LBYM? Not in America

[Rich_by_the_Bay]

This article states what we all assume, but the extent to which Americans are living beyond their means (mostly by leveraging their houses) is extreme. Only 7 such cases in history, including WW 2 and the Depression.

Party's over, hangover just beginning.

[heyyou]

At the end of the article, the blurb about the author states that he does not own stocks other than his employer's stock. So where is his retirement money?

[Andy R]

I was just reading that article also. This article talking about the stock market fall today in Japan also mentions recession:

"as the dollar slumped to a 15-year low against a basket of major currencies on concerns the U.S. economy may be heading into a recession."

If it's not enough that most US citizens are not LBYM our government is saddled with it's largest debt ever (link) at just shy of $9 trillion or nearly $30k per person.

[bots2019]

Quote:

Originally Posted by Rich_in_Tampa LBYM? Not in America

I disagree, "B" just stands for 'beyond'

[twaddle]

As an economist, however, he is well aware that others might not agree with his interpretation of the numbers. "There are people who deny man walked on the moon, and there are people who will deny this, too," he says. "But the data are overwhelming that households are spending more than their income."

We've been getting this same message for years. When you break down the numbers, the negative savings rate is largely due to baby boomers retiring.

By definition, retirees have a negative savings rate. The more retirees we have, the more negative our savings rate will be as a nation.

[Nords]

Quote:

Originally Posted by Andy R If it's not enough that most US citizens are not LBYM our government is saddled with it's largest debt ever (link) at just shy of $9 trillion or nearly $30k per person.

Most people would look at that graph and think that we're barely halfway to capacity... We're #1, now get out there and spend!!

[laurence]

Quote:

Originally Posted by twaddle As an economist, however, he is well aware that others might not agree with his interpretation of the numbers. "There are people who deny man walked on the moon, and there are people who will deny this, too," he says. "But the data are overwhelming that households are spending more than their income." We've been getting this same message for years. When you break down the numbers, the negative savings rate is largely due to baby boomers retiring. By definition, retirees have a negative savings rate. The more retirees we have, the more negative our savings rate will be as a nation.

What we need is a breakdown of savings rate by age group. The best I could come up with was this: Are you saving too much for retirement? - USATODAY.com

According to this article's graph, 50% have saved less than 50k, excluding home equity. Retire at 67 and hope SS is enough?

[twaddle]

Summary:

Our negative savings rate can be misleading measure - The Denver Business Journal:

Research:

Center for Retirement Research at Boston College - How Much Are Workers Saving?

[Andy R]

Here is some interesting info about savings rates and GDP growth.
Intelligentguess - Analysis of Market Economics » USA - Relationship between GDP and Savings rate ( Quarterly data since 1985 )

I thought the authors summary on this page was interesting:
Intelligentguess - Analysis of Market Economics » USA - Manner in which the Deficit has been financed since 1995 ( Savings viz external debt)

[W2R]

Quote:

Originally Posted by twaddle By definition, retirees have a negative savings rate.

Really? I plan to save when I am retired. That is built into my spreadsheet and into the amount I feel I need in order to retire.

[Khan]

Quote:

Originally Posted by Want2retire Really? I plan to save when I am retired. That is built into my spreadsheet and into the amount I feel I need in order to retire.

I'm retired and I'm still saving.

[brewer12345]

Quote:

Originally Posted by Want2retire Really? I plan to save when I am retired. That is built into my spreadsheet and into the amount I feel I need in order to retire.

Your and my definition of "saving" is not necessarily equal to that used to compile savings rate data.

[W2R]

Quote:

Originally Posted by brewer12345 Your and my definition of "saving" is not necessarily equal to that used to compile savings rate data.

Well, guess whose definition I think is most realistic?

[saluki9]

Quote:

Originally Posted by heyyou At the end of the article, the blurb about the author states that he does not own stocks other than his employer's stock. So where is his retirement money?

