Comment by dzink | Hacker News Reader

Comment by dzink | Hacker News Reader

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The biggest financial problem for most economies these days are retirement obligations towards the growing share of seniors. France and The UK are flirting with the need of being bailed out by the IMF (not possible given the size). Many EU countries have pension obligations their markers are simply not big enough to feed. Similarly in the US the stock market is puny in comparison to the returns expectation of trillions by retirees. The cash held by the wealthy and those who don’t have an overinflated stock market available to them to invest their savings into gets stashed in real estate and that is an even bigger issue. All over the world, passive investment cash is taking over the real estate supply - a needed good is hoarded and supply is choked off.

In proper market economies, that scarcity should lead to more and more construction. Cities should be expanding, right? So to fix the issue, you need regulation that reduces the incentive for real-estate hoarding as an investment vehicle (maybe more serious property taxes on residential real estate that is not a primary home) and you need easier supply of new construction with more government involvement in expanding cities/towns by building infrastructure to support them.

Another issue is healthcare - 90% of your healthcare expenses are incurred the last 10 years of your life. Your two systems of choice are either universal supply of the most basic healthcare (definition of basic expands with the wealth of the country you are in), or privately funded advanced health options for those with life-threatening conditions. The US has the latter, most countries have the former. The biggest problem there is burnout and harder to scale supply of health workers relative to the ever-higher demand. The scary thing here is that governments with high retirement and healthcare debt to their seniors have an increasingly strong incentive to reduce that debt. Pandemics, wars, autocratic silencing of opposition all help with that. In the US where 401k accounts hold the retirements, the stock market will struggle to provide all the returns expected of it. In countries where government provides the pension, the squeeze is on government debt and thus even stronger when yields on that continue to rise (as they do now in Japan).

In the US the 401k is in addition to a relatively generous (by European standards) government pension, it isn’t a replacement or alternative. The same thing exists in many European countries, it just isn’t as strongly encouraged as it is in the US.

The idea that it is important to diversify your retirement income instead of relying on the government or some other single source is one thing American culture gets right. It reduces risk and increases resiliency.

You're going to have a hard time generalising "European" here, because there's a lot of countries and nothing is set (at all AFAIK) at the EU level.

I lived in the UK and Sweden and both countries had massive private pension systems that you pay into ("optionally"). The state pension is a tiny sliver of that.

In fact, in Sweden I can go look at all my private pension funds in one place; here's a picture of that: https://i.imgur.com/rMw6W44.png

You see the tiny red sliver at the bottom: that's my state pension ("Allmän Pension") which is less than 1,850 USD per month before income taxes. That doesn't even include the inflation that will happen between now and 65 (assuming I will be permitted to retire at 65 which seems unlikely).

Fair, my strong impression has been that average people in most countries in Europe put relatively less into private pension schemes than equivalent Americans. I know that is the case in the UK, for example.

My state pension alone in the US is notionally ~$4k per month when I reach retirement age (plus all the other subsidies and free stuff). Despite this, Americans are pretty much indoctrinated from birth to assume that won’t exist and to have alternative plans. This leads to the interesting phenomenon where many people that weren’t particularly well off during their working years find themselves relatively flush with money during retirement because they were operating from a pessimistic model.

> My state pension alone in the US is notionally ~$4k per month

That's huge! Does the US state pension scale based on your lifetime contributions (amount, not just years)? Because int he UK, if I retired with a full state pension today, I'd get $1345 per month. To achieve this you need to have contributed about a minimum threshold per year for 35 years. There is no way to increase this amount, only decrease it by not meeting the 35 years requirement. So to me, given the rhetoric about the US, $4k per month state pension along is insane.

That leads to a much bigger phenomenon where seniors are catered to in the US with products and services and treated with a lot of attention and ads while many seniors in Europe (especially Eastern Europe) live on government mercy and in horrible conditions.

> You see the tiny red sliver at the bottom: that's my state pension ("Allmän Pension") which is less than 1,850 USD per month before income taxes.

Did you mean to type per month here? That's an enormous state pension.

I did mean monthly, but you’re missing a lot here.

I know previous inflation does not infer future inflation But if we use the previous 30 years of inflation to project the future, this money would be worth $882-ish today.

I’m not sure how you live, but that doesn’t cover ground rent on my apartment and food today.

The major point is that private pensions are common, and they are investments made by banks (I think similar to a 401k). I think its mainly Germans who don’t like private pensions.

I dunno: We’re well into the retirement years of the Boomers, and despite whatever drawdown they’re making, the market hasn’t been suffering; just the opposite.

It's because they still print trillions for that. Now it does not cost them much but Printing is not scalable. World has limited resources and limited human capital. At some point European countries will become like Japan, with old native people. But it's not sustaniable in a competitive world economy. In Japan it barely work because they work in older ages and they have very low crime rate and immgration. No developed country is fully ready for this. They stared to increase retir. age but with not enough jobs that can't help at all. Some EU countries already have crazy debt/GDP ratio.Imagine in a decade? They know what is coming.

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