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MIT Lecture
Old 01-21-2005, 08:41 PM   #1
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MIT Lecture

I came across this lecture by Laurence Kotlikoff, the "brains" behind "The Coming Generational Storm" (no offence to Burns, but Kotlikoff DID write the paper)

The Video: http://mitworld.mit.edu/video/202/
The Paper which lead to the book: http://econ.bu.edu/kotlikoff/GenerationalStorm.pdf

He talks about the problems facing the US, and talks about what you can do about it. The Q&A session is full of good information as well. Overall, very depressing, but nice in the sense that he validates everything I have been telling my friends

Anyways, if you have an hour, I highly reccomend you get some popcorn, pull up a chair, and enjoy!
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Re: MIT Lecture
Old 01-21-2005, 11:26 PM   #2
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Re: MIT Lecture

watched the video, very scary!
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Re: MIT Lecture
Old 01-22-2005, 02:42 AM   #3
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Re: MIT Lecture

Quote:
I thank Merrill Lynch for funding this description of America's demographic transition and its
implications for America and Americans.
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Re: MIT Lecture
Old 01-22-2005, 05:27 AM   #4
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Re: MIT Lecture

And of course everyone posting here is sending a copy to their Congressman so they'll be informed. Heh.heh, heh.
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Re: MIT Lecture
Old 01-22-2005, 09:41 AM   #5
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Re: MIT Lecture

Marshac,

Thanks for the "Coming Storm" link. It is well
worth the time.

The author is apolitical ..... he says a pox on
both Dems and Repubs and offers a middle
ground solution that might appeal to the
moderate pragmatics of both camps.

I sincerely hope that we can bury the political
biases on these issues and start coping with
the problems we face.

Cheers,

Charlie
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Re: MIT Lecture
Old 01-22-2005, 11:17 AM   #6
 
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Re: MIT Lecture

@ell, I certainly agree with "a pox on both Dems and Republicans"

JG
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Re: MIT Lecture
Old 01-22-2005, 01:06 PM   #7
 
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Re: MIT Lecture

Thanks for posting these links.

I watched the video and am 50% through reading his paper.

This is a very worrisome situation. It's had me concerned for a while, but he puts a lot of analysis and real numbers into the mix.

He's a big advocate of NOT investing an long-term US bonds, as he thinks the US is bankrupt and it's only a matter of time before othwr nations who invest heavily in the US will figure this out and move their monies elsewhere.

He also suggests NOT putting your savings into IRAs and Roths (except to get a company-match) because he thinks the federal income tax rates will be escalating significantly and will impact these savings vehicles in the process.

Many of his proposed solutions are going to involve a lot of belt-tightening...and will not make many people happy.

Does anyone who has read and/or watched these have any suggestions on how we (the high-savings group) can best prepare?

EngrGal

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Re: MIT Lecture
Old 01-22-2005, 01:24 PM   #8
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Re: MIT Lecture

De Gaul and the Norwegian widow

History does not repeat exactly - but I can recognize familar elements of the 70's, 80's and early 90's.

We will muddle thru - at least until someday we don't.

BTY - the pinch hitter is Adam Smith and his 'Invisible Hand' - with Yogi as the coach.
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Re: MIT Lecture
Old 01-22-2005, 01:31 PM   #9
 
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Quote:
History does not repeat exactly - but I can recognize familar elements of the 70's, 80's and early 90's.
Yes, I remember reading a lot of other papers predicting demise in those times. One of the most popular ones was Ravi Batri, Professor of Econ at Princeton, I believe.

It's human nature to believe in these scenarios. And someday one of these gloom and doomers are going to be right. Not because they are smarter than everyone else, but just because they got lucky.

They have always been with us, and I expect them always to be. This is not saying that I think he's wrong, but there are so many unforseen variables that cause different reactions than were expected.

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Re: MIT Lecture
Old 01-22-2005, 02:40 PM   #10
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Re: MIT Lecture

To put it bluntly - adjustments will be/are being made in world currency, stock, bond markets and Congress will 'do something' - like pension reform in 1975 or saving SS in 1983. Remember Graham/Rudman?

Some people will benefit and others won't.

Sooo - to throw in a little Bear Bryant - watch the football and like a linebacker be: 'agile, mobile and hostile'.
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Re: MIT Lecture
Old 01-22-2005, 04:32 PM   #11
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Re: MIT Lecture

EngrGal,

I recently bought a long term CD (2014) that pays
2% + CPI as an inflation hedge.

Some of us on this forum use Short Term Investment
Grade (Vanguard) as a MM substitute. I am seriously
considering shifting the rest of my bond allocation
to my MM fund. IMHO, this is a safer play right now
even if you give up 1.5% of current yield. If long
rates go up 1% MM will have a better total return
than Short Term Investment grade.

