Consumer spending

[Khan]

if you were at an SES level of pay, like a federal district judge or an agency head, or a member of Congress, i'll grant that one.
if you were a regular person, no way is a govt pension enough to live on.

YMMV, I am spending less than $30,000/year. I do have other funds that I have not yet accessed.

 

[Gone4Good]

The best way to invest, in my small opinion, is to

• preserve capital (minimum)
• buy again when stocks are cheap (better)
• meanwhile own long Treasury bonds (best)

Didn't we have this discussion here? http://www.early-retirement.org/forums/f28/estimating-the-stock-bond-risk-premium-40838.html

 

[Gone4Good]

Well the Treasuries have been fun, especially now with the Fed on my side!

Do you think Uncle Ben will drop you a line when he decides to stop buying or stop jaw-boning?

 

[freebird5825]

YMMV, I am spending less than $30,000/year. I do have other funds that I have not yet accessed.

what does YMMV mean?

 

[REWahoo]

what does YMMV mean?

http://www.early-retirement.org/for...slang-frequently-used-on-the-forum-34884.html

 

[freebird5825]

http://www.early-retirement.org/for...slang-frequently-used-on-the-forum-34884.html

couldn't find it amongst all the posts.
can someone spell it out, pleeeeezzz?

 

[REWahoo]

Ahem...

Standard Acronyms You May Find on the Forum

YMMV - Your Mileage May Vary

 

[freebird5825]

Ahem...

OMG - i thought YMMV stood for "You're Making Me Vomit".
i think i need a lobotomy!

 

[Khan]

OMG - i thought YMMV stood for "You're Making Me Vomit".
i think i need a lobotomy!

I sometimes forget that I have been posting since mammoths roamed the web. I tend to assume that people know what I am talking about.

 

[Gardnr]

Do you think Uncle Ben will drop you a line when he decides to stop buying or stop jaw-boning?

I was thinking the same thing. Holding 30 yr T Bonds right now seems a lot like holding internet stocks in spring of 2000. Yeah they can go higher I suppose, but not much. And when they start reversing it could be (will be) nasty.

 

[freebird5825]

I sometimes forget that I have been posting since mammoths roamed the web. I tend to assume that people know what I am talking about.

from here forward, read YMMV a la my interpretation and try to keep a straight face.

 

[jazz4cash]

Not to hijack, anybody see this?

My dear friend and co-blogger Doris “Tanta” Dungey passed away early this morning. I would like to express my deepest condolences to her family and friends.

from the link in post #23

 

[Architect]

You folks still don't understand the nature of the problem. Comparing Treasuries right now to the dot.com bubble is a false analogy.

OT - yes I knew Tanta.

I was thinking the same thing. Holding 30 yr T Bonds right now seems a lot like holding internet stocks in spring of 2000. Yeah they can go higher I suppose, but not much. And when they start reversing it could be (will be) nasty.

 

[Gone4Good]

You folks still don't understand the nature of the problem. Comparing Treasuries right now to the dot.com bubble is a false analogy.

Understanding and agreeing are two different things. And they don't necessarily go hand in hand.

 

[Nords]

The conundrum of our retirement planning is that the non-retired portion of the population must support us. Assuming we have them, we have to be able to sell our stocks and bonds and houses and gold or whatever to the younger generations. The working population has to fund our SS and Medicare (as current legislated). Tax collections have to pay public pensions, and business income private pensions.
If we are retired and not contributing to society via work, then somehow, society supports us. Only a strong economy can support a lot of retirees.

Excuse me, but by any chance have you posted to the wrong discussion board? Hopefully you're not posting from your workspace!

What about the possibility that retirees have worked their assets off to accumulate possessions that are of value to everyone else, no matter their age or employment status? I don't know how old the people are who buy the stocks & bonds & houses I sell to them, and I don't know if they have jobs or they're retirees, but they're presumably buying these things at what they perceive to be a fair value. No charity required.

Have you considered that you're not paying taxes to support a bunch of deadbeat retirees? You could be paying taxes to encourage people to undertake careers that few may care to pursue but which may become attractive when funded by an annuity. It's the price paid to enjoy the society we're all supporting. Or maybe firefighters & police officers choose those careers because it's easy to get hot dates.

It's a very grim view of the world to think that one can only support a society by working for money. Just like farmers & ranchers attempted to become self-supporting, at some point one's efforts should achieve the critical mass to do the same. Social Security and Medicare have turned out to be the way this particular society has implemented a safety net-- for a lot more people than just retirees-- but again it ain't charity.

As for strong economies supporting a lot of retirees... I'm not sure how Dave Barry would justify Florida.