Most likely mutual funds.

[FinallyRetired]

What frightens me the most is the "Fiscal Reality Tour" by GAO Chief David Walker.

GAO Chief David Walker: Economic Disaster Looms

[Dawg52]

Quote:

Originally Posted by SoonToRetire What frightens me the most is the "Fiscal Reality Tour" by GAO Chief David Walker. GAO Chief David Walker: Economic Disaster Looms

Yes, I saw him on 60 Minutes. Paints a pretty bleak picture.

[FinallyRetired]

Quote:

Originally Posted by Dawg52 Yes, I saw him on 60 Minutes. Paints a pretty bleak picture.

Here are his slides.
http://www.gao.gov/cghome/d061084cg.pdf

[twaddle]

Unfunded future liabilities is not just a problem in the US. Japan and Germany are closer to doomsday in that regard, so it'll be interesting to see how they deal with it. One trend is already clear in Japan. Workers keep on working about 10 years past the mandatory retirement age in Japan on average.

The main difference between Japan and the US is that Japanese old folk are generally in better health than American old follk. That is something we'll have to figure out how to deal with on our own.

[Nords]

Quote:

Originally Posted by twaddle Unfunded future liabilities is not just a problem in the US. Japan and Germany are closer to doomsday in that regard, so it'll be interesting to see how they deal with it.

First, let me say that I'm glad we're all being admonished that we're doomed on the highway to hell. I think it's a good idea for governments to have to account for liabilities and to prepare to fund them. Much of the recent despair over retiree benefits has been instigated by the new requirement for state & local govts to account for and actually fund their healthcare liabilities, not just hand them out at every contract negotiation like Ford & GM & Chrysler in the 1980s. So grappling with the problem, even if it's made overly scary, is a good thing.

Second, I think it's good to focus on the pessimistic scenarios. Too many "good" scenarios rely on statistically challenging feats like "no bad surprises" or "no volatility". Focusing on the pessimistic forces people to, at a minumum, study statistics & history to come up with solutions. Or to at least avoid repeating history.

Third, the "gloomy" forecasts are a better mandate on govts to spend responsibly. You know what'd happen if Social Security was declared to be overfunded, and there'd never be a rebate of our tax payments. At the very minimum the politicians are aware that they can't raise taxes across the board to solve a problem like Medicare, so they're forced to at least pretend to some semblance of fiscal responsibility and solution-seeking.

Fourth, I think the statisticians & actuaries & accountants need better tools. They've been predicting disaster for over four decades now, which tends to reduce their credibility to at best Cassandra, if not the boy who cried "Wolf!" Pretty soon even the politicians are going to decide that there's no consequence for ignoring the problems.

Quote:

Originally Posted by twaddle One trend is already clear in Japan. Workers keep on working about 10 years past the mandatory retirement age in Japan on average.

Gosh, they must be so bored & unfulfilled. You know in Japan that it's almost impossible to get a tee time, and the surf sucks too. I wonder if there's a Japanese phrase for "Whaddya DO all day?!?"

Is it possible that the Japanese Boomers have delayed their retirements because their stock market & economy have sucked for the last 1.5 decades? Or, gee, maybe they didn't save enough money either. I'm sure the Japanese I see in Waikiki have a pithy colloquialism for their spending.

Quote:

Originally Posted by twaddle The main difference between Japan and the US is that Japanese old folk are generally in better health than American old follk. That is something we'll have to figure out how to deal with on our own.

Higher immigration quotas for geriatric & elder-care specialists... Hawaii's a harbinger of the same issues.

[unclemick]

Sooo - last time we elected Clinton, the Japanese stopped buying Golf Courses and Sean Connery was in the Rising Sun movie.

Soo - whadda we gonna sell the Chinese? The oil thingy got people upset.

heh heh heh -

Oh Yeah - raised taxes also as I recall. Foreign stocks yuck, $ and US - yeah!