Early Retirement Extreme Forums

The Economist has an article on retirement benefits and how the official retirement age must be increased. I doubt many here are banking on the goverment sponsored retirement but it is still worthy read especially for the young European readers who may not yet realize that they will not be able to get goverment retirement at the age of 50 as is currently possible
Link:

http://www.economist.com/node/18529505? ... d=18529505

Well, I have no problem when they threaten to raise the age of these public programs. In the US anyway, social security came about to keep old people from having to beg on the street, not to give them 15 years of vacation with public money.
So, if a 69 year old can work and has a job available, why should he be able to get government payments if he chooses not to work? Get back to the grindstone, I say.
Surely there should be resources like social security disability to cover people who CAN'T work, but giving money to people who just don't want to work?

@mikeBOS: No disagreement here. Public programs will be less generous in the future. What will happen is that anyone born after the baby boomers will pay a lot more in taxes and get a lot less in return. Those who already have retired will get to keep most of their benefits. This would bother me a lot more if I was not planning to for early retirement thus avoiding 30+ years of social security taxes.

Social Security is not always a "hand out". People paid in to Social Security, so the 15 or so years of drawing time is drawing out "their own" money. In the large scheme of things it would be akin to a retirement investment, only it is on a government mandated program, because let's face it, the majority just won't save anything on their own.
Where Social Security fails is in the SSI arena. SSI is paid out to people who don't want to work, and claim they can't. I have "building phobia" so I can't go in a building, therefore, I can't get a job, therefore I can't work". Or I have five "out of wedlock" kids and I need the money to raise them. Also for that there is WIC, TEA, etc. The list of give away's for not wanting to toe the line grows annually.
But for the guy/gal who toed the line for all those 40 quarters of work and paid in----those are drawing out their own money.
Additionally, SS benefits, or return on your paid in investment, is not designed, and was never meant, to fund a person's full retirement. It was, however, designed to cover those who had no foresight to save "anything" for old age. At one time, Social Security Benefits were called "Old Age Benefits". Since the government program that funds the Social Security is paid for by the US citizen out of earnings, it is an owned program by and for the participant.

In my opinion, if someone chooses not to participate, they should be excluded from receipt of any benefits, retirement or hand out. That said, the onus of the lazy will still wind up on the back of the worker. The "if you don't work, you don't eat" theory has been dismantled by government programs in whole.

By experiences of owning and having personally run apartment complexes for the elderly and disabled, I can truthfully state that these folks would be in deep kimshee were it not for Social Security and it's straggler program, SSI.

Another fallacy I often hear is if someone earns a "certain" amount in retirement on their own doings, then they should not be eligible for SS benefits. So what that's saying is social security is only for people who "won't" make an effort? I consider this train of thought administrative/politician bullshit. I want to say, "ok give me back all my SS money I paid in and that's fine with me".

Working to 70? I don't know a lot of people who have the health/fitness to do this.
I did see some surfers in their 80's on PBS once. That was impressive.

I think there needs to be some kind of differentiation between retirement and drawing on SS. I agree that SS shouldn't fund a 15-year vacation, and everyone should save for old age/the inability to work/traditional retirement.
The fact that the retirement age is determined by the age at which you can withdraw on social security's kind of sad imo.
@H: "Social Security is not always a "hand out"." That might have been true before the trust fund was raided, but now the way it works is money goes directly from the taxes on the young/middle aged into the hands of the 70 year olds.
The people I know on SSI (two) have legitimate mental illnesses that prevent them from working (schizophrenia, multiple personality disorder). There might be abuse in the system, but that goes for anything of this nature. The program shouldn't be threatened because some people abuse it.
"In my opinion, if someone chooses not to participate, they should be excluded from receipt of any benefits, " This would be really cool actually. So people choosing to ERE or otherwise fully fund their own retirements could forgo FICA!

