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(Wall Street Journal)   Thanks to the Great Recession, people under 35 are now doing something with money called "saving"   (blogs.wsj.com) divider line 130
    More: Spiffy, shahs, moving average, risk averse  
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4959 clicks; posted to Main » on 06 Mar 2013 at 8:33 AM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-03-06 12:35:13 PM  

pciszek: waterrockets: Pension? Social Security? I don't think saving means what you think it means.

Many people refer to the money they put into a retirement fund as "saving up for retirement".  It's not wrong to do so, even if the account involved is not an actual "savings account" like the ones banks used to offer.  Many banks no longer offer them--I went through a stretch around the turn of the century where my bank would keep getting bought out by a bank that would convert my savings account into a "pay us a fee to store your money" account, and I would have to find a new bank, which would get bought out a year later...


That doesn't change the fact that pensions and Social Security aren't "money they put into a retirement fund." If somebody is actually putting money away, they will still have it even if they lose their pension and their SS. The fact that you and the OP can't understand this is a textbook example of why this country is farked beyond repair.
 
2013-03-06 12:48:16 PM  
Don't worry. Liberals and baby boomers will soon come for that as well. Saving isnt fair.
 
2013-03-06 12:53:02 PM  

DerAppie: ringersol: HotWingConspiracy: "Shame our economy is designed to punish savers."

High savings and deflation ain't so great either.
Having to choose between them, I'll take our problems over that.

Serious question, why is deflation bad? Sure, it is not smart to take on debt, but if left to a natural cycle inflation and deflation will pretty much negate each other. Money will, on average, maintain its value instead of devaluating year after year.

Besides, deflation might be bad for debtors but inflation is bad for the people lending the money. They need to charge higher interest rates to ensure that they won't lose money on the deal.


If your money loses a little bit of value every year, people are motivated to do *something* with it.  Be it stick it in a bank, invest it in stocks, buy video games, start a business, buy a car, etc.

With deflation, one of your best options is to keep your money in a matress.  There is less incentive to go make your money do something.  For any given person, this may not make a huge difference, but on the aggregate, it's  a drain on the economy.

For instance, Apple currently has like $150B in cash.  That's $150B that's currently not doing a whole lot for the economy.  We'd prefer that they spend it on R&D or new capital as that employs people and creates jobs and new products.  A bit of inflation encourages Apple to do that as their pile of cash is at best really just holding steady in value.  Whereas if we had deflation, Apple would actually benefit by just stockpiling more cash.
 
2013-03-06 01:05:02 PM  

umad: pciszek: waterrockets: Pension? Social Security? I don't think saving means what you think it means.

Many people refer to the money they put into a retirement fund as "saving up for retirement".  It's not wrong to do so, even if the account involved is not an actual "savings account" like the ones banks used to offer.  Many banks no longer offer them--I went through a stretch around the turn of the century where my bank would keep getting bought out by a bank that would convert my savings account into a "pay us a fee to store your money" account, and I would have to find a new bank, which would get bought out a year later...

That doesn't change the fact that pensions and Social Security aren't "money they put into a retirement fund." If somebody is actually putting money away, they will still have it even if they lose their pension and their SS. The fact that you and the OP can't understand this is a textbook example of why this country is farked beyond repair.


And they wont have it if they lose their 401K or their mattress.  Yes, if you lose money you don't have it any more.  Good job.

Pensions are definitly putting money away.  It's generally done by your employer and not you, and if it's defined benefit, the amount put away doesn't alway match the amount you'll recieve, but it's absolutely saving money for retirement.  That's a specific portion of your compensation that you're specifically earmarking for retirement.  How is your employer saying "I"ll pay you X in 3 weeks, and Y when you retire" any different than "I'll pay you X+Y in 3 weeks, and you can put Y in an account you'll use when you retire"?

And people genearlly see social security as some sort of giant welfare scheme, but it's really not structured that way.  If we wanted that we should probably means test it and pay for it with income taxes instaed of FICA.  It's structured as a defined benefits pension that you're required to pay into - which is absolutely saving for retirement.
 
2013-03-06 01:10:56 PM  

Bill the unknowing: Because saving at today's savings rates is a sign that you are well prepared for the future.  Also, note to self, look into that undercoating thing, just like the folks on the Jersey shore did prior to Sandy.


It reads like you're saying "there is no hope for the future, so why bother?" You can avoid all of that anxiety about a frightening future by simply killing yourself now.