 

[FinanceDude]

I sometimes forget that I have been posting since mammoths roamed the web. I tend to assume that people know what I am talking about.

I agree, 2 years on here seems like an eternity.......

 

[Independent]

The conundrum of our retirement planning is that the non-retired portion of the population must support us. Assuming we have them, we have to be able to sell our stocks and bonds and houses and gold or whatever to the younger generations. The working population has to fund our SS and Medicare (as current legislated). Tax collections have to pay public pensions, and business income private pensions.

If we are retired and not contributing to society via work, then somehow, society supports us. Only a strong economy can support a lot of retirees.

Yup.

 

[SteveL]

Excuse me, but by any chance have you posted to the wrong discussion board? Hopefully you're not posting from your workspace!

What about the possibility that retirees have worked their assets off to accumulate possessions that are of value to everyone else, no matter their age or employment status? I don't know how old the people are who buy the stocks & bonds & houses I sell to them, and I don't know if they have jobs or they're retirees, but they're presumably buying these things at what they perceive to be a fair value. No charity required.

Have you considered that you're not paying taxes to support a bunch of deadbeat retirees? You could be paying taxes to encourage people to undertake careers that few may care to pursue but which may become attractive when funded by an annuity. It's the price paid to enjoy the society we're all supporting. Or maybe firefighters & police officers choose those careers because it's easy to get hot dates.

It's a very grim view of the world to think that one can only support a society by working for money. Just like farmers & ranchers attempted to become self-supporting, at some point one's efforts should achieve the critical mass to do the same. Social Security and Medicare have turned out to be the way this particular society has implemented a safety net-- for a lot more people than just retirees-- but again it ain't charity.

As for strong economies supporting a lot of retirees... I'm not sure how Dave Barry would justify Florida.

Gee, guess I hit the wrong button with you.

Let me try again. (I am retired.)

The challenge of SSec is that by the time I am 66 there will be fewer people working to pay for each person who is collecting. This same problem might affect the stock market (401k's, IRA's, Roth's), the housing market and any other market. Assets (like houses and stocks) have no intrinsic value. For values to go up, there must be more buyers than sellers.

Pensions, whether of public employees or private retirees must be funded from (at least in part) current tax collections, business profits etc.

Only a strong economy can produce rising tax collections, business profits, and increasing asset prices, and thus cover the cost of pensions and the income needs of retirees.

 

[NW-Bound]

SteveL, the way you just explained was the way I (and likely Independent) read it the first time. I could see how your initial post could have been interpreted differently than you intended, but better you explained yourself than me trying to put words in your mouth.

 

[Nords]

The challenge of SSec is that by the time I am 66 there will be fewer people working to pay for each person who is collecting. This same problem might affect the stock market (401k's, IRA's, Roth's), the housing market and any other market. Assets (like houses and stocks) have no intrinsic value. For values to go up, there must be more buyers than sellers.

That's one explanation, and a very popular one with the media.

Another explanation would hypothesize that the compounded value of our SS contributions (and our employer's contributions) would tend to throw off enough of an income stream to support our distributions-- especially when you factor in the "leftover" contributions of those who either aren't eligible for SS or are no longer alive to collect it. And then some of our SS distributions are taxed right back out of our pockets again.

I don't know which financial analogy is considered closer to reality.

Only a strong economy can produce rising tax collections, business profits, and increasing asset prices, and thus cover the cost of pensions and the income needs of retirees.

I agree that a strong economy floats everyone's boat. However I think that many businesses (and govts) can cover those expenses if they're properly planned & accounted for. The trick is to take conservative measures to be able to pay those obligations without having to engage in wishful anticipation of Dow 36,000.

If I felt that the only way that I could receive a pension was to suck the lifeblood out of subsequent generations, then why would I ever want to stop working?

 

[barbarus]

What I do think is that people are going to keep spending until they run out of money. They they're going to keep working to get more money. Some of them will work until they die, and others will figure out how to live on Social Security deposits. But I don't think that people's spending habits will permanently change, any more than similar sectors of the population will stop consuming more calories than they use, drinking too much alcohol, or smoking cigarettes.

I suspect that stocks in those demographics will continue to make money, too, even if they're killing off the customers...

No, the basic psychology of the majority will not change. Most people will spend as long as they have money or credit.

The opportunity to make more money IS changing though. Many j*bs are gone for good. Many now w*rking are going to find themselves involuntarily retired or at best, perpetual part-timers. They will quite likely not be able to earn enough for basic necessities, let alone the accouterments of the good life that they are used to. One must speculate on how society will change in the coming years.


Remember that the politicians and bureaucrats are on their side and future policy will reflect this. Are you ready to support them with your funds?

