I think we could use some innovation in our model of a career. I have thought retirement being largely binary was lame since I figured out that is mainly how it worked. You work 40 hours a week (1,800 – 2,000 hours a year) and then dropped to 0 hours, all year long, from them on.
It seems to me more gradual retirement makes a huge amount of sense (for society, individuals and our economy). That model is available to people, for example those that can work as consultants (and some others) but we would benefit from more options.
Why do we have to start work at 22 (or 18 or 26 or whenever) and then work 40 or so straight years and then retire? Why not gap years (or sabbaticals)? Also why can’t we just go part time if we want.
The broken health care system in the USA really causes problems with options (being so tightly tied to full time work). But I have convinced employers to let me go part-time (while working in orgs that essentially have 0 part time workers). And I am now basically on gap year(s)/sabbatical now. It can be done, but it certainly isn’t encouraged. You have to go against the flow and if you worry about being a conventional hire you may be nervous.
Related: Working Less: Better Lives and Less Unemployment – Why don’t we take five years out of retirement and spread them throughout your working life? – Retiring Overseas is an Appealing Option for Some Retirees – Living in Malaysia as an Expat – 67 Is The New 55
Across the globe, saving for retirement is a challenge. Longer lives and expensive health care create challenge to our natures (saving for far away needs is not easy for most of us to do – we are like the grasshopper not the ants, we play in the summer instead of saving). This varies across the globe, in Japan and China they save far more than in the USA for example.
The United States of America ranks 19th worldwide in the retirement security of its citizens, according to a new Natixis Global Retirement Index. The findings suggest that Americans will need to pick up a bigger share of their retirement costs – especially as the number of retirees grows and the government’s ability to
support them fades. The gauges how well retired citizens live in 150 nations, based on measures of health, material well-being, finances and other factors.
Top Countries for Retirees
- 1 – Norway
- 2 – Switzerland
- 3 – Luxembourg
- 6 – Finland
- 9 – Germany
- 10 – France
- 11 – Australia
- 13 – Canada
- 15 – Japan
- 19 – USA
- 20 – United Kingdom
Western European nations – backed by robust health care and retiree social programs – dominate the top of the rankings, taking the first 10 spots, including Sweden, Austria, Netherlands and Denmark. The USA finished ahead of the United Kingdom, but trailed the Czech Republic and Slovakia.
Globally, the number of people aged 65 or older is on track to triple by 2050. By that time, the ratio of the working-age population to those over 65 in the USA is expected to drop from 5-to-1 to 2.8-to-1. The USA actually does much better demographically (not aging as quickly) as other rich countries mainly due to immigration. Slowing immigration going forward would make this problem worse (and does now for countries like Japan that have very restrictive immigration policies).
The economic downturn has taken a major toll on retirement savings. According to a recent report by the U.S. Senate Committee on Health, Education, Labor and Pensions, the country is facing a retirement savings deficit of $6.6 trillion, or nearly $57,000 per household. As a result, 53% of American workers 30 and older are on a path that will leave them unprepared for retirement, up significantly from 38% in 2011.
On another blog I recently wrote about another study looking at the Best Countries to Retirement Too: Ecuador, Panama, Malaysia. The study in the case was looking not at the overall state of retirees that worked in the country (as the study discussed in this post did) but instead where expat retirees find good options (which stretch limited retirement savings along with other benefits to retirees).
See the full press release.
Related: Top Stock Market Capitalization by Country from 1990 to 2010 – Easiest Countries in Which to Operate a Businesses: Singapore, Hong Kong, New Zealand, USA – Largest Nuclear Power Generation Countries from 1985-2010 – Leading countries for Economic Freedom: Hong Kong, Singapore, New Zealand, Switzerland – Countries with the Top Manufacturing Production
Those that want to continue the policies of the last few decades of policies that tax our grandkids to pay for us living beyond our means seem to have won the day again. Not a surprise; very sad though.
In my reading stories on the wonderful success of “avoiding the fiscal cliff” seems to amount to passing the George Bush tax cuts again (except this time when in a much much worse budgetary position) and modifying the extent to which the absolute richest benefit from those cuts (so the richest don’t get quite as step cuts as they had been getting but still are getting big cuts from before the Bush tax cuts were made. And the recent trend of treating trust fund babies as the absolute most favored taxpayers was continued (though a few of the absolute richest trust fund babies will have to have some taxes withheld from their windfalls).
I haven’t read anything about them getting rid of the “hedge fund manager” tax favors. Did they? Did they even bother to change the law so retired managers don’t get the super huge tax favors too?
On the spending beyond our means issue they seem to have just decided that having the grandkids continue to fund our spending is wonderful.