Pro-tip: Saving is useful even if interest rates are 0%. This is because you may be able to accumulate money in increments so small that they do not negatively impact your standard of living.

I typically spend about $20 a week for the lunches I bring from home. Many of my coworkers spend $12 a day for crappy chain-restaurant lunches that are bad for them. The difference goes into a savings account that is growing even though the interest rate has essentially no positive impact.
 
2013-03-06 01:14:56 PM  

AlwaysRightBoy: People under 35  lived through the Great Recession of 1929?

/ doesn't know what we would have done with this last one if was as bad as the one 1929


The term Great Recession was coined specifically because it was the largest recession since then, but wasn't so bad as to be labeled a Depression (for which only fuzzy relative terminology exists). I think if we had seen U3 at 15% and the GDP recession had lasted longer, we'd have started calling it First Great Depression and Second Great Depression - like we did with the world wars.
 
2013-03-06 01:18:50 PM  

seanpg71: DerAppie: ringersol: HotWingConspiracy: "Shame our economy is designed to punish savers."

High savings and deflation ain't so great either.
Having to choose between them, I'll take our problems over that.

Serious question, why is deflation bad? Sure, it is not smart to take on debt, but if left to a natural cycle inflation and deflation will pretty much negate each other. Money will, on average, maintain its value instead of devaluating year after year.

Besides, deflation might be bad for debtors but inflation is bad for the people lending the money. They need to charge higher interest rates to ensure that they won't lose money on the deal.

If your money loses a little bit of value every year, people are motivated to do *something* with it.  Be it stick it in a bank, invest it in stocks, buy video games, start a business, buy a car, etc.

With deflation, one of your best options is to keep your money in a matress.  There is less incentive to go make your money do something.  For any given person, this may not make a huge difference, but on the aggregate, it's  a drain on the economy.

For instance, Apple currently has like $150B in cash.  That's $150B that's currently not doing a whole lot for the economy.  We'd prefer that they spend it on R&D or new capital as that employs people and creates jobs and new products.  A bit of inflation encourages Apple to do that as their pile of cash is at best really just holding steady in value.  Whereas if we had deflation, Apple would actually benefit by just stockpiling more cash.


I get that, but the next year you might get some inflation which wipes out the "gains" from not doing anything. It also appears to me that inflation only works if you can get the economy to keep growing. If it doesn't all you are left with is less real spending ability. For centuries prices have been reasonably stable and we've had golden centuries left and right. But now that we have demonized any and all deflation while ensuring continuous inflation I can't remember 3 consequtive years in which people weren't talking about how bad the economy was. The entire 20th century was almost one big recession from which there has been no way back.

Instead of people having some money saved we get people who get debt, which only increases inflation. Especially because it is also governments who keep borrowing without making any net payments. There is an ever increasing pool of money after a limited amount of product, yet people keep complaining that someone having a bit saved for a rainy day (not debt) somehow is the thing destroying the economy...
 
2013-03-06 01:28:16 PM  

DerAppie: Also, if we are duscussing purchasing power how does a higher inflation (compared to the official number) not factor into it? Especially if we assume that once upon a time wages were corrected for an inflation number, which was artificially reduced, and that inflation correction on their wages is something people can only dream of?


It does factor, but not as much as one would think. There are other mitigating factors out there that can affect purchasing power than inflation, especially when its as low as it is. The number we are discussing on the micro level is wage share which is wages compared to preferably GDP to factored cost since including the factored cost will include that previous macro inflationary number we discussed earlier.

Of course then we get into the debate of what wage cost is and how it doesn't factor in that mythical thing some economists call 'value added', which when you try to pin them down on what the fark is value added and how do you even measure it they hem haw and go into a word soup.

Trying to pin down value added, and even remotely arguing that its a major factor is like using a diving rod to find water.

seanpg71: For instance, Apple currently has like $150B in cash. That's $150B that's currently not doing a whole lot for the economy. We'd prefer that they spend it on R&D or new capital as that employs people and creates jobs and new products. A bit of inflation encourages Apple to do that as their pile of cash is at best really just holding steady in value. Whereas if we had deflation, Apple would actually benefit by just stockpiling more cash.


And this is why most economist are trying to figure what the Fed is trying to farking do. They want to keep inflation below 3% but at the same time they are trying to inject money in the system. its like you cannot have farking both people, and free money does not an economy make. They make the argument, well if its lower than obviously its easier to borrow. I am still trying to farking figure out that one.

