Saturday, September 08, 2012

The Mathematical Impossibility for Gen Y to Save for Retirement

A quote from Goldfinger:

"Yes, well, I've worked out a few statistics of my own. 15 billion dollars in gold bullion weighs 10,500 tons. Sixty men would take twelve days to load it onto 200 trucks. Now, at the most, you're going to have two hours before the Army, Navy, Air Force, and Marines move in and make you put it back."

I've worked out a few statistics of my own, too.  Back of napkin of course.

The average Gen Y youth as well as all future youth have to spend the first 18 years growing up and getting an elementary education.  Another 4 years, more likely 5 with unnecessary liberal arts prereq's shoved down their throats make them 23 by the time they graduate with their bachelors degrees.  However, their bachelors are worthless and most companies won't hire them anyway because of the lousy economy, so they return for another 2 years of school making them a quarter century old before they hit the labor force.

But, when they do hit the labor force, it won't be at a job they're capable of.  It will be something mundane that they could have done in high school.  Thus why underemployment rates are roughly 50% for the average 25 year old. 

The problem is compounded because not only are the youth working jobs they could have done in high school (and at a commensurate wage), they have student debts they have to pay off.  The next decade they muddle through lousy jobs with no hope for advancement or challenge due to the managerial ineptitude of the previous generations, finally paying off their student debts at the age of 35. 

35, however, is pretty late in the game to "finally" be "starting a life."  And by "starting a life" I mean starting families and getting a house. IF you were fortunate enough to not have a kid by this time, you could feasibly find a spouse and afford a house.  If you were like everybody else however, you have a kid, still have student loans, and probably defaulted on your house.  Your credit is shot, you won't be able to find a house soon and starting a traditional family is nearly impossible as men do not have the earning power (even in their 30's) to pay for a family and women are starting to push child-bearing into a risky age range.

You get a couple kids and you get a house.  The kids will keep you financially strapped for the next 20 years, the mortgage 30.  Of course, the mortgage will not be as much as a liability as it will be progressive property taxes that will increase to the point the house is no longer an asset, but a liability.  Whatever the case, you're pushing 60 by the time these liabilities are paid off.

"60" did you say?

Yes, 60 and you haven't even started saving for retirement.  And I am not blaming you.  You never had the money to save for retirement.  It took 25 years to get you educated to the point the Credentialism-Infected American labor market would even entertain hiring you.  And another 10-20 years before they'd ever give you a decent wage or consider giving you a job with responsibility.  This is of course requiring you to take "CPE" every 6 months while offering nothing in terms of employment security, job stability (ie-not changing your job duties every 3 months) let alone, sanity in your job.

Regardless, 60 years old is too late to save for retirement.  Despite government promises of retirement at the age of 65, mathematically you are going to have to work till you're dead.  I hope MI6 has a good pension, 007.


Anonymous said...

Came across the following article and thought the Captain and his audience would also enjoy:

Death by Degrees

Jaedo Drax said...

Even trades workers in many places will have the same problem since the apprentice programs are largely full of nepotism, unionism, and massive government interference.

Anonymous said...

Yes, but what if Generation Y just wants to destroy the entire money supply and make it unusable to anyone.

Anonymous said...

Bismarck set the retirement age at 70, in 1889, when the average life expectancy was 45. When generation Y retires at 80, it might not be quite as old, perhaps like today's 76 or so.

Not so great, but it's the inevitable fate of being on the wrong end of a demographic transition. Generation Z and later will be in a much stronger position.

With socialism, though, all bets are off.

Mrs. Bob said...

Once again Captain you have psychic abilities to come up with the very problems we face trying to save for "retirement". As in nothing. I think we are technically Gen X but we are the last year so we probably fit the Gen Y picture better. These student loans are going to kill us.

Anonymous said...

Of course you are correct in general, but you can do it if you are lucky/careful. I didn't manage to start a "career" type job until I was 40. I paid off my student loans by about 30, started an apprenticeship I could have done out of high school (assuming there was any work in 1982) at 35. I am now 48. I have several 100k in savings and investments, a house that will be paid off in less than five years (purchased 5 years ago) and a stay at home wife to look after our two primary school aged sons.

For me life is good (at least for now), but it didn't start to get good until I was 35. Don't get too depressed. With a lot of hard work and a little luck it will get better. - minuteman

Anonymous said...

Further to my last, its not much of a consolation, but retirement is a very post WW11 concept. Retiring at 55 to 65 and then enjoying 30 years of leisure probably only exists for people who retired from 1975 to 1995. As good as I have it, I probably won't retire until I'm 70. If I do I will hopefully have twenty years of good health and leisure. neither of my grandfathers lived to be 70. It is my understanding that the first public pensions in the modern world were in Bismark's Germany. When he created the system you had to be 65 to collect a state retirement pension but the average life expectancy was 56.

