Lancelot wrote: ↑
Thu Jan 03, 2019 5:59 am
dh wrote: ↑
Wed Aug 16, 2017 7:24 am
I am always surprised when I read that millennials don't believe social security will be there for them. It may be that many are excellent savers and see SS as "gravy" -- that may take away many irrational fears.
SS is the primary source of income for many in retirement, and that fact may increase unless we see the vast majority of American's really step up their savings. I see the "gravy" idea flipped 180 degrees, especially given the lack of pensions in America. Rather than fear for SS, I fear that many haven't saved enough in retirement plans (a dollop of gravy) to supplement their SS. Pensions are gone, people will rely on SS and their personal savings going forward.
I am a Baby Boomer and I remember many of my co workers opining that they would never receive a dime from SS- in the 1980s! Fast forward to now and I get it when Millennials are doubtful that they will ever receive funds from SS. Projecting 30 years out and I have no idea if SS will continue to exist. But human behavior is still the same and there will be folks that find them selves unprepared for retirement; therefore, I feel that some form of SS will in fact exist, modified of course for sustainability. FWIW, if I were a Millennial, I would probably be in the "I don't expect a dime" crowd. On the positive side, Millennials, as a whole, are far more retirement savy than Baby Boomers at an equivalent age. It's just the reality that DH stated "Pensions are gone"
UK perspective here (with some North American insights).
I have to admit I don't experience the "Millennials" as more retirement savvy than I was at their age in the mid 1980s. Mostly they don't seem to have thought of it. They certainly don't value the pension plans (DC) their employers are now required to provide for them.
If they have any comment at all it is a sort of resigned "I will start saving after I have paid off my student loans and got my downpayment for a house, and that will be in my 40s, so I am going to be working forever". Our state pension is considerably less generous than US Social Security.
The difference is primarily that they have only seen bull markets in equities (with the occasional brutal bear) and thus are conditioned to expect that individual equity investments will provide them with enough retirement funds. They think equities produce reliable high returns. The 1970s is as ancient to them as the Tudor Kings and Queens, or the Second World War.
Thus the compulsory savings (4% of income) give them this "balance" that they get a statement for every year, but they think (generally) that that will be enough - whereas most modelling indicates they need to be saving 15-20% of gross income through their working lives to achieve a retirement income of 2/3rds of their pre retirement income.
The actual demographic case, in the US situation at least, is that the Millennials are probably OK. The Baby Boom has already turned at least 53, and increasing mortality is a feature going forward. In 20-30 years, the Baby Boomers are mostly out of the system - the oldest Baby Boomer in 2043 would be 98, and the youngest 78 -- the 5 years after that will see a very steep falloff in numbers.
US state provided pensions peaks, from memory, at 6.5% of GDP sometime in the 2040s. That's below where many western countries are *now*.
Sidebar on rising life expectancy
(When Social Security was created, the founders made some predictions about increasing life expectancy, and they were amazingly accurate. I think Roger Lowenstein chronicles that in his book).
There is a generation born roughly 1928-1945 that is just reaching the end of their lives. They may well turn out to have an anomalously long life expectancy:
- one thing which does increase your life expectancy is reduction in calorie intake (to a certain point) -- the scientific evidence points that way. If this takes place in childhood and adulthood it seems to have particularly good effects. Cue the Great Depression and wartime rationing - the average working class person probably ate *better* 1939-1949 than before (that's certainly true of the UK because it was a designed policy - food was in short supply, coming across the U Boat infested oceans of the world, and so things that were bad for you were strictly rationed - if your workforce is not properly fed, they cannot win you the war - this was the age of Total War**)
That generation just does not have the weight and diabetes problems of the successor generations. McDonald's was still an occasional treat, not the normal after school fare.
- conversely the privations of the Great Depression and wartime weeded out those who as vulnerable children could not survive them, mentally or physically. What we have now is a generation of survivors. That's going to be strongest in Russia, Germany, Japan, China etc - the places that survived the worst depredations. But it's also true of the UK and to an extent US Australia Canada
- the welfare state gave healthcare and pensions, universally, to this generation
- from memory the US Surgeon General's Report on smoking came out in the winter of 1963 or 1964. Something like 63% of American adults smoked - and the number fell by 10% in that winter. Now it's well less than 20%. It came early enough in the adult lives of the 1930-1945 generation to have a meaningful impact on health and life expectancy
** In the (tragically late) Helen Dunsmore's The Siege, about the siege of Leningrad in WW2, there's a scene, based on actual records, of a bureaucrat working out that if he increases the food intake of the civilian population in the besieged city from something like 875 to 945 calories a day, it increases the expected life enough for those civilians to work in the factories and defence construction, to justify the increase - a mathematically worked out calculation.