had done for their parents and so on up the generation tree. Its never a burden, its just a way of doing things. I would like to hope that my children would do the same for me as their value system would be passed down from me and my surroundings. I think its because of the cultural upbringing. I would also add most south asians would agree with my sentiment.
I watched my parents, and especially my mom, give up their entire youth caring for my dad’s excessively elderly parents.
They sacrificed portions of mine and my sister’s childhood to take care of two people, who from the age of 75 to almost 100 (both of them), were a net loss to the family since they did not speak English, could not drive, and “needed” home cooked meals 2 to 3 times per day.
It was absolutely a burden for my family, and I hope to never be the parent that needs chronic care, and I am certainly not wanting my kids and grandkids to give up their youth for my senescence.
It also gets more difficult when your parents can't pay their own way precisely because they've made horrible decisions over time. That they'd take comfort in the fact that their kids will take care of them -- I don't know how that doesn't breed resentment.
No, I will not be squandering my retirement now with the plan that my kids will take care of me. Frankly, I find the very thought of that repulsive.
What, giving them a sense of purpose, a home to move into, and access to free childcare?
Yea, how awful -- you might get in the way of their modern narcissistic lifestyle.
But yes, it can go badly -- if, for instance, you're moving in with your kids, rather than providing the house for them to move into. And doing so when no longer physically capable of providing that childcare as a benefit. And then expecting them to pay for your groceries, etc.
But then, the same has been known to happen when you've got ungrateful children, who can't be asked to lift a finger around the house, and who rely on child protective laws to shield them from ever being taught a lesson in reality.
Living with other people isn't always easy, but it does typically pay dividends when you can make it work.
This is very polarizing and seems to be a cultural issue. Americans and westernized cultures are appalled at its selfishness, while many Asian cultures are accustomed to this totally normal and expected part of the closer family unit.
I would never want to put that burden on my kids. I'm a middle-aged gen-xer with teenagers. My boomer parents are doing well enough for themselves but still are relying on their kids (me and my siblings) to "do something" when they get into their 80's. Having to juggle both my kids and my parents is a lot of stress and worry. I'm doing everything I can to not let that happen to my kids when I'm in my 80's.
It's impossible to save because of the inflation, high cost of living and taxes.
It was never possible historically speaking and we are no different today.
Question we have to ask, how that happens that with taxes taking like 50% we can't provide people with pensions.
It's completely possible. The typical HN reader has plenty of resources to do so. If you're making median wage or better and not saving a substantial portion of your income, there are almost certainly changes you could make to improve your savings dramatically.
A group of us at work ended up talking about retirement. I always assumed these guys were paid significantly more than me. They had big houses, expensive cars, and several have their kids in private school. It turns out they’re not saving anything. They’re at max burn rate, cashing out their RSUs as soon as they vest.
At a FAANG table of 5, I was the only one doing anything outside of 401k. I’m also the only one without a Tesla.
I vehemently disagree. The basic issue is that people live beyond their means and it is facilitated/incentivized by a consumer society and a basic human “flaw” of optimizing for the short term and not the long term, financial illiteracy, amongst other things.
Thinking you can have 3 kids and drive a new car etc etc when you don’t have the means but will use a credit card is not a good financial startegy. But then again, very few people think about money and plan…
I know a lot of people in my age cohort who don't have even a dime saved up. And these are not the average struggling American like in the article. They're privileged well-to-do techies. They don't have the very critical "pay yourself first before paying your bills" mindset. I don't know what their plan is if they get critically sick to the point where they can't work, or when their health inevitably deteriorates in their old age. They just kind of shrug and say I'll cross that bridge when it comes. Trading in the Tesla is not going to pay for assisted living.