![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
The Falsity of Saving for Retirement
Jun. 16th, 2008 12:26 pmI am not saying that you should not save for retirement, or whatever else you might choose to save for. But savings cannot pay for a retirement in the absence of a base of workers willing to take up those savings in exchange for their work. Savings are the same as government programs like social security at one step removed.
Do this thought experiment with me. Say a worker's savings are in the hardest of hard investments, gold. In this thought experiment gold could be replaced with anything of value that almost never goes down in value and is pretty imperishable. The worker has saved real gold all his life, putting away and average of one ounce a month from the age of 20 until retirement at age 67. That is 47 years or 564 months and 564 ounces of gold. Today's price on gold puts its value at $869.20 that represents a dollar value of almost half a million dollars.
But that is only if there are workers on the other end willing to buy the saved gold. Let's not assume this worker is unique, but is part of a generation of retiring workers who all saved bigger or smaller piles of gold in this nation and expect to live well in retirement off of these savings. If the nation has not been investing in new workers, teaching them the skills they need to run their society then even though gold is the best commodity we know of for holding value over time it will not go as far if there are not enough people working to produce the transitory goods we want to buy with gold or any legal tender.
Less severely, what if younger workers don't buy up the gold as fast as the retires are unloading it? This could be for whatever reason. From there simply not being enough of them to not earning enough to put away a full ounce of gold every month as their parents did. The natural outcome is the gold won't go as far for the retirement as the people saving it all those years expected.
Ideas like saving for retirement are dependent on the ratio of workers to non-workers. It does not matter why or how people are not working, only that they are not. Unmotivated, unskilled, disabled, or simply non-existent does not make a difference in the outcome, only in what might be done about it.
To some extent the system is self correcting. Not enough workers? Perhaps wages will rise and with prosperity they may choose to have more children. But that is a may and a might and it depends on child rearing being as attractive as anything else a person might do with time and money. And it ignores the hardships of the imbalance between people working and non-workers.
Savings or social security, we were going to have to adjust the way things work with the impending retirement of a very large block of workers and the failure to create their replacements. All social security does is short circuit the process and make it obvious who's actually paying for retirements. It has always been and will always be the younger workers. In the past it was just a lot easier because there were always so many more young workers (and ones with good paying jobs too) than there were people retiring.
Do this thought experiment with me. Say a worker's savings are in the hardest of hard investments, gold. In this thought experiment gold could be replaced with anything of value that almost never goes down in value and is pretty imperishable. The worker has saved real gold all his life, putting away and average of one ounce a month from the age of 20 until retirement at age 67. That is 47 years or 564 months and 564 ounces of gold. Today's price on gold puts its value at $869.20 that represents a dollar value of almost half a million dollars.
But that is only if there are workers on the other end willing to buy the saved gold. Let's not assume this worker is unique, but is part of a generation of retiring workers who all saved bigger or smaller piles of gold in this nation and expect to live well in retirement off of these savings. If the nation has not been investing in new workers, teaching them the skills they need to run their society then even though gold is the best commodity we know of for holding value over time it will not go as far if there are not enough people working to produce the transitory goods we want to buy with gold or any legal tender.
Less severely, what if younger workers don't buy up the gold as fast as the retires are unloading it? This could be for whatever reason. From there simply not being enough of them to not earning enough to put away a full ounce of gold every month as their parents did. The natural outcome is the gold won't go as far for the retirement as the people saving it all those years expected.
Ideas like saving for retirement are dependent on the ratio of workers to non-workers. It does not matter why or how people are not working, only that they are not. Unmotivated, unskilled, disabled, or simply non-existent does not make a difference in the outcome, only in what might be done about it.
To some extent the system is self correcting. Not enough workers? Perhaps wages will rise and with prosperity they may choose to have more children. But that is a may and a might and it depends on child rearing being as attractive as anything else a person might do with time and money. And it ignores the hardships of the imbalance between people working and non-workers.
Savings or social security, we were going to have to adjust the way things work with the impending retirement of a very large block of workers and the failure to create their replacements. All social security does is short circuit the process and make it obvious who's actually paying for retirements. It has always been and will always be the younger workers. In the past it was just a lot easier because there were always so many more young workers (and ones with good paying jobs too) than there were people retiring.