If it were up to me I would have continued some of the Bush tax cuts (certainly not for those making more than $200,000 – unless we can cut spending way more than I would guess in which case I would be fine having taxes even for the richest few lowered). I would have continued treatment that reduced taxes owed on dividends and capital gains, though perhaps a bit less than they did. I would cap mortgage deductions (at say $50,000 a year or something).
I certainly would not have supported such massive Bush tax cuts without large spending cuts. If this level of spending is what we intent to do, we need to pay for it and not just bury our kids and grandkids with huge bills. Without spending cuts I would not have voted again for the Bush tax cuts, which seems to be the main extent of their “solution” (taking a bit of the tax cuts for the wealthiest off the plate but pretty much just passing Bush’s tax cut again).
I am glad we have a “fiscal cliff” to finally get some reduction in the future taxes both parties have been piling on with abandon the last few decades. When you have enormous spending beyond your income, as the USA has had the last few decades, cutting current taxes is just raising taxes on your grandchildren to pay for your spending. Shifting taxes to your grand children is not cutting taxes it is shifting them to future generations.
If you want to really cut taxes you must cut taxes and not pass on paying for your cuts to your kids. It seems pretty obvious those that advocating cutting current taxes the last few decades were only interested in living beyond their means today and foisting the responsibility to pay to their grandchildren. That is despicable behavior.
The fiscal cliff is an opportunity to return to a budget that has the generation doing the spending paying the taxes (last seen in the Clinton administration). The fiscal cliff outcome is going to be far from perfect. But the result will be a much more honorable outcome than foisting ever increasing taxes on future generations to pay for our current spending.
Obviously, if you reducing how much you are adding to your credit card balance each month and start paying your bills that means you don’t get to live off your future earnings today. So you will suffer today compared to continuing to tax the future to pay for your spending.
I hope the compromise results in spending cuts and an elimination of the Bush generation shifting taxes (cutting taxes on the the current wealthy without spending cuts – so just taxing the future to pay for tax cuts today). It is unlikely the fiscal cliff results in us actually paying for our spending (the best possible result is not an elimination of adding to the taxes future generations must pay but just a reduction in the level of tax increases we are imposing on the future every year).
Lots of little things should be done to save a few billion (maybe it could add up to $50 billion a year if we are very lucky). But the serious spending cuts have to come from reductions in military spending, reducing waste in the health care system and making social security more actuarially sensible (social security is not part of the fiscal cliff discussions though). Reducing tax breaks also has to happen, unless absolutely huge spending cuts can be found which is not at all likely.
Bain Capital is a product of the Great Deformation by David Stockman
Except Mitt Romney was not a businessman; he was a master financial speculator who bought, sold, flipped, and stripped businesses. He did not build enterprises the old-fashioned way—out of inspiration, perspiration, and a long slog in the free market fostering a new product, service, or process of production. Instead, he spent his 15 years raising debt in prodigious amounts on Wall Street so that Bain could purchase the pots and pans and castoffs of corporate America, leverage them to the hilt, gussy them up as reborn “roll-ups,” and then deliver them back to Wall Street for resale—the faster the better.
That is the modus operandi of the leveraged-buyout business, and in an honest free-market economy, there wouldn’t be much scope for it because it creates little of economic value. But we have a rigged system—a regime of crony capitalism—where the tax code heavily favors debt and capital gains, and the central bank purposefully enables rampant speculation by propping up the price of financial assets and battering down the cost of leveraged finance.
So the vast outpouring of LBOs in recent decades has been the consequence of bad policy, not the product of capitalist enterprise.
I abhor the subsidies provided to those that saddle corporations (that build up value through decades of hard work by employees) with huge debt. The actions of leveraged by out firms are atrocious. They seek to pretend that business is once again the land of the amoral behavior, as the robber barron’s sought to convince society of long ago. Those that saddle corporations (that have an obligation to those that built them up) with huge debt are despicable.
Those same despicable people then take huge amounts of cash (for themselves) from the debt they saddled the corporation with.
Quite a few smart people have figured out how to pay congress to allow those smart people to take huge profits out of businesses. By being smart enough to have congress create laws to allow their behavior they can say it was just doing what the law allowed. When you conspire with the authorities to create a system to drain cash from legitimate businesses into your pocket you can claim you are acting legally (if you do so by having them change the law, instead of having them just ignore the existing laws). But what is being done (for decades by both parties) by those we continue to elect to allow this behavior shows just how corrupt the system is.
It is sad we allow those politicians who payoff those that give them large amount of cash, at the expense of our society, to remain in office. But we don’t even discuss the issues in any significant sense. Those using this cronyism and corruption know they are continuing to be given the open door to continue their very destructive ways. These are smart people. They know how to use public apathy and rhetoric to keep from discussing the important issues. It is going to take us to stop the corrupting cronyism that has taken over our political parties.
