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Rich Retirees Are Hoarding Cash Out of Fear

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Re: Rich Retirees Are Hoarding Cash Out of Fear

#81

Post by ransom1538 »

dsmithatx wrote: post #61

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 ever…

Whatever you save with your blood, sweat and tears (if you are lucky) will be blown on medical expenses. The trick is to convert to cash (literal), then give it to your wife, convert medical expenses to debt and die.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#82

Post by [deleted] »

dsmithatx wrote: post #61

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 ever…

[deleted]

Re: Rich Retirees Are Hoarding Cash Out of Fear

#83

Post by ldayley »

bradleyjg wrote: post #67
skybrian wrote: post #35

Earlier quoted context omitted.

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…

This is exactly the kind of thing that financial planners are currently making a killing doing as they shift from helping boomers accumulate wealth to helping them spend that nest-egg.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#84

Post by FabHK »

oppositelock wrote: post #68
FabHK wrote: post #52

Earlier quoted context omitted.

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 natur…

What you say doesn't invalidate the paradox.

In fact, that is precisely the paradox - that the individually responsible and rational thing (more saving in the face of uncertainty) actually accelerates the problem: an economy crashing down.

Among the policy lessons would be to reduce uncertainty, and encourage consumption (in the economic sense), e.g. via government provided stabilisers (food stamps, unemployment benefits, etc.).

> saving is the correct response to economic uncertainty, and it's what's responsible for the eventual recovery after a crash.

That's a very contentious statement, and personally I'd be rather careful in casually contradicting eminent economists on economic matters.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#85

Post by drblast »

This is a really good argument for subsidized medical care. This fear of not having enough for medical expenses is perfectly reasonable, and I wouldn't fault sometime for hoarding cash for a second.

Solve the inherited inequality problem with inheritance taxes or guarantee medical care. Otherwise of course people will save for medical expenses. And they should, it's prudent.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#86

Post by passivepinetree »

gedy wrote: post #3

Fear? Seems more that there are simply no safe investments with decent returns, interest rates are abysmal. I think folks are 'hoarding' simply to not run out by the time they die. Low interest rates are painted as great for the economy, but they amount to a war on savers and fixed incomes.

Not just that, but I imagine (as others have noted) the fear of crippling medical bills is a huge part of it as well. America's heath care system has an uncertain future, and that may affect retirees' savings habits.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#87

Post by [deleted] »

FabHK wrote: post #62
skybrian wrote: post #50

Earlier quoted context omitted.

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.

[deleted]

Re: Rich Retirees Are Hoarding Cash Out of Fear

#88

Post by FabHK »

anigbrowl wrote: post #69
toomuchtodo wrote: post #25

Earlier quoted context omitted.

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.

And a collective insurance-like pension system, where the people dying early subsidise the people dying late. Then everyone just needs to save to the expected age of death, rather than the maximum age of death.

Re: Rich Retirees Are Hoarding Cash Out of Fear

#90

Post by Erik816 »

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.

A valid concern. But estate planning lawyers like to remind people that it's quite possible you will get more love and attention from your relatives in your old age while they are still expecting an inheritance than when they know you have already given it to them. A bit cynical, but relevant to consider.
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