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Rich Retirees Are Hoarding Cash Out of Fear

bloomberg.com

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Re: Rich Retirees Are Hoarding Cash Out of Fear

#61

Post by dsmithatx »

My grandfather worked at Exxon Mobile for 60 years and retired around 1988 with a few million dollars in stock. I remember my dad saying he had about 3 Million in stock he purchased as his retirement plan.

He built a house and bought a couple of nice cars living on about 100,000 a year. About 12 years ago he had a heart attack and stroke and was bed ridden. 12 years of doctor bills and hospice ate through almost every dollar he saved.

My grandmother sold the house and now lives on her social security. Maybe people 60 should not be so fast to go spend their cash. He was 72 when he got sick and 84 this year when he finally passed away. If something happens to our grandmother there wont be a nice $3 million to cover 12 years of hospitalizations and surgeries.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#62

Post by FabHK »

skybrian wrote: post #50
acover wrote: post #12

Earlier quoted context omitted.

It's not a strawman. Most of the article is written with the assumption that not spending all your money is sub-optimal. From the article: > After a lifetime of saving, it requires some psychological gymnastics to start spending your nest egg. Browning’s suggestion is that financial planners urge their thriftiest clients to make big purchases–like a second home or a fancy car–before they retire, out of their pot of s…

Sub-optimal for whom? What does sub-optimal even mean in this case? Who benefits from "training to spend"? It's not at all clear that the authors of the article are concerned about the well-being of rich old people. There seems to be some other argument that's not being stated explicitly.

That might well be the paradox of thrift, that is that their frugality, while individually rational, collectively harms the entire economy (including themselves).

Just like arguably a lot of austerity in the Euro zone was self-defeating.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#63

Post by asdfjlkasdf88 »

bradleyjg wrote: post #42
djrogers wrote: post #18

Earlier quoted context omitted.

The benefit of leaving my heirs a legacy far outweighs any 'benefit' I'd get from spending money needlessly...

Consider, it's up to you but consider, that you might get more joy out of gifts while you are alive to watch the recipients benefit from them than you do out of imagining how much they'll benefit from bequests you intend to leave when you die.

That's how my grandpa lived: A life full of fleeting moments now in exchange for shellshock when 65 arrived.

Given the reluctance of our culture to show care and concern for people in general, I'm not too psyched about getting to the end and needing a handout.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#64

Post by drivingmenuts »

crdoconnor wrote: post #46
charlieflowers wrote: post #6

> "As a result, millions of Americans are living too frugally" WTF, really? Reminds me of Edward Bernays [1], the "father of public relations", who set out to help Americans become materialistic (and succeeded!). If someone is enjoying their life without blowing all their money, that person is BETTER off. It's just corporations that want to suck the money away from them that need to "train them to spend." [1] https:/…

Living in sheer terror of a medical emergency triggering a financial emergency doesn't sound like an ideal way to spend one's retirement.

I am going thru that very scenario right now, having had an emergency crop up while unemployed and uninsured.

I'm very sure that unless I get very lucky, I am so very fsck'd for the rest of my life.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#65

Post by anigbrowl »

charlieflowers wrote: post #6

> "As a result, millions of Americans are living too frugally" WTF, really? Reminds me of Edward Bernays [1], the "father of public relations", who set out to help Americans become materialistic (and succeeded!). If someone is enjoying their life without blowing all their money, that person is BETTER off. It's just corporations that want to suck the money away from them that need to "train them to spend." [1] https:/…

Economists distinguish between saving, consumption and investment. Excess saving is economically inefficient.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#66

Post by digikata »

djsumdog wrote: post #47
hkmurakami wrote: post #2

Just another way in which "the world is becoming more like Japan" (wrt to its demographic and economic woes). (The generaltional wealth gap is such that corporations have been shifting product strategy away from the youth and towards the elderly)

Japan has real health care

For the most part, US retirees have health care too.. more so than the rest of the population at younger ages.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#67

Post by bradleyjg »

skybrian wrote: post #35
bradleyjg wrote: post #14

Earlier quoted context omitted.

Optionality has value but it decays over time. If you forgo consumption in favor of savings up until the very end then you haven't been better off, you've been worse off. The dead can't benefit from spending money.