Cheers,

Charlie

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Re: MIT Lecture
Old 01-23-2005, 11:07 AM   #12
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Re: MIT Lecture

So maxing out 401-K is a bad thing?

http://www.esplanner.com/ConsumerReports.pdf
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Re: MIT Lecture
Old 01-23-2005, 11:48 AM   #13
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Re: MIT Lecture

If the government raises taxes in the future (and thus increasing the rate at which your 401k withdrawals are taxed at), possibly. It all depends on what your tax bracket is now. In the paper I linked to, there is a table he made that shows you how a 20% tax increase later would affect your lifetime consumption, and your lifetime tax burden.

He wasn't telling people "don't save for your retirement", but rather telling people to look at some of the alternatives to a tax-deferred retirement account.
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Re: MIT Lecture
Old 01-23-2005, 07:33 PM   #14
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Re: MIT Lecture

This poped up today on Google news:

http://news.ft.com/cms/s/bd52ee06-6d...00e2511c8.html
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Re: MIT Lecture
Old 01-24-2005, 10:04 AM   #15
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Re: MIT Lecture

The book that Kotlikoff has written with Scott Burns generally recomends being more heavily weighted toward international stock and bond investments, using funds that don't hedge away currency risk. In addition, they suggest natural resource stocks and funds in anticipation of higher inflation. They are moderate in their suggestions.

I take Social Security at their word, planning on receiving 73% of expected benefits at most as mentioned on the annual statement. After Medicare B is deducted, I view SS as a fixed pension, with rising medicare costs eating the inflation adjustment, as happened this year to low income SS recipents.

The tax laws affecting SS are not inflation adjusted, so it eventually becomes fully income taxed.

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Re: MIT Lecture
Old 01-24-2005, 02:17 PM   #16
 
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Re: MIT Lecture

Hello mark! I basically view SS in the same way.
They send you the annual statement. Sure, the
law could change, but beyond what they show you
it's all just guessing isn't it? I have recently started to
factor my DW's SS benefits into my projections
(she will be 62 four and a half years after I start
drawing). With my SS, her SS, and the income from my investments, we look golden. Of course, it is entirely
possible we won't live to see it. OTOH, 2011 no longer seems that far away.

JG
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Re: MIT Lecture
Old 01-25-2005, 07:36 AM   #17
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Re: MIT Lecture

While there are many opinions on Social Security, it is won't disappear, just become more stingy. In my personal opinion, there will be less of a crisis than is politically expected (as opposed to the real world) due to insufficent personal savings. Retirement will start later from necessity.
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Re: MIT Lecture
Old 01-25-2005, 04:20 PM   #18
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Re: MIT Lecture

Quote:
If the government raises taxes in the future (and thus increasing the rate at which your 401k withdrawals are taxed at), possibly. It all depends on what your tax bracket is now. In the paper I linked to, there is a table he made that shows you how a 20% tax increase later would affect your lifetime consumption, and your lifetime tax burden.

He wasn't telling people "don't save for your retirement", but rather telling people to look at some of the alternatives to a tax-deferred retirement account.
I hadn't thought about a 20% tax increase between now and retirement. Wondering about how tax-deferred compounding would affect the long term scenario I looked at the article. On the first page this leaped out at me:

Quote:
I thank Merrill Lynch for funding this description of America's demographic transition and its implications for America and Americans.
Merrill Lynch would probably benefit more if people saved more in after-tax accounts, at least for companies that don't use them as their 401(k) trustee.

The graph is on the last page. If I read it right it's saying that a 4% tax-deferred savings works better in the 20% rise in taxes scenario than 6% or 8% tax-deferred savings. I think I'll run my own numbers on that sometime...too many questions from that graph, like when do the taxes go up?

This is in the executive summary on page 4 when talking about the effect of high tax-deferred savings for low and moderate income households:

Quote:
Third, and most importantly, withdrawals of tax-deferred balances when old can trigger much higher levels of Social Security benefit taxation under the federal income tax.
Huh? 401(k) and IRA withdrawals don't have SS tax taken out of them, do they? Last I checked I pay SS tax on my gross income, not my gross income minus tax deferred savings, so why would I pay SS again later? Or is he saying that since it's taxed as income that having a higher income would limit my SS benefits?

Or is he simply saying that the marginal tax rate or resultant total tax rate is higher with tax-deferred withdrawals being taxed as income as compared to having after-tax capital gains styled investments? You pays your taxes now, or you pays your taxes later. Your marginal tax rate changes with higher taxable income, but I don't see how that diminishes SS benefits.

I gotta tell you, I was interested in his article when I read your post about 20% tax increases, but at first glance I'm suspect of his motives. I've only read the first and last pages plus the executive summary, though.
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Re: MIT Lecture
Old 01-25-2005, 05:17 PM   #19
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Re: MIT Lecture

BMJ,

Didn't you know that up to 85% of your SS income
is subject to income taxes under certain conditions?

We can thank our Lib friends on the left for that.

Cheers,

Charlie

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Re: MIT Lecture
Old 01-25-2005, 05:41 PM   #20
 
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Re: MIT Lecture

Quote:
BMJ,

Didn't you know that up to 85% of your SS income
is subject to income taxes under certain conditions?

We can thank our Lib friends on the left for that.

Cheers,

Charlie
This is too easy - I'll let someone else do it!
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