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Some Pension Solution...



February 05, 2009 – Comments (10)

Mish has a post on contrasting California and Ireland's moves to cut government wages.

What was of interesting note to me is that Ireland is doing it as a 7% cut to workers, but it goes to fund their pensions.

I think it would be better to cut pensions to something sustainable and affordable.

But seriously, 7% more to pensions, for a lot of pensions this would essentially double the worker contribution.  I have been saying that we've been paying about half what we need or that pensions can only afford to pay about half of what they promise.  Seems that truth has already come home for Ireland.

10 Comments – Post Your Own

#1) On February 05, 2009 at 9:54 AM, dwot (28.81) wrote:

Freedom 65, 55, 65 is a Canadian report on trends in retirement.

I completely disagree with this statement:

"On the basis of historical evidence, we can continue to anticipate that about half of the workforce ill retire before they reach the age of 65, with four out of five retired by the time we reach the 5 to 69 age group."

When will researchers start looking at what is in front of them?  This is what I see, people in my age group are not saving for retirement, they are struggling to stay afloat.  When I was 18 and working in banks I saw may people in their 30s paying homes off.  This is the cohort that has been retiring early.  Today people in their 30s are often only getting a downpayment together.  There is an enormous difference in people's ability to prepare for retirement today then the cohort who had more opportunity they any generation before them, and it will likely be a long time before another generation has such an abundance of opportunity.

I just did a search, and sure enough, born in 1945.  And from Vancouver.  I just can not believe someone that is supposedly an expert can be so incredibly blind to the degree of the declining level of wealth and ability to accumulate wealth of younger generations.  They aren't making ends meet let alone prepare for this early retirement.

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#2) On February 05, 2009 at 10:14 AM, Gemini846 (34.27) wrote:

"When I was 18 and working in banks I saw may people in their 30s paying homes off.  This is the cohort that has been retiring early.  Today people in their 30s are often only getting a downpayment together."

Just curious why do you think that is? Is it simply lack of knowledge, overspending, lack of foresight, or do inflated houses have anything to do with it?

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#3) On February 05, 2009 at 11:23 AM, socialconscious wrote:

DWOT good food for thought. 

"When I was 18 and working in banks I saw may people in their 30s paying homes off" 

In the 50's and early 60's social norms made people get married sooner usually in their early 20's. They HAD to buy a house given the fact that having children early was also a social norm. Given 15yr-30yr mortgages, strictly bank mortgages, thrift and reasonable home prices most people would have had their house mostly paid by their mid-30's.

Also interesting in that time period pensions paid by the employees would be ridiculed.

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#4) On February 05, 2009 at 4:41 PM, dwot (28.81) wrote:

Gemini846, it is because disposible income and wages were good relative to the price of homes.  Additionally, taxes were low, but the cost there was a huge debt burden passed on to the next generation.  So homes have gone up, taxes have gone up and the ability to save for a down payment is enormously different. 

Heck, I had a friend who supported herself working 20 hours per week at a minimum wage job in high school.  Every penny was budgeted, but it was doable.  I think she was better off then a person today working full time on minimum wage.

And here is something else to put it into perspective, a 60 year old aquaintance who makes $90k per year with very limited education was gripping about how he figured his take home pay buying power was about $500 per week less then when he was in his early 20s.  Well, with taxes that puts him at a gross buying power equivalent of about $140k when he was 22.  By the time I was his age I was probably about $35k in today's cost of living.

That is also the period my father was screaming about age discrimination because he could not find anyone willing to hire him at his $120k equivalent expectation. He was a smart guy, but also never finished high school...


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#5) On February 05, 2009 at 5:20 PM, jesusfreakinco (28.11) wrote:

Good find.


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#6) On February 07, 2009 at 9:10 AM, BravoBevo (99.97) wrote:

dwot: I like your blog. But I especially admire your discipline because I notice that your most recent caps pick occurred about 4 months ago. I can hardly sit still when I see a stock unfairly move drastically in a direction away from Mr. Market. Is it really that you don't see anything you like (in either direction)?  Or do you cherish that "No Picks in 90 Days" icon?