Related: Too Much Leverage Killed Mervyns – Failed Executives Use Leverage to Increase Their Pay, Let Others Bailouts Later – Executives Treating Corporate Treasuries as Their Money, A Sad State of Affairs – CEOs Plundering Corporate Coffers – Leverage, Complex Deals and Mania – Looting: Bankruptcy for Profit
Hong Kong again topped the rankings, followed by Singapore, New Zealand, and Switzerland. Australia and Canada tied for fifth, of the 144 countries and territories in the Fraiser Institute’s 2012 Economic Freedom of the World Report.
“The United States, like many nations, embraced heavy-handed regulation and extensive over-spending in response to the global recession and debt crises. Consequently, its level of economic freedom has dropped,” said Fred McMahon, Fraser Institute vice-president of international policy research.
The annual Economic Freedom of the World report uses 42 distinct variables to create an index ranking countries around the world based on policies that encourage economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property. Economic freedom is measured in five different areas: (1) size of government, (2) legal structure and security of property rights, (3) access to sound money, (4) freedom to trade internationally, and (5) regulation of credit, labor, and business.
Hong Kong offers the highest level of economic freedom worldwide, with a score of 8.90 out of 10, followed by Singapore (8.69), New Zealand (8.36), Switzerland (8.24), Australia and Canada (each 7.97), Bahrain (7.94), Mauritius (7.90), Finland (7.88), Chile (7.84).
The rankings and scores of other large economies include: United States (18th), Japan (20th), Germany (31st), South Korea (37th), France (47th), Italy (83rd), Mexico (91st), Russia (95th), Brazil (105th), China (107th), and India (111th).
When looking at the changes over the past decade, some African and formerly Communist nations have shown the largest increases in economic freedom worldwide: Rwanda (44th this year, compared to 106th in 2000), Ghana (53rd, up from 101st), Romania (42nd, up from 110th), Bulgaria (47th, up from 108th), and Albania (32nd, up from 77th). During that same period the USA has dropped from 2nd to 19th.
The rankings are similar to the World Bank Rankings of easiest countries in which to do business. But they are not identical, the USA is still hanging in the top 5 in that ranking. The BRICs (Brazil, Russia, India and China) do just as poorly in both. The ranking due show the real situation of economies that are far from working well in those countries. China and Brazil, especially, have made some great strides when you look at increasing GDP and growing the economy. But there are substantial structural changes needed. India is suffering greatly from serious failures to improve basic economic fundamentals (infrastructure, universal education, eliminating petty corruption [China has serious problems with this also]…).
Us treasury yield hit a incredibly low level years ago and they have continued to fall further. Granted this is mainly due to the bailout of the economy necessitated by the politicians favors to the too-big-too-fail financial institutions that have given those politicians so much cash over the years. Other factors are at play but the extent of the excessive punishment of savers is mainly due to political bailouts of bankers and bailouts of the economy caused by the bankers actions.
This extremely low rate environment is crippling to many retirees. The small percentage that actually did what they were told to have been blindsided by years of artificially low rates (and it is likely to continue for years). This has pushed some that would have been comfortable in retirement into an uncomfortable one an has pushed some from a challenging balancing act to essentially having to eliminate every possible expense (and even that may not be enough).
I can’t believe long term bonds are a sensible investment now. Of course I haven’t thought they were for 10 years, but they are even worse now. Bonds of “strong” governments (USA, Germany, Japan) are paying less than inflation (sometimes even less than 0 nominally – I think this has just been for short term issues so far).
I cannot see putting more than token amounts into long term bonds at these rates. Corporate bonds are not much better. The economic damaged caused by out of control too-big-too-fail institution is huge and continuing. And the politicians that have been paid lots of cash by those too-big-too-fail institutions continue to treat the too-big-too-fail players are favored friends. The yields are corporate bonds are not good for companies that are strong.
The alternatives are not great. But real assets, strong dividend stocks, strong company stocks, and short term bonds seem like better options to me in many cases. And hope we elect people that will put the economic interest of the country ahead of a few well paid friends at too-big-too-fail institution. They also need to eliminate the captured “regulators” that have facilitated the continued wrecking of the global economy. I don’t hold out much hope for this though. We keep re-electing those given lots of cash by the too-big-too-fail crowd and they continue giving them favors. We are getting what we deserve given this poor performance on our part but it is pretty annoying having to watch us vote ourselves into economic calamity.
The Curious Cat Investing, Economics and Personal Finance Carnival is published twice each month with links to new, related, interesting content online. Also see related books and articles.