 

[SteveL]

"I agree that a strong economy floats everyone's boat. However I think that many businesses (and govts) can cover those expenses if they're properly planned & accounted for. The trick is to take conservative measures to be able to pay those obligations without having to engage in wishful anticipation of Dow 36,000." (Nords)

When I took economics in college in 1964, there was an on-going discussion in class about whether or not the DOW would ever hit 1000. Today, we are floating around 8200 give-or-take. It isn't unthinkable that by 2034 the DOW could hit 36000.

If you do a Google search on Public Pension funding, you can quickly discover that most state and local government pension plans are in trouble. Some of this is due to the current investment environment, more though is due to systematic under-funding; making promises to public employees and then not paying the piper.

Public employees (and private too) work for decades counting on these promises and will be discovering that their pensions are not secure. Only higher taxes, or reduced benefits will fix this.

For those of us who had higher incomes while we worked, it will be a stretch for us to come out even on SS, given what was paid into the program. However, given that 10 quarters of employment, part-time at minimum wage, can get someone a significant lifetime payment, there is no way that SS can be fair to us. Someone has to pay for the low-income folks who will collect far more than paid in. (Fortunately, we have millions of illegal immigrants who are paying SS but will never collect to help.)

 

[Nords]

If you do a Google search on Public Pension funding, you can quickly discover that most state and local government pension plans are in trouble. Some of this is due to the current investment environment, more though is due to systematic under-funding; making promises to public employees and then not paying the piper.

It's worth pointing out that most of those plans weren't "in trouble" until the GAAP accounting rules were imposed on the states & municipalities, requiring them to account for their future liabilities (healthcare as well as retirement) similar to the way industry is already required to account for them.

In other words, the trouble officially started when the rules were changed. (I'm not implying correlation & causation, only that this is how the issue came into focus.) The rule change is a good thing but I wouldn't blame pension funding on the current investment environment or under-funding any more than I'd blame it on too many retirees leaving too soon...

 

[al_bundy]

"I agree that a strong economy floats everyone's boat. However I think that many businesses (and govts) can cover those expenses if they're properly planned & accounted for. The trick is to take conservative measures to be able to pay those obligations without having to engage in wishful anticipation of Dow 36,000." (Nords)

When I took economics in college in 1964, there was an on-going discussion in class about whether or not the DOW would ever hit 1000. Today, we are floating around 8200 give-or-take. It isn't unthinkable that by 2034 the DOW could hit 36000.

If you do a Google search on Public Pension funding, you can quickly discover that most state and local government pension plans are in trouble. Some of this is due to the current investment environment, more though is due to systematic under-funding; making promises to public employees and then not paying the piper.

Public employees (and private too) work for decades counting on these promises and will be discovering that their pensions are not secure. Only higher taxes, or reduced benefits will fix this.

For those of us who had higher incomes while we worked, it will be a stretch for us to come out even on SS, given what was paid into the program. However, given that 10 quarters of employment, part-time at minimum wage, can get someone a significant lifetime payment, there is no way that SS can be fair to us. Someone has to pay for the low-income folks who will collect far more than paid in. (Fortunately, we have millions of illegal immigrants who are paying SS but will never collect to help.)

when most of the pension promises were made, lifespans were a lot shorter. This has a lot to do with the underfunding as well, not some evil plot by stupid people.

Logan's Run anyone?

 

[Independent]

That's one explanation, and a very popular one with the media.

Another explanation would hypothesize that the compounded value of our SS contributions (and our employer's contributions) would tend to throw off enough of an income stream to support our distributions-- especially when you factor in the "leftover" contributions of those who either aren't eligible for SS or are no longer alive to collect it. And then some of our SS distributions are taxed right back out of our pockets again.

I don't know which financial analogy is considered closer to reality.

I agree that a strong economy floats everyone's boat. However I think that many businesses (and govts) can cover those expenses if they're properly planned & accounted for. The trick is to take conservative measures to be able to pay those obligations without having to engage in wishful anticipation of Dow 36,000.

If I felt that the only way that I could receive a pension was to suck the lifeblood out of subsequent generations, then why would I ever want to stop working?

I'll agree that local governments and private firms should be setting aside "prudent" amounts to cover their future pension obligations.

But, I'll also agree with what (I think) SteveL is saying. From the perspective of the entire economy, all retirement systems are simply ways of transferring economic goods from current workers to former workers. If the ratio changes in the wrong direction, all retirement systems are stressed.

This means that replacing SS with an "advance funded" system wouldn't make us immune to the retiree/worker ratio. One way of thinking about it is that you could own stocks, but not have anyone to buy them. Another is that your stock ownership gives you a share of the company's revenue, but the shortage of workers means that they have more bargaining power, and your slice of the pie is smaller.