I would prefer to save more and retire earlier. That would increase my chances to enjoy the retirement and make the person enjoying the retirement more similar to the person who saves the money. Also, the sooner I retire, the more chance I have to make money while retired -- so I could just make a plan to retire as soon as possible after I have enough money to survive; and then optionally make some more money and add them to the retirement.
As a programmer, these days I make more money than I need, but I find it hard to imagine doing this job at 60. Not because I wouldn't have valuable skills, but in my experience during job interviews most employers only care about familiarity with the few most recent frameworks -- there is not much competitive advantage I could have against someone who just learned that at university; and in addition the young competitor will probably be willing to do a lot of cheap overtime.
Unfortunately, I don't know how to do that. In my country, the rules for retirement change after almost every election. The money in the retirement funds is taken to repair some other part of economy, or is simply stolen. The state is willing to support old people with some sm...
Have you looked into opening an investment account in the US as a non-resident (so your government won't be able to easily appropriate your money)? I'm not familiar with it myself, but a cursory Google search seems to indicate that it's possible and not too difficult. Or if the US doesn't work for some reason, some other country...
I wonder if maybe the reason we retire, i.e. set aside a very relaxing experience for the end of our lives rather than spread that utility across our entire lifespan, is the same reason that the idea of heaven was so appealing for medieval peasants. Perhaps the only way we can motivate ourselves to work is by irrationally believing that one day there will come a blissful time free of suffering where we never have to lift a finger ever again and can live in utter peace. In this way, we avoid accepting the essentially Sisyphean nature of reality.
Personally, I'm worried about becoming unemployable. I'm especially worried about new technology replacing human labor. The best insurance against my labor being devalued is lots of capital.
This question is a subtype of "Why should I save any money, anyway?"
There are two basic answers. One is the utility function, as has been mentioned. The same dollar amount has different value for someone rich and for someone poor. If you expect that at some point in the future you will become more poor than you are now (because your income stream dries up), it makes sense to transfer some money from the rich now-you to the poor future-you. That transfer is known as saving.
Answer two is risk management. Future in uncertain, generally speaking you would like to be able to handle a variety of unfortunate events. Money really helps with that. If you have no savings, you have no tools to deal with what economists would call "negative shocks" and that is likely to send you down a financial death spiral. Speaking technically, the costs of not having a reserve of cash on hand to deal with emergencies can be very high.
There is a variety of other answers (e.g. future might provide much better utility for your dollar so you want to save up for that better utility), but I think that the two above are the main ones.
(e.g. future might provide much better utility for your dollar so you want to save up for that better utility)
This is one of my main reasons for saving a lot and I'm surprised nobody else has mentioned it. If technological progress continues, it seems likely there will be all kinds of cool toys and useful procedures (e.g., cognitive enhancement or life extension) that one could buy in the future, not to mention investment and charitable opportunities, and I'd hate to be left out because I had already spent my money on a bigger house or flashier cars and clothes.
You are 10% to 20% likely to die before you enjoy even your first retirement year.
Careful, this is from birth and for all categories. The survival rate to age 65 for a healthy middle-class educated person in his late 20s or early 30s is likely much higher than the survival rate from birth (the first few years of life are quite dangerous, and many chronic diseases should be already diagnosed at age 30), and middle-class educated persons doing intellectual jobs (the typical audience of LW) live longer than factory workers or miners.
According to Wolfram Alpha if you're a 30yo male in the US then your probability of reaching 65 is somewhere around 80%.
The other demographic details surely make some difference, but I wouldn't assume they're all favourable; for instance, being largely sedentary brings all kinds of problems.
[EDIT: I wrote 20% where I meant 80%. Thanks to wedrifid for catching my mistake!]
Most people here live in rich countries - darn, hate to be the exception! - , and their state would happily provide them with at least the maximal retirement plan legal in my country (aprox 2000 dollars/month).