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#7) On February 07, 2009 at 8:17 PM, Donnernv (< 20) wrote:


Two things have occurred in my lifetime that I believe explain what you have observed.  After I graduated (1963) from eight years of college and graduate school, I was hired at a prestigious NYC consulting firm for $5/hour.  I was thrilled.

I bought a three bed, bath and a half house in Bergen County, NJ for $25,000, 10% down, 20 year, 5%.  Two and one half times my gross income.  Commonplace.

The same house is valued at about $600,000 today.  We can debate endlessly why that happened, but it did.

My income taxes were about $1500 annually.  Today, the same job pays about $125,000 annually.  The income taxes (Fed and State) are about $30,000.

I had $8500 net income against my $22,500 mortgage, 2.65 times.  The lucky guy getting the same job has $95,000 net income against his $540,000 mortgage, 5.68 times.  And he had to come up with $60,000 cash down, as a new graduate.

Bottom line, the insane increase in housing prices and the nutty increase in taxes due to increased brackets and government spending have made it virtually impossible to pay off a new mortgage.

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#8) On February 08, 2009 at 8:09 PM, dwot (28.81) wrote:

BravoBevo, I took a year to evaluate and the end of that year was in the fall and I still did not like what the market looked like so I am taking another year.  But I honestly think the burden falling to young people means that the economy will be sluggish for much longer then most people are thinking.  I have the cash from selling my home and retirements savings plan.  I doubt the money from selling my home will make it into the market as I would like to get back into the housing market in probably a couple years.  I do have patience on my side and that comes from taking very hard hits in the past.  Been their, done it, don't care for a replay.  I am in a place where I can be comfortable in retirement and I don't want to risk that.

Donnernv, that would exactly be my points and the bigger cost to the economy is the economy will be sluggish.  I just got rid of a 19 year old vehicle and I have a feeling 10 years from now vehicles that old will be far more common.


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#9) On February 08, 2009 at 11:39 PM, BravoBevo (99.97) wrote:

Thank you, Deb. Last weekend we bought a 10 year old Jeep SUV in nice condition for our high school daughter to drive back & forth from home to school. So our family "fleet" is now up to 4 Jeep Gand Cherokees,  We've come a long way from the early days when my lovely wife would say "Buying a used car is picking up someone else's problems."  Now she recognizes the hit the original owner takes when it leaves the showroom floor.

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#10) On February 12, 2009 at 1:24 AM, riskybus (< 20) wrote:

I was listening to you when you were number no. 1 and I really respect your ability to talk even when you're only no. 3 now (still not bad at all) but your latest comment was very mean-spirited because you're saying to cut wages away from hard-workers who you think are "overpaid" when in reality it's the people who work less that are being overpaid. There are a number of people who if you were to measure the height of a person between the tallest and the shortest in height there would actually be a bell curve means of correlation, but not between the highest paid and the lowest. And you seek to blame the lowest, and take it out on them. Not very profound, very il-informed. There are too many of these people: "managers" to workers. "Too many cooks kill a kitchen." Have you seen the movie Office Space, he's got three mangers per worker. If any cuts ar going to be made it should come from these: people who make 500 k and then hoard the rest of their millions in savings because they're worried, when they cashed in on the boom, and should be the ones retaliating because they have the money and could perhaps cash in on the turmoil or stat a company, or should at least use it. Then you have the people who could figure out how to work and live on not even a 1/5 of that 30k and they're getting by. They could use the money. In light of the bailouts we'll see if the banks found out responsibly how to give it to the people that can really make something of it, not necessarily 30k ers but not the hoarders either--maybe the MIDDLE CLASS! In a nutshell, give it to the people who know how to spend it, not the hesitant ticking time bomb people who will hoard it. Jesus only had 12 disciples and "man cannot make a worm but makes Gods of themselves," so how do you think they get paid much more than the equivalent of that mass. How do you preside over cutting away money from the people that can truly use it?

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