Pensions and dreams

Many people like to dream about the things they will do in retirement and count on their pensions and savings to make the dreams come true.  For lots of current seniors this has been true but younger people may not get beyond the dream.  All the uncertainties of the economic future come to the fore when one starts thinking about pensions.

One hears two major concerns about pensions:  most  people are not saving enough and too many pensions are based on unfunded liabilities.

The one certainty about retirement futures is that well-being and standard of living will depend upon the quantity of goods and services we are capable of producing and the number of people with whom those goods and services must be shared.  Inflation or bankruptcies could easily wipe out  pensions and savings. In any case an increasing population and people living longer into retirement will put pressure on pensions.

There are two ways we can try to ensure our futures into retirement – we can work our butts off in an attempt to return to economic growth or we can reduce our expectations so that we don’t need so need so many goods and services.  It is possible the second option will be forced upon us.  That may not be all bad.  This blogger knows from experience that canoe camping is a lot cheaper and more enjoyable than the large cruise ships..   I also have to recognize that camping would be a lot less fun if we had to share the lake with 2,000 people at a time.

Most  of us are subject to a lot of media hype about the importance of pensions and saving for retirement.  We should keep in mind that we are in for the long-term while the people selling investments are more interested in their next pay cheque.  What is good for them may not be good for their customers and by the time you find out you may not even remember their name.

Some people are worried about government pensions and see private investments as the answer.  I figure the whole financial system is at risk of either inflation or bankruptcy.

In planning for the future we have to evaluate the potential for a return to economic growth.  If one believes we are going to return to growth then it might  be okay to put a lot of effort into a pension.  .  Personally, I think the best long-term investment at this time is a market garden.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

Pensions or a cruise?

A columnist for The Economist says people should ensure their pensions are adequate before they think of a world cruise.  I think the world cruise should come as soon as possible and worry about the gas bill later.

It could be that we have conflicting conflicts of interest in these recommendations.  One of my stepsons and his wife are entertainers on a cruise ship and the columnist probably has friends in the investment industry and gets some of his income from advertising and subscriptions from the industry.  You can read the column here.

Retirement is important for a lot of people.  A few years ago it was fashionable to plan for retirement at the age of 40 or 50.  Now that columnist is suggesting people may have to work beyond normal retirement age in order to have the lifestyle they desire.

Retirement planning is easy when the economy is growing and everyone believes that growth will continue.  But when growth ends all those plans and savings are likely to fall apart.  There are three things that can happen to savings and retirement funds:  inflation can wipe out their value, firms can fail or governments can decide to give haircuts.  It is not clear that there will soon be a return to economic growth.  Given the current economic uncertainty, any one of these could happen at any time.

The columnist suggested that inflation-linked government bonds  “should be the building blocks  of a pension portfolio.”  This ignores that most governments are carrying more debt than they will ever be able to repay.  When the Ponzi scheme explodes a lot of people will find their dreams destroyed.

In the meantime, those in the investment industry are doing short-term well out of all those people worried about their retirement income.

So far the economic crisis has mostly hurt young people.  If or when it hits older people and they can no longer afford cruises the cruise industry will have a surplus of ships.  They may then have lots of work for an Italian cruise captain with some experience at decommissioning ships.  I encourage people to take a cruise before he gets called back to work.

Here’s a Irving Berlin/Fred Astaire song from 1936: “Let’s face the music and dance”  or cruise.

Economic growth and working till you drop

The Economist’s columnist Buttonwood argues in the February 11, 2011 issue that there is no need to encourage older workers to retire to provide job opportunities for younger people.

The real fallacy and myth in this column is the statement that “growth depends on having either more workers or greater productivity.”

Growth also depends upon having the resources and energy to make things and deliver services.. The columnist is right when says  when people work for a living they earn money and spend it on goods and services produced by other people.  However, when we work we also use up the planets resources and energy.

There may be lots of resources and energy left but we have used up the most readily available and the easiest to extract.

This is probably the reason for the worldwide recession which is probably going to get even worse.

So far it appears more young people are feeling the effects of the recession than are older people.  It wouldn’t hurt the give some of them a break.

Should retirement savings be forced?

An article on the CBC news website asks if Canadians should be forced to save for retirement.

The article points out that some people pushing for this are in the financial industry and have a vested interest in getting more people to put money into retirement funds.

I would point out our well-being and standard of living in retirement will depend upon the ratio of population to the quantity of goods and services being produced at the time of one’s retirement.  At this time it is not clear what that ratio will be next year let alone into the future.

There are three risks facing retirement savings.  Inflation could wipe them out,  the institutions holding them could go broke or they could bed lost to fraud.  The longer the term the greater the risks.

I still think the best investment is a market garden.

I would refer you to the story at the start of the previous post on this blog.

Delaying retirement and young people

Statistics Canada reports Canadians are delaying retirement and working later in life.  Presumably this is an attempt to maintain our standard of living into our golden years.

At the same time young people are taking to the streets in frustration at what they see as a lack of opportunity for the same standard of living.

I wonder if the older folks were to retire earlier and accept a slightly lower standard of living, would it provide more opportunities for the younger people?

Worrying about pensions

Pensions are a major concern for many people in the industrial countries. I wonder what percentage of the world’s population has a pension and what the rest do.

Our standard of living in retirement will depend not upon how much “money” is in our pension fund but on the ratio of population to the quantities of goods and services our economies will be capable of producing and our ability to obtain a share of that.

There are two things that could take away our retirement savings – inflation or the failure of financial institutions.

Maybe the best pension fund would be a market garden.

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