The richest country, the United States, does no such thing. Poverty among the elderly is a big problem here. I have two friends in the 70+ region, who are trying to skimp by on around $1000 a month in Social Security + medicare and food stamps. One is currently homeless. Both would like to find a job, but neither is medically able to work any more. And these are people who worked for a long time. Not everyone gets as much from the U.S. government as they do. I have another elderly friend who is selling her apartment in NYC and moving to Iowa to have enough money to live on.
I also have a few more retired elderly friends who are quite well off. This is because they were successful in their careers (some very successful) and saved a lot of money along the way. I can think of one other who's still actively working at a high-paying job.
The goal is to end up like the happy, well-off retired folks and not the ones living out of their cars or on the street.
You can escape parentheses with a backslash, like so:
[Wiki link](http://en.wikipedia.org/wiki/List\_of\_countries\_by\_GDP\_\\(PPP\\\)\_per\_capita)
producing:
Wiki link_per_capita)
(You also need to escape underscores if you want to avoid toggling italics in body text, but it's not an issue in the destination field of links.)
I invest about 60-80% of my income. There are a variety of reasons but here are some:
Spending money doesn't seem to make me much happier. Buying stuff is certainly fun, but the enjoyment of owning a new thing wears off in a few weeks. Also, some things have carrying costs, they make moving more difficult etc.
I'm in my 20s, and I'm worried about possible trends toward large scale structural unemployment and declining median income per worker in developed countries. If these trends do continue, owning a fair amount of capital will be vital if you want to be financially secure.
I also get some pride from watching the numbers roll upwards on my accounts. It reminds me of how people who have lost weight often say, "no food tastes as good as being thin feels."
People really do seem to have different utility functions/discount rates etc. YMMV, but I like the feeling of having money more than I like buying/owning stuff.
Tax advantaged retirement accounts are, you know, tax advantaged. That pretty much says all that you need to know about it. You should invest dollars into where the free money is up until the marginal dollar invested yields as much utility as the marginal dollar spent elsewhere.
In other words, as much as you can afford.
There are various ways you can take money out of your retirement accounts if you need to, with and without penalty. For instance, you can take loans against a 401K.
Meanwhile I'm updating my outline for a rational financial planning sequence. I think I may have to begin with posts on why it makes sense to plan for retirement, and how cool compound interest is.
Robin Hanson thinks an optimal donation policy looks like saving up and investing as much money as you can and then making a large donation at the end of your life. So retirement accounts seem sensible from this point of view ("tax advantaged" seems like an important keyword here).
Another reason would be to save up money to pass on to your family after you die.
The mortality rate you cite doesn't control for demographics, which I think is important. Many people die early in ways that I think the LW demographic can avoid.
Most people here live in rich countries - darn, hate to be the exception! - , and their state would happily provide them with at least the maximal retirement plan legal in my country (aprox 2000 dollars/month). And surely would provide them with double the minimal (about 200/month) if they needed.
It depends on your prognosis about the future. As the average person in society gets older it's not clear whether the state has still as much money for financing retirees as it does at the moment.
It's about choice, as far as I'm concerned. Debt makes you brittle, assets make you flexible. Additional money right now is of low value to me, especially if I calibrate my spending habits to taking 20% off the top and stashing it and don't develop as many expensive hobbies as someone of my income bracket typically does. But having money put away lets me keep living decently even if I can't work, or I can raid it if I lose my job, or I can use it to help buy a house or put my (hypothetical) kids through college, if stupidly overpriced college is still a th...
I wrote an article with a smilar conclusion: http://messymatters.com/savings
It includes this caricature of traditional financial advice: "You want to stop working when you’re 60ish, right? And you don’t want to be dirt poor at that point, right? So here’s what you do: live as if you’re dirt poor from now till you’re 60. Problem solved."
Utility per annum is strongly sublinear in expended money per annum.
The point of diminishing returns goes up when you have additional maintenance expenses. Being old is expensive, and having to skimp is rougher when you're old.
SO, for example,
Seems like a good trade to me.
With the 500E, an old person could indeed get better pain meds that would allow them to basically function instead of living in hell.
