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The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

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Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#51

Post by Clubber »

fivestar wrote: post #26
QuarterReptile wrote: post #19

Earlier quoted context omitted.

Most discussions about "fully funded" safety nets go something like this. It's the reason, so far as I can tell, why Republicans talk about social security being trillions in the hole while others point out that the money in the fund is more than sufficient. The same principle is responsible (along with other things) for suburban growth in America. The reason is that republicans are referring to accrual accounting, w…

The smugness practically drips from your pores. It's not government building those houses out in the cornfields, it is the monied developers who capture local governments and bribe them into letting them build those cracker boxes. I live in an 80s suburb and while I can see that the newer ones are even worse, I prefer to avoid telling others how they should live their lives. For example, urban high rises are just hum…

>So what if low birth rates break their system?

Birth rates fund our social security system. It keeps the "Ponzi" scheme going.

I think I'm having a hard time with it being called a Ponzi scheme. Had an individual invested the amount they put into SS into the market, it would not be a Ponzi scheme, and is essentially a 401K. Is SS is only a Ponzi scheme because of the way the government manages it?

If I take a step back and government takes money an invests it into the growth of the GDP, is it no longer a Ponzi scheme?

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#52

Post by SilasX »

lr4444lr wrote: post #33

People will have to pay a little more, a little longer, and take out a little less in some combination. I am sure the actuaries are smart enough to figure it out.

No. That is a dangerous attitude on this. There are limits to how much you can raise through taxes before you trigger a death spiral, where you scare off working age contributors, which increases the burden the rest have to pay, which scares off more contributors, and so on.

That's exactly what happened with the dinosaur companies (GM, Bethlehem, etc) with unfunded pension obligations. The "legacy costs" made it so they couldn't compete. True, it's harder to switch countries than avoid employment at a dinosaur, but that's a difference of degree, not kind; the dynamics are all the same.

Don't start from a model that assumes no one will ever leave. That's how earlier generations of actuaries "didn't figure it out".

Edit: It's not even necessary that workers flee the country; it could also be that more of the economy is driven underground, which has its own nasty side effects.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#53

Post by blindwatchmaker »

anovikov wrote: post #40
blindwatchmaker wrote: post #39

Earlier quoted context omitted.

A lot of solutions for budget shortfalls seem to be focused on increasing burdens and reducing services for the lower classes. Maybe some of these shortfalls could be made up for by bringing the tax rates on the wealthy and corporations back up to pre-Reagan era levels, and also recouping some of the trillions in tax avoidance money hiding in offshore shelters? This seems more preferable to me than nickle and diming…

Well, people are supposed to fund their own pensions. This is not a tool of redistribution. If they life longer, it is logical they have to either retire later, get lower pensions, or contribute more, or all of the above.

I don't think it's axiomatic that individuals should be funding their own pensions. I feel a lot of these problems that keep popping up have the same fundamental root cause: governments (and the non-wealthy) have less resources, as more of those resources end up concentrated in fewer hands over time which has certainly been the case in first world countries over the last few decades.

Proposed solutions of austerity and cutting and degrading services even further for the lower classes are exacerbating this tendency. I'm not sure what the endgame here is supposed to be.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#55

Post by payne92 »

lr4444lr wrote: post #33

People will have to pay a little more, a little longer, and take out a little less in some combination. I am sure the actuaries are smart enough to figure it out.

The problem isn't the actuaries, it's the assumptions.

For example, NOBODY KNOWS how much health care will cost in 20 years, but that's central to figuring out defined benefit obligations (as just one example).

Or, what's a good investment rate of return assumption to use? Small differences (e.g. fractions of a percent) compounded over decades lead to huge differences.

How do you model black swan events (e.g. 2008 crash)?

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#56

Post by Retric »

verelo wrote: post #49
gulbanana wrote: post #46

Earlier quoted context omitted.

Why are they "supposed to" do that? It's in the interest of society as a whole to make sure that everyone is looked after in their old age.

The US has to pick model for right or wrong. Saying it's in everyone's best interests to look after people is totally true, but it's not really the design of the US social system. The US is free market, in a free market you look after yourself and in return are a little less regulated and/or taxed. Both work, but yeah...in the current model, it anticipates people looking after their own retirement plans. In my opinio…

US pension model (Social Security) does do redistribution just from the middle class to the lower class and single people to married people.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#57

Post by SilasX »

RobertoG wrote: post #3

I get how an excess of pensioners (not enough workers) in an economy can be a problem. I get how an excess of unemployed people (people without a job) can be a problem. What I don't get is how both can be a problem at the same time.

By being unable to find productive work for the workers. You can't produce anything for the retirees, and you can't find out how to make the workers produce.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#58

Post by nugget »

lr4444lr wrote: post #33

People will have to pay a little more, a little longer, and take out a little less in some combination. I am sure the actuaries are smart enough to figure it out.

What should scare people the most is the Illinois pension funds' assumption of ~ 7% real returns going forward. If the market stays flat in real terms for the next decade, which seems at least possible (if not plausible), it's significantly worse than their worst-case scenario, which is already probably unsolvable without some form of default.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#59

Post by jerf »

Clubber wrote: post #51
fivestar wrote: post #26

Earlier quoted context omitted.

The smugness practically drips from your pores. It's not government building those houses out in the cornfields, it is the monied developers who capture local governments and bribe them into letting them build those cracker boxes. I live in an 80s suburb and while I can see that the newer ones are even worse, I prefer to avoid telling others how they should live their lives. For example, urban high rises are just hum…

>So what if low birth rates break their system? Birth rates fund our social security system. It keeps the "Ponzi" scheme going. I think I'm having a hard time with it being called a Ponzi scheme. Had an individual invested the amount they put into SS into the market, it would not be a Ponzi scheme, and is essentially a 401K. Is SS is only a Ponzi scheme because of the way the government manages it? If I take a step b…

"Ponzi scheme" as a term is generally overused. It identifies a specific fraud, and things that look sorta vaguely like it may have any number of critical differences in those sorta-vague similarities that result in a completely different outcome, including potentially worse ones. It is not a sufficient analysis of the situation to stick the label "Ponzi scheme" on social security and think anyone has obtained any sort of understanding of the situation from it.

Resist metaphors.

Re: The World Economic Forum predicts a USD 400 trillion pensions shortfall by 2050

#60

Post by onion2k »

twoquestions wrote: post #45
onion2k wrote: post #15

Earlier quoted context omitted.

After all pensioners aren't likely to riot. I would highly recommend reading The Road To Serfdom ( https://en.wikipedia.org/wiki/The_Road_to_Serfdom ). It details precisely why a right wing government needs to invest in welfare and social care for this exact reason; when a government fails the poor (or the poor's parents I imagine) they have a tendency to rise up and kill all the rich people.

> It details precisely why a right wing government needs to invest in welfare and social care I was gobsmacked when I read this, as most of the Hayekians I know argue to let the poor/weak fend for themselves, as it would be better to let the weak perish than to steal from the strong to protect them. I may actually have to read it now! Also, I feel it's unreasonable for those without property to respect property right…

Hayek was one of the first to suggest a Universal Basic Income would be a good idea. That would be quite a strange notion if he thought the poor should be left to fend for themselves (at least economically).
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