The problem with making this an optional program is that some people would choose not to participate and spend the money foolishly. And I think even informed, intelligent people could make mistakes with their SS money.
Those people wouldn't have any money when they're old. And since we don't (or shouldn't) live in a society where old people starve on the streets, we'll end up paying anyway. It's a moral hazard.

@ HSpencer -- I agree. SSI is a worthwhile program for those who need it. I read somewhere that something like 25% of all SS recipients are receiving $ under SSI. Also, I read somewhere that the average SSI payment is only about $600 per month.
If an employer simply put the 6.5% SS contribution that it pays for each worker into an IRA account for each worker, then over 20 or 30 years of working that account would far exceed anything anyone could collect under SS. And it would belong to the worker and could be withdrawn as wanted and willed to heirs.
@dot_com_vet -- I'd have to agree. Many 60 and 70 year-olds seem to be in poor health and not capable of full-time employment. I work in a government agency that lets workers "retire" in theory, but continue working in the same position at the same salary for up to 5 years, while their monthly pension check gets automatically deposited into an IRA account. At the end of the 5 years, the worker leaves employment and takes the accumulated IRA with them. This is called the DROP (Deferred Retirement Option Program). The average annual pension in the system is only about $15K per year (some are much more). But, say, an annual pension of $25K, then after 5 years in the DROP, the retiree would walk away with a $125K (+ interest) IRA account. A pretty good boost to a retirement. One problem is the fact that these workers are eligible to enter the DROP at age 62, hang on for another 5 years (at relatively high salaries), and are age 67 by the time they finally leave the employer. Our agency seems to be overloaded with 60+ year-olds hanging around until age 67. I hate to say it, but these workers are, frankly, obsolete and underperform. They can't get throught the day w/o taking a nap in the mens room. I wonder what the heck they are doing showing up to the office everyday in their 60s, and why didn't they prepare an ER. Oh well, I guess I'll be that age one day, but I surely won't be working!
I do not mean to offend any of the wonderful folks on this site, but this is just my honest view of the situation at my large employer.

@AO
"@H: "Social Security is not always a "hand out"." That might have been true before the trust fund was raided, but now the way it works is money goes directly from the taxes on the young/middle aged into the hands of the 70 year olds."
Yeah I know. When I was young/middle aged, I paid for a lot of older folks myself. I don't think of it in that way (paying for the next-gen). I think of it as I paid into some pie in the sky account with my name on it, it sat there until I was like the older people and I started taking some of it back. No, it does not work that way, but the mental concept I have is working for me. All SS really amounts to is "taxes with a specific purpose", or is so advertised as such. What people are saying today is that SS worked for the boomer-rangers but won't be there for GEN X or Y or even Z. I don't have anyway to know if it will or not, and I seriously doubt anyone else does either simply because we are not privy to that information. That information lies with the string pullers. The thing that is going for us would be that SS is sooooo sensitive that it is political suicide to tamper with it. That seems to be the stumbling block to politicians in Social Seecurity total dismantlement.
@Andre900.

"I hate to say it, but these workers are, frankly, obsolete and underperform. They can't get throught the day w/o taking a nap in the mens room"
Actually, once a person reaches age 60 or plus in a workplace, some factors zoom into the picture:
Around that age and on, one has had about all the BS they can tolerate. If the job includes a lot of BS, I would be for chucking it. Patience goes to zero or less, once your 60.
Around that age and on, the body has changed. The vim and vigor are gone. Like the mental cells, the physical cells have also had about all they want of the deal. If the job is physical, I would again, chuck it.
The difference comes in when you have kept yourself mentally and physically sharp. Redundant jobs, with nothing to do that is new and exciting, make even the fit go south at 60+.

"Been there, done that" becomes a nightmare for older people.