A 70-year old is fully capable of doing the last four of the seven items you named (though he would be more likely to do the last three than the middle one). My grandfather finally gave up body-surfing when he was 85. It seems like you've imported 'be boring' into your definition of 'old person'. Plus, drug-fuelled party? Now THAT's a really high efficiency use of money. Really utilitarian.
Well, first of all, if you set aside enough money for retirement, you can retire early. Example: If your retirement accounts are 84,000 dollars at 64, you probably aren't retiring early. But if your retirement accounts are 84,000 dollars at 29, retiring early looks far more practical. Imagine being able to be retired at 50 instead of 65.
Second of all, if you have enough in your retirement accounts, rather than having your descendants support you, you can support your descendants. Personally, I think my descendants (in this case, my nephew, I don't have any...
Not to mention, that there is also some chance that technology will make your investments less valuable - be it because of nano machines, 3d printing, uploading, AI-related progress, x-risk or 'the singularity'.
Forget saving for retirement, even if that is the stated reason. Perhaps people are actually saving for the sake of saving, and it happens that they start using the savings when they can work no longer.
Why save at all? Maybe to help your children when they need your help. Maybe it's fun.
That said, everything depends on what you want out of life. If you must believe that you will live on after death through cyropreservation, then it makes sense live and let freeze. But I would rather choose to prepare for a situation where cryopreservation is not possible within my lifetime, until I am convinced otherwise. I'm not yet convinced.
the maximal retirement plan legal in my country (aprox 2000 dollars/month).
Which dystopian state is this, that caps retirement payouts? I can understand corrupt states stealing retirement money, but having an actual policy that none may have more than that?
Saving for retirement is the traditional conscientious young person thing to do. It doesn't make any sense if you believe in radical life extension or uploading or the singularity (assuming it's within your lifetime). As medicine and technology increase, retirement age will stop even being a thing, because it won't make sense to stop working at 65 and then live 65-650 more years.
On the other hand, investing to maximize your long-term income and wealth potential makes a LOT more sense than saving for retirement. Basically: saving for retirement is like taking the sure 450 instead of flipping the coin for 1000.
You are 10% to 20% likely to die before you enjoy even your first retirement year.
I wonder if there are any death insurance companies, where you give them your retirement savings, and when you retire they pay you money continuously until you die. That way, they can pay you extra to take into account that you might not live that long.
Last, but not least: That person is not even you that much anyway.
The question is how much you care about that person. Does having a worldline connecting you matter regardless of length? Does it matter at all? Do you ca...
I wonder if there are any death insurance companies, where you give them your retirement savings, and when you retire they pay you money continuously until you die. That way, they can pay you extra to take into account that you might not live that long.
Yes; they are called annuities (well, some types of annuities work this way).
I know I said I'd be gone... but this was just a comment originally, and I noticed it may actually be relevant.
Elharo said in Munchkin Ideas:
I'm interested in the following:
Why should people invest in retirement? Or, instead, why should someone invest as much as most do in retirement.
Few facts that make it a boggling question for me:
You are 10% to 20% likely to die before you enjoy even your first retirement year.
People adjust much more to harsh economical conditions than they believe they would. They remain happy, as many studies by Seligman and others show.
People who retire are only happier as retirees if they retired by choice (I lost the paper, sorry).
Most people here live in rich countries - darn, hate to be the exception! - , and their state would happily provide them with at least the maximal retirement plan legal in my country (aprox 2000 dollars/month). And surely would provide them with double the minimal (about 200/month) if they needed.
If you have descendants, they may support you in case you are still alive, and if you are not rich enough to keep a house, you have a good excuse to be in company of loved ones (you have nowhere else to go).
Last, but not least: That person is not even you that much anyway.
Given all that, I have no clue what the whole fuss about retirement plans, and being 60% of a rich old person with a crappy body is all about, specially if you are in the grave.
I mean, in the cryopreservation chamber, of course.
Edit: A related question not worth its own post, but maybe worth discussing, is Should inheritance "jump" a generation. Everyone inheriting from grandparents, instead of parents? Just the abstract ethical question. Regardless of implementation procedure.