Okay, but as long as they're happy, why is this a concern? The article implies with the talk about "training people to spend" that other people should be concerned about this, but doesn't say why. I'm not really seeing it. It's not like the money supply is fixed. There are other ways to grow it if the Fed were willing to do it.

Suppose you are a financial planner or whatever they call themselves. You've been in the business a while and you've observed dozens of wealthy peoples' retirements. Isn't it possible you might reasonably have some perspective to share with a wealthy couple just coming into their mid 60s and ready to stop working?

Look at this paragraph from the article:

One of those irrational reasons may be simple habit. Something strange happens when people retire, Browning says. All of a sudden, they’re not getting a regular paycheck, and that makes them scared to spend. Goals set before retirement are abandoned, along with pre-determined spending plans, because retirees are terrified see the balances on their retirement accounts drop even a tiny bit.

What's wrong with someone, like a financial planner, reassuring a couple that yes they can take those vacations they always dreamed of, yes they can pay for their grandkids' college tuition, yes they can make a substantial donation to that museum they love so much -- here's the math showing that it is likely to be okay?

Re: Rich Retirees Are Hoarding Cash Out of Fear

#68

Post by oppositelock »

FabHK wrote: post #52
charlieflowers wrote: post #6

> "As a result, millions of Americans are living too frugally" WTF, really? Reminds me of Edward Bernays [1], the "father of public relations", who set out to help Americans become materialistic (and succeeded!). If someone is enjoying their life without blowing all their money, that person is BETTER off. It's just corporations that want to suck the money away from them that need to "train them to spend." [1] https:/…

The problem is that their individual virtuosity (or frugality) can hold back the economy as a whole (and poor people might suffer most from that). This is Keynes' Paradox of thrift. https://en.wikipedia.org/wiki/Paradox_of_thrift

Keyne's paradox of thrift is hogwash.

If the occasional person is thrifty, there's no problem.

If everyone is collectively "too thrifty", then we've got a problem, but this isn't the cause of the problem, it's a symptom. What does it mean when everyone is saving? It means that there is some kind of uncertainty or fear which is making people forego current consumption in favor of future consumption. This isn't a natural state of human affairs, since we tend to value things today more than things tomorrow. The extra "thrift" happens because of political or economic uncertainty.

Political uncertainty is fickle, you can't predict it or plan for it. However, saving is the correct response to economic uncertainty, and it's what's responsible for the eventual recovery after a crash.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#69

Post by anigbrowl »

toomuchtodo wrote: post #25
bradleyjg wrote: post #14

Earlier quoted context omitted.

Optionality has value but it decays over time. If you forgo consumption in favor of savings up until the very end then you haven't been better off, you've been worse off. The dead can't benefit from spending money.

I am absolutely worse off if I run out of money before I die, whereas its only a minor inconvenience if I don't happen to spend down my estate to zero before death (in my case, it will flow to my wife and/or daughter). EDIT: I will live frugally and drastically below my means forever (and I'm only 34!) while putting aside substantial savings; the fear of running out of funds in the last part of my life is terrifying.…

Fallacy of the excluded middle, nobody suggested that people should be spending themselves into penury. This is a great argument for universal healthcare though.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#70

Post by nosuchthing »

djsumdog wrote: post #27
charlieflowers wrote: post #6

> "As a result, millions of Americans are living too frugally" WTF, really? Reminds me of Edward Bernays [1], the "father of public relations", who set out to help Americans become materialistic (and succeeded!). If someone is enjoying their life without blowing all their money, that person is BETTER off. It's just corporations that want to suck the money away from them that need to "train them to spend." [1] https:/…

> Edward Bernays Sigmund Freud's nephew, who used psychoanalysis to sell products. Freud hated Edward and Anna for going that route. They are the reason more women smoke and why Americas eat bacon for breakfast. If you want to know more, watch The Century of the Self by Adam Curtis.

Adam Curtis's The Century of the Self: https://thoughtmaybe.com/the-century-of-the-self/

(Most of) the rest of his films: http://thoughtmaybe.com/by/adam-curtis/

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