Hanging around just for more retirement may be worth it, but I wouldn't do it unless I had to have the extra funds.
Believe it or not, age 60+ people can be great workers. I am 66 and help my son in law with his tile and flooring business. This is hard, heavy, and dirty, thankless work. I love doing it and put my whole heart and soul into it. Of course I am not earning any living from it, just doing it to help the son in law and frankly I do like keeping busy. Son in law tells me I am worth several of the drug using, drunk on the job, low class clueless, temporary workers he gets referred to him. In fact, I have seen him go through a platoon of these clowns and not hire any of them.

I do get cranky, but I keep on keeping on and my body tells me at night I need to begin to start "getting it" about my age. I personally could have easily worked until I was 70 or older, and I would venture a guess that I would be better off physically and mentally in the process. I listened to the "better-half" and others about time slippy sliding away. Yeah, I made the right decision. I did not need the obligations on a daily basis anymore. But I happily could have if I chose to. I just have not "adjusted yet" to it. I "mite" and I "mite" not. As my grandma used to say "Hell son, chickens have the "mites".

I can't resist posting a somewhat contrary position. The late Walter Breuning, born in 1896, died on April 14, 2011 age 114. He worked 50 years for the railroad,retired at 66, then took up another job until he finally retired at age 99. He even quit smoking cigars at 103.
An interesting perspective on life and history. He led a simple life, which I admire, through some pretty harsh times that many Western people today can't fathom.
http://en.wikipedia.org/wiki/Walter_Breuning
http://www.youtube.com/watch?v=jpOf6iqdPng

I thougth about this from ERE perspective: What would it take for everyone to be able to retire at less than 50 years of age?
Currently: Many (most?) retired people are too sick to work and the society cannot support the goverment sponsored health care for 15+ years for non-workers.
Solution: Retired people should get healthy! I know this is obvious but I really must take care of my body to dream about ERE...

Ahh, memories. I had a run-in once on this point in this thread here -- one of those stalemates. I've even posted (yet another series) on this topic here, if anyone is interested.
Good to see some consenseus over the point that people living longer need not mean they are in a position to be able to work. And sadly, health isn't a commodity that can be bought off the counter. If so, there'll be mega deals on mega stores already..
People didn't choose to live long... it was a side-effect of the times we lived in. That might be over soon with rising energy crises and soaring food shortages -- as Catton points out in his book.
Also, I couldn't tie in a certain video about people's expenses in the post or the thread at that time, but maybe now.
Prof. Elizabeth Warren (Harvard) is an outspoken critic of America's credit economy, which she has linked to the continuing rise in bankruptcy among the middle-class
The impression that people are having frivolous lifestyles and wasting their money....Is it true? You'll know if it is or if it isn't so, once you see the video. HTH. Maybe this is relevant to the tax thread also... Also, it made for chilling viewing on the US health insurance saga.

@Surio
I have followed Elizabeth Warren for a long time. I read her books, watch her videos and even eat the same brand of cereal that she does.

Elizabeth, or "Beth" as I call her, does make a few good points in favor of the middle class, almost as if in defense of their actions financially. She makes a big deal of getting in the "best" neighborhoods so you can "compete"(?) to send your kids to the least toxic public schools. She justifies this taking a bigger bite out of the family budget.

Does she mean the schools without one to two daily murders? So, I have to live in a $300,000 dollar home subdivision, because due to that subdivision's tax base, they can hire the "Terminator" to guard the kids, and they can install the three story high curved upscale type windows in the school?

Not buying this.

Read "The two income trap" she wrote (I think that's the title, I gave my copy away after I read it.)

She goes on and on about health care. It costs our two income family so much they cannot afford a $50.000 new Chevrolet Tahoe every other year!! My word!! What is happening to the middle class? How will they show their collective faces in a 2005, possibly dented up by hail damage, Tahoe? The shame of it all!!

Now "Beth" does zone in on some of what I would write about with the middle class. I am no Harvard professor, and my degree is only a shill in comparison to hers, but we do agree on taxation issues. Like the marriage penalty tax (repeal it), and keeping exemptions for child care alive.