Like I said, not much of a consolation, but it is a return to reality. - minuteman

isomorphismes said...

youth working jobs they could have done in high school

Yup, this is what doesn't make sense about the system. American school is like preparing you to work in a factory (hush up, don't talk to anyone, listen to me and follow directions) rather than create your own self-employment...which is much more the way of an increasingly service-based economy. Find a customer, understand yourself, define yourself, network.

Anonymous said...

Story of my life. Only I'm 38, still can't find stable employment, still have some student loan debt, and am no where near forming a family or owning a home. I was doing OK...surviving...during most of this crash, but now I'm hanging by a thread hoping I won't end up living back at home with my mother. (I guess I should be grateful that's an option, otherwise I would be looking at the street.)

Oh yeah...I'm in a STEM field!

The American dream has been nothing but a nightmare for me. Everything I hoped to have when I graduated high school and then college is out of my reach. I was the kid who stayed off drugs, didn't go out much, stayed at home and studied. For what?

I can't pin my situation on any single mistake. I haven't blown money on anything stupid or lived it up. No fancy cars, vacations, etc. Just one lackluster job after another. Before someone assumes I'm bad at what I do, every job I've lost I've lost because the company was struggling and/or was outsourcing. I've never been the only one to be fired, it's always a group.

I've been so depressed as I've drifted into my late 30's that one family member and two different friends have recommended I see a doctor for anti-depressants. As if I shouldn't be depressed? I purposely stayed away from alcohol and drugs thinking I was making a better life for myself, and now I'm supposed to accept that drugs are the answer? Why didn't I just enjoy them when I was in high school?

I don't date. I don't go out. I've fallen behind on what's left of my student loans ($7k), and now they're skyrocketing up. (Funny how making a payment doesn't seem to have the same impact as missing one.) I don't know what to do next. My love of life is gone. I've literally stopped caring.

I just watched my grandmother die (96!), and I can't stand the thought that this is going to be my life until I die. Honestly, crime is starting to look like an appealing option.

I'd leave this country if I had any idea of where to go.

MarkyMark said...

When Social Security was started, the average life expectancy was 58. Then, as now, you had to be 65 to start collecting SS. IOW, you would have been, statistically speaking, dead for seven years by the time you were ready to collect SS. Now, with people living longer (not to mention the demographic decline), folks wonder why SS will be insolvent soon? Come on!

Oh, and even for those of us who have jobs, it's increasingly difficult to save for retirement. Why? Because costs have skyrocketed! The present administration has done everything it can to drive up the price of fuel, which affects everything. We pay more every time we pull up to the pump; gas was $1.85 a gallon when Obama took office, and now it's $3.82. I drive a small economy car, and it's cost me $40 to fill the thing over the last month-$40! That's just for routine driving during the week. Before Obama took office, I was paying $25-$30 a week for fuel. What kind of impact does that have on the personal bottom line when the cost of necessities has increased by 25% and more?

We also pay more for electric, natural gas, etc. The personal bottom line is affected directly, leaving us with less money left over. That's less money for saving, investment, taking vacations, etc.

Ah, but it doesn't stop there! Because fuel affects the price of everything in our society (that food in the grocery store did not appear by magic, folks; it was trucked in-duh), we pay there too. The price of food and everything else we buy has gone up. Two years ago, buying a couple of incidentals at the grocery store cost me $10-$12; now, I can't HOPE to get out of there without forking over at least $20. That's about a 50% increase!

Why? Because it's trucked in, that's why! With diesel costing over $4/gallon, truckers are paying over $1,000 every time they fill up-a thousand bucks! Those costs get passed on to us, because the truckers can't afford to work for free. Since the vast majority of goods we buy are brought to the stores by truck, the price of everything has gone up along with the price of fuel. Again, that's less left over at the end of the month-if folks HAVE anything left over, that is.

If folks don't have money left over, they can't save it. They can't save it for a new car; they can't save it for a rainy day; they can't save it for retirement. Folks just don't have the MONEY to save for retirement anymore, so they're not doing it. It really is as simple as that, Cappy...

Anonymous said...

"I've worked out a few statistics of my own, too."
You're kinda confusing statistics (even back-of-the-napkin) with a narrative. Gen Y will indeed spend their lives in debt if they try to match the unhealthy, anti-social lifestyle of their boomer forebears. So don't.

Unknown said...

you can not go to college(which is a big business anyways) surround yourself with successful people and successful thinking and work harder than anyone you know in a job with huge margins(sales) and dump all your money into RE for long term wealth creation. education, economy, kids, house these all sounds like excuses people make for why their lives are wasted. Remember: things don't happen to you. things happen because of you. take responsibility and make for yourself and your family a great life.