- A Nation of Public Housing by Neal Peirce – “One government agency manages 80 percent of the housing stock — all called public housing. It checks your age and whether you’re married to decide whether and when you’re eligible for an apartment.” Racial quotas are used, unmarried people can’t apply until they turn 35. Any guess on what country this is? The same country is ranked as the easiest, or close to it, country run business in the world.
- China’s end game:the dark side of a great deleveraging by Dee Woo – “The dilemma is that business entities will need more and more credit to achieve the same economic result, therefore will be more and more leveraged, less and less able to service the debt, more and more prone to insolvency and bankruptcy. It will reach a turning point when the increasing number of insolvencies and bankruptcies initiate an accelerating downward spiral for underling assets prices and drive up the non-performing loan ratio for the banks. And then the over-stretched banking system will implode. A full blown economic crisis will come in full force. The chain of reaction is clearly set in the motion now.
The biggest problem for China is the state, central enterprises and crony capitalists wield too much power over national economy, have too much monopoly power over wealth creation and income distribution, and much of the GDP growth and vested interest groups’ economic progress are made on the expanse of average consumers stuck in deteriorating relative poverty.”
- Challenges faced by middle-class L.A. families by Meg Sullivan – “Managing the volume of possessions was such a crushing problem in many homes that it actually elevated levels of stress hormones for mothers. Only 25 percent of garages could be used to store cars because they were so packed with stuff.” (read the book: Life at Home in the Twenty-First Century)
- USA Social Security Disability Insurance (SSDI) by John Hunter – Benefits have a maximum of $2,346/month (in 2011). The average benefit payment now is $1,111. More than 8.7 million people are received disability benefits currently (partially disabilities are not eligible for SSDI.
I do think there is merit to reducing yearly hours worked in the USA. The problem is this is all within a larger system. The USA’s broken health care system makes it extremely expensive to hire workers. One way to deal with the health care system failure is maximizing hours worked to spread out the massively expensive USA health care costs.
Also the USA standard of living is partially based on long hours (it is but one factor). We also have to work quite a few hours (about 5% of the total hours) to just bring us equal with other rich countries, in order to pay for our broken health care system.
Still reducing our purchases by cutting out some fancy coffee, a few pairs or shoes, a few cable channels (or all of them), text messages from overcharging phone companies… in order to have a couple more weeks of vacation would be a great tradeoff in my opinion. And one I have made with my career.
I have changed to part time in 2 of my full time jobs (to make my own sensible yearly hour model even if the bigger system can’t. Another time I bargained for more vacation time over more $. It isn’t easy to do though, most organizations are not willing to think and accommodate employees (hard to believe they respect people in this case, right?). The system is not setup to allow people to adjust total hours to maximize their well being.
Another option in the USA is to live within your means and then make your own sabbaticals during your career. Take a year off and travel the world, or hike the Appalachian Trail, or read trashy novels, or whatever you want.
Welcome to the Curious Cat Investing, Economics and Personal Finance Carnival. The carnival is published twice each month with links to new, related, interesting content online. Greece just voted for the party that wants to attempt to keep Greece in the Eurozone. We will see how that works. I don’t think the odds are great unless Greece is willing to substantially change their recent (last few decades) running of their economy.
- Big Investors Don’t Know Where to Put Their Cash by Sven Böll and Martin Hesse – “‘In the past, we searched for risk-free returns.’ He pauses for effect. ‘Today we know that what we mainly have are investments with return-free risk.’… Corporate bonds and the sovereign debt of emerging economies, once something for the intrepid, are suddenly seen as safe havens.”
- Are More Bailouts to Banker and Politicians the Answer to the Credit Crisis Aftermath? by John Hunter – “It feels to me similar to a situation where I have maxed out 8 credit cards and have a little bit left on my 9th. You can say that failing to approve my 10th credit card will lead to immediate pain. Not just to me, but all those I owe money to. That is true. But wasn’t the time to intervene likely when I maxed out my 2nd credit card and get me to change my behavior of living beyond my means then?”
- The Great Recession is changing our behavior–in ways that point to slower growth for a longer period of time by Jim Jubak – “The third, most powerful in its effects and the least obvious, is the way that the Great Recession has undermined existing belief in financial security. That decline in real and perceived security is likely to change where people put their money, what kinds of returns they think they can count on, and, therefore, how much money they think they can spend and how much they have to put away.”
- A Global Perfect Storm by Nouriel Roubini – “To prevent a disorderly outcome in the eurozone, today’s fiscal austerity should be much more gradual, a growth compact should complement the EU’s new fiscal compact, and a fiscal union with debt mutualization (Eurobonds) should be implemented. In addition, a full banking union, starting with eurozone-wide deposit insurance, should be initiated, and moves toward greater political integration must be considered, even as Greece leaves the eurozone.
CommentsUnfortunately, Germany resists all of these key policy measures…”