She also defends my view on government regulation of child care facilities---we need a lot of that. Since middles are the two income earners, one of us might get sick, and have to stay home thus halving our intake. She alleges that in the old days, mom stayed home with the sick kids, no problem. She changed the beds when they upchucked in them and no hire out to babysitters necessary. (Did anyone not know that?)

Now when it comes to saying "poor middles, you are so put upon", well that's ok for a while. As long as these middles are not demanding Crystal Palaces to live in, The fastest newest cars (at least two of 'em) and a flatscreen for every room, even the five bathrooms. Then Beth and I find space between us.

Beth would be better off to have gone into Bankruptcy Court Judgement, that is where her expertise is. Then after a few years on the bench, hearing all that BS, she could say "Well, some of these greedy baaaastards deserved what they got"!

Beth is ok. She just needs to come down from her Ivory Tower, and smell the Folgers. BTW: When I eat bran flakes, it keeps me regular. I wonder if it works for her as well?

Thanks for leaving your comments on the video Spence,

This is why I left the link here . To get another opinion of the views made.
In a way, I was thinking in the same way you were. But as an outsider (now) to the USA, I may not be aware of nuances that others may be.
I sometimes think of one word that describes the type of behaviour (You're worth it.... You can have it all.... Reach for the stars.....etc....) you mentioned: "entitlement". I want to reassure everyone, I sit on no Ivory tower.
I notice that we're becoming just as bad as the rest of the West in India, being goose-fed with a steady stream of the same mindless garbage on TV, the same syndicated silly columns on newspaper and from observing the hordes of 'yuppies' that seem to have infested the woodwork.

What a complete rotten state of affairs...

But, having said all of the above, don't you think there's been a trend of "hollowing of the middle class", by and large in the Anglo-Saxon parts of the West? The article itself is not such a well written one, but SEO threw that first .. I hate SEO...
One of the paragraphs. Jacob and others also allude to this kind of prevalent state of afairs:

Here's the central paradox of American jobs and education. While benefits from going to college are increasing exponentially, the fastest growing jobs aren't for high-earning college graduates. They're for low-wage workers. Retail sales persons, cashiers, and food preparation workers are adding more jobs than any in the country. Their combined median wages are below $10.

The article then goes to defend college anyway (then I suddenly felt like I was reading one of Trent Hamm's articles)....

RE: the $300K house - In Austin in 2010 a sixty year old 2/1 bungalow was starting in the neighborhood of $200K. You could find something further out from the town center that was larger would cost more to heat and cool. Since the construction was newer, it was shoddy at best.
You could still buy a similiar bungalow closer to downtown for slightly less if you were willing to be on the wrong side of the tracks. Of course being on the wrong side of the tracks did mean frequent shootings and the like.
And Austin is not considered a high cost of living area.

If employers would put 6.5% into everybody's IRA, we'd see a bubble of massive proportions that would pop just at the wrong time.
Say every household in the U.S. needs 2M to retire. That comes out to 200 trillion dollars. The U.S. stock market capitalization is 20 trillion. The u.s. bond market capitalization is 30 trillion. Woops?
There simply is not enough investible assets for this much money to be chasing. If you thought we had inflation and bubbles, boy you haven't seen anything until social security is privatized and sent like a cascade onto the markets.
What this means is social security in it's present form is an awful system .. but it's still better than the alternatives. Not until we have hypertunnel wormhole access to alien capital markets.

@MossySF - what about rental properties in that investing scenario?

100M households × 160K median sale price = 16T. Double this number to account for commercial RE and we're still way short.

@MossySF: How about a bit more conservative savings scenario. Average SS check is $1,177 and collect them on average 15 years. That is 12*15*1177 = $200k cash. If invested in yielding assets, even less would be enough. Note also that only the retiring persons need the full $200k. Most of the poplation would still be working to save for it. So in raw numburs, SS is not worth $200T - it is more like $10-20T.