Under-rated problem. The decline is real, and towards the end of their life many people end up handing a power of attorney to their children or other close relative in order to run their lives. While in the meantime there are so many more internet-enabled scams.
Google site:bogleheads.org elderly scams - the list goes on and on ...
I've also got elderly relatives, and even with their pensions secure (European-style pension system), there's lots of people going after their money. Trying to prepare them for encounters with online and real world scammers is an ongoing process, e.g. by recounting the cases that I read in the news to foster mistrust.
I've lost count how often an elderly family member (who is still sharp as a tack fortunately) told me that the "police", "your beloved niece", or "Microsoft" called them.
>>I've lost count how often an elderly family member (who is still sharp as a tack fortunately) told me that the "police", "your beloved niece", or "Microsoft" called them.
It's very sobering when we realize that we too will one day be just like them.
My mother bought a house in a retirement village decades ago. A few years ago she had her land line disconnected. The reason is on weekends she was getting 20 or so scam calls a day. I asked around, and everyone in the village was getting these calls. But if you went a block outside of the village it all stopped. The scammers had identified the range of phone numbers used by land lines in the village, and rang them non-stop, for months on end.
Except increasingly many elderly don't have children / relatives to pass power of attorney to. A bit of a tangent but there is a market opening for a national scale business that is a trustworthy end of life management service for people who are going to die alone. That is going to be a huge market if demographic trends are any indication.
Local attorneys / solicitors already provide such services but one has no way of knowing whether they are trustworthy or will remain trustworthy (think Lionel Hutz from the Simpsons) whereas a larger scale business can afford to do internal auditing and integrity checks and make them public to ensure trustworthiness. A large enough scale business can also afford to maintain specialists on hand to handle things like managing online social media accounts that a local operation wouldn't be able to afford.
Sure. But in our society that “trustworthy end-of-life management service” is going to realize that it can achieve better returns by abusing seniors’ finances (or else lookalike services will pop up.) This is the pattern with most debt management companies: they take vulnerable people and upsell them on high-interest consolidation loans.
You either need strong societal values that can stop this (and a business structure that keeps reasonable people in control) or a government that legislates to stop it. We currently have neither in the US, which is one of the reasons we’re in this jam.
Surely the government provides that? In my country it does. Those children EPOAs can also choose to give up their responsibility and the government will appoint a professional. It's not hard to just basically avoid hemorrhaging money.
i strongly oppose the American approach to pensions, which is regrettably spreading worldwide.
relying on private savings to finance retirement is highly risky, and this is the crux of the article in question.
pension systems should be administered through public programs, not turned into moralistic contests in which individuals are penalized if their investments fail for any reason (and it's only their fault... while it's clear it's a social failure).
basic solidarity is essential in ensuring both the health of retirees and the fulfillment of reasonable expectations for a secure retirement.
European pensions are predominantly unfunded, and promises typically amount to 3.5 times GDP. The prevailing view among those who have looked at this is that nobody under the age of 40 will get anything close to what is promised. The only exception is Netherlands, and maybe Sweden. Leaving private pensions the only option.
Basic demographic analysis will point out that in a world with a declining and aging population, private investments are probably not going to be doing so hot, either.
Wealth creation requires work. Retirees don't work, but still require a portion of the wealth that workers create to live.
It doesn't matter if it's a government pension or a 401K investment, a declining worker population will mean that you'll have the exact same retirement problem. Government pension require people working and being productive and paying taxes. Your investments will only produce returns if people are working and being productive (in which case they are also probably paying taxes).
Unless, you know, you do some wealth redistribution, away from people who own all the means of production, to the people who don't. Then they former will be the ones with a problem. It won't generate more net wealth, but it would certainly prevent a large portion of it from being locked up in the hands of a small elite.
Or, alternatively, more automation and high taxes on robots.
Privatizing the problem of pensions is just an accounting trick. It doesn't actually solve the problem.
We always forget that people actually consume services, not dollars. What if instead of a pension or Social Security delivered as a cheque, we provided a basket of highly subsidized services, essentially state-funded retirement homes?
These can be delivered on enormous government scale, potentially bringing unit costs down far below what individuals can achieve.
It could be an effective way to create an evergreen economic engine in regions that have had poor development-- dropping a community of 200,000 retirees into a Rust Belt city creates tens of thousands of infrastructure and support jobs.
Private retirement schemes could, of course, deliver additional luxuries, but it would be a huge stabilizing influence to know that nobody is going to have to try to drag themselves back into the workforce at 92 because their 401(k) ran out and they can no longer afford their rent.
Public pension schemes always end up being turned into Ponzi schemes for short term political gain, especially as birthrates keep dropping.
US social security and Medicare are a great example of this but you'll find similar examples throughout the western world.
In contrast private retirement plans put the individual in charge of their own retirement (why should the government be telling you when to retire?) and doesn't put a financial burden on unborn generations.
The money always has to come from the labour of the future somehow. So you get the same burden laundered through the private sector, such as young