Yes, as a bank who has shareholders and a requirement to make them money

"I am going to do it by blowing on this guy named Vinny. Sure his business plan is a little weak and our return is honestly only around 2% but damnit if we just don't got this pile of farking money sitting around doing nothing. Here Vinny, here's 200m for your start up!"
 
2013-03-06 01:30:28 PM  

DerAppie: Instead of people having some money saved we get people who get debt, which only increases inflation. Especially because it is also governments who keep borrowing without making any net payments. There is an ever increasing pool of money after a limited amount of product, yet people keep complaining that someone having a bit saved for a rainy day (not debt) somehow is the thing destroying the economy...


Its not people, its the corporations and businesses and banks that are all sitting on huge piles of cash. In general people saving money IS a good thing. It means that we're seeing debt paid down (good thing), and people saving money which means they had capital to spend technically (also a good thing)

In general its not uncommon to see short periods of saving, debt pay down before an economy begins to grow faster again
 
2013-03-06 01:30:33 PM  

wildcardjack: I've got $20k idling in the bank. I'd buy a CD just to stash it out of reach for a year but at 1% interest it's not worth the hassle. I'm keeping it liquid so I can do something crazy, like move for a job.


I suggest you look at what your bank offers for low-load mutual funds.  I have an intermediate term bond fund through USAA that is my "safe and stable-ish" investment that returned 8.9% net last year.  There is probably something offered by your bank that might not be as safe as a CD, but that yields a return well above inflation.

The real issue is the college tution hike.  State schools used to be affordable for in-state tuition.  Since I was attending school in 2003, most school tuition costs have gone 10+% a year.  The school I attended now costs almost 3 times what I paid in tuition and fees.  It is going to be very hard for graduates to find jobs that can pay off that debt in any reasonable amount of time.

I am under 30 and I have well over a years salary saved for retirement, and more than another years salary saved for emergency/house-down-payment/ect.  I do not believe that the average student graduating today will be out of school debt by the time they are 30, let alone be able to save for retirment/future.
 
2013-03-06 01:37:52 PM  

The WindowLicker: I have an intermediate term bond fund through USAA that is my "safe and stable-ish" investment that returned 8.9% net last year.


I had a Fidelity program that netted 20%, you know the one that NPR did a report on about how they aren't taking anymore cash because they are not sure what to do with it.

Yeah, flipped that to USAA bonds immediately because the minute my investor says the words "I don't know" I run for the hills.
 
2013-03-06 01:43:09 PM  

seanpg71: How is your employer saying "I"ll pay you X in 3 weeks, and Y when you retire" any different than "I'll pay you X+Y in 3 weeks, and you can put Y in an account you'll use when you retire"?


It is different because the former is a promise that can be broken, where the latter is an account in your name and under your control that can't be taken away because your employer went out of business. Jesus, this isn't rocket science.

If you are only relying on a pension and Social Security for your retirement then you are a farking retard, period.
 
2013-03-06 01:54:20 PM  
I have a real good plan.  Save my money, contribute to 401 K, bought house before they were expensive, don't refinance, have rich parents and be an only child.  I'm good.
 
2013-03-06 01:57:32 PM  
I'm under 35 for another year, and I'm doing something called "paying child support".
 
2013-03-06 02:05:07 PM  
Should I not have bought a sailboat last year... was that bad?
 
2013-03-06 02:08:35 PM  

Kaiser442: Should I not have bought a sailboat last year... was that bad?



Bro, you can live on it.
 
2013-03-06 02:24:45 PM  

Fubini: Not just saving- getting married as well.

Live off of one person's paycheck, put the other person's paycheck entirely into savings. In a few years you could buy a modest house for cash money.


Best advice ever.
 
2013-03-06 03:05:36 PM  

HotWingConspiracy: Shame our economy is designed to punish savers.


I don't have a problem.  Paying off my debts aggressively has cut off 70% of my lifelong expenses--it's easy to cheat the banks at Mortgage, but easier when interest rates are very high.

By paying my mortgage ahead of time, I knock off most of my obligation and reduce my debt to 3 years from 15.

Consider a 14% mortgage rate where you pay $1200/mo in P&I.  $1180 for your first month is 1 month accrued interest, while $20 is what you bring your balance down by--called "Principal Payment".  By the 10th month, it's $1179.23 interest... still about the same.

Now:  Pay $200 extra.

Suddenly you just bypassed 10 payments, and saved yourself $11,800.  So you can imagine when interest rates are high and nobody can afford $3500/mo payments, you start aggressively paying your mortgage, you get a second job, your wife gets a job, for 1-2 years.  The bank loses out on a ton of money, you wind up cutting back months or years off your payment schedule at a time with money you didn't have available for a down payment.

The other way is to wait 30 years, then pay in cash; this way allows you to take your debt down sharply, then reap the benefits of low payments over an extended period while coasting.  $1500/mo for mortgage and you can afford it?  Dump in $2500/mo with that second job, save yourself the bulk of the payments, then quit that job and coast with a 10 year mortgage.  You could refinance at this point to get a lower interest rate, and then electively pay the $1500 or coast on a $500/mo mortgage.

Debt elimination leads to expense reduction, which leads to accelerated savings.
 
2013-03-06 03:24:02 PM  

umad: It is different because the former is a promise that can be broken, where the latter is an account in your name and under your control that can't be taken away because your employer went out of business. Jesus, this isn't rocket science.


Sure, though the former will be better for you when the stock market tanks and you live to 150.  And your 401K gets wiped out if all the companies involved go bankrupt.  And since people often have significant amounts of their 401Ks invested in the companies that they're working at, that may not be all that different.

I wasn't talking about the risk associated with various types of retirement savings.  I was replying to the idea that a pension is not retirement savings.
 
2013-03-06 03:35:14 PM  

umad: seanpg71: How is your employer saying "I"ll pay you X in 3 weeks, and Y when you retire" any different than "I'll pay you X+Y in 3 weeks, and you can put Y in an account you'll use when you retire"?

It is different because the former is a promise that can be broken, where the latter is an account in your name and under your control that can't be taken away because your employer went out of business. Jesus, this isn't rocket science.

If you are only relying on a pension and Social Security for your retirement then you are a farking retard, period.


As an aside, companies should prefer pension plans to a 401k.  Assuming similar benefits, a pension should be cheaper since the pension plan can assume that you'll live to 80 because on average you will.  If you're funding your own 401k, you have to assume that you'll live much longer, because otherwise you may run out of money.

However, companies know that you don't fund your 401k at reasonable levels, and thus your total compensation can be lower if you're funding your 401k instead of them pretending to fund your pension.
 
2013-03-06 03:55:22 PM  
I have a pension....and it sucks.  I'm forced to contribute 15% of my salary into the 'pension' that I can't touch until I'm retired (say 40-45 years).  The company I work for is a tiny fraction of 45 years old and I have zero confidence that I will ever see a single penny from it.

My last 401k was a joke too.  I could choose between 'Aggressive' or 'Conservative' while they company 'administrating' the plan took it's cut.  Nevermind the utter lack of evidence that suggests these money managers can outperform me throwing darts (they just talk a better game).  Nevermind the idea that it is supposed to be 'my' money.

The whole concept of 'encouraged' savings is retarded.  But when you force people to save and then remove their ability to do so effectively; it's pretty much the same as theft.  I don't see how countries can pretend to value 'Freedom' while telling you exactly how you have to live.

Our world is filled with idiots and the only way to keep them from revolting en-mass is to treat them like children knowing that even with our highly ineffective policies, they'll be significantly better off than if we allowed them freedom over their money.  And everyone else is worse off for it.
 
2013-03-06 04:14:21 PM  
I barely end up with enough saved up to starch a sock.
 
2013-03-06 04:55:42 PM  

DerAppie: Baryogenesis: dynomutt: The government doesn't need to send armed troops to steal your savings, if you keep it in a bank.

They just need to keep printing and printing (or its electronic equivalent).

Read "When Money Dies", especially the vignette about the German woman who broke her leg skiing, stayed in Switzerland for about a year to heal up, and came home to find that her entire life savings was less than the cost of the stamp of a letter from the bank indicating that her account balance was too small to keep the account open.  BTW: The numeric balance of the account had not gone down.

Go ahead and explain what hyperinflation in Weimar Germany has to do with our current economy (inflation last year was ~2%).  I'll wait right here.

Ask Boskin how it works. According to him a computer that costs 700 dollar now is cheaper than a computer that cost 500 dollar 15 years ago because the modern computer is at least 300% better. Therefore the price for the computer can be "corrected" for quality, making it just 250 dollar in the inflation index. The increase in the price of steak is ignored because people will eat more hamburgers, therefore the amount of spendable money remains the same and no inflation occurred. Which would be somewhat acceptable if people at the bottom weren't being forced into eating the cheapest crap available while the people at the top claim everything is going fine since the amount of spendable income remains the same.

The actual inflation number is much higher. Inflation as tracked by a Dartmouth cum laude graduate.


Even if we accept the alternate inflation number the graph clearly shows the same basic thing.  Inflation is within a range of a few % points for the entire listed time period.  There is no surge in inflation associated with govt. policy that could be compared against Weimar Germany.
 
2013-03-06 05:32:51 PM  

seanpg71: umad: It is different because the former is a promise that can be broken, where the latter is an account in your name and under your control that can't be taken away because your employer went out of business. Jesus, this isn't rocket science.

Sure, though the former will be better for you when the stock market tanks and you live to 150.  And your 401K gets wiped out if all the companies involved go bankrupt.  And since people often have significant amounts of their 401Ks invested in the companies that they're working at, that may not be all that different.


So you think it is equally likely that hundreds of companies will simultaneously go out of business as it is for just the company you work for. I give up. You are too stupid to respond to further. Enjoy your pension and Social Security, and go fark yourself when you find out it isn't enough to get by on.
 
2013-03-06 05:35:11 PM  
Baryogenesis:
Even if we accept the alternate inflation number the graph clearly shows the same basic thing.  Inflation is within a range of a few % points for the entire listed time period.  There is no surge in inflation associated with govt. policy that could be compared against Weimar Germany.

Based on stagnant wages alone, I don't believe this nonsense and you shouldn't either. Look at the total wage stagnation since the great recession started and try to tell me that the purchasing power of the average american hasn't significantly decreased.
 
2013-03-06 06:55:46 PM  

umad: simultaneously go out of business as it is for just the company you work for. I give up. You are too stupid to respond to further. Enjoy your pension and Social Security, and go fark yourself when you find out it isn't enough to get by on.


No, I don't think it's equally likely.  I also don't think that you have the same amount of risk associated with a portfolio that's all startup energy stocks vs one that's all municipal bonds and utilities.  That doesn't change the fact that that's all still retirement savings.

Is there some standard of expected return on an investment that makes it retirement savings or not?  62% of the 401k funds for Enron employees was in Enron stock.  Were the employees of Enron not saving for retirement?
 
2013-03-06 09:03:26 PM  

KrispyKritter: Good for them. Seems like some young people appear to be very anti-materialistic too, although these claims are sometimes made while they are texting with one hand while removing the earphones with the other. Big difference in what one wants and what one needs.


So 99% of the poor HAVE A FRAKING FRIDGE wargarble?

There's a difference between having things, and hoarding stuff.  I look at the sheer amount of plastic crap in my parents garage, basement and attic and want nothing to do with that sort of lifestyle.
 
2013-03-06 11:33:22 PM  
and then mcdonalds is gonna remove the mcdouble and fark up everyone's pocketbook
 
drp
2013-03-07 09:54:59 AM  

seanpg71: 62% of the 401k funds for Enron employees was in Enron stock. Were the employees of Enron not saving for retirement?


They saved - foolishly.  The bulk of anyone's equity investments belong in low cost index funds, not individual stocks, for precisely this reason.  Diversification is important.  So is overall asset allocation.

Neither diversification nor asset allocation are too hard for anyone who give a shiat about their savings to figure out.
 
2013-03-08 07:11:50 AM  

Big Man On Campus: Baryogenesis:
Even if we accept the alternate inflation number the graph clearly shows the same basic thing.  Inflation is within a range of a few % points for the entire listed time period.  There is no surge in inflation associated with govt. policy that could be compared against Weimar Germany.

Based on stagnant wages alone, I don't believe this nonsense and you shouldn't either. Look at the total wage stagnation since the great recession started and try to tell me that the purchasing power of the average american hasn't significantly decreased.


Stagnant middle class wages are a huge problem (over the past 30 years, not just the last 3) and a major cause of the sluggish economy.  It's still not comparable to hyperinflation in post war Germany.  It's not going to take a wheelbarrow full of dollars to buy bread next week.  Middle class purchasing power isn't decreasing becauseinflation is eating it away.  It's a complex combination of corporate greed, globalization, computerization, tax policy, and regulation (or lack there of), among other things.  Weimar Germany is an outrightstupid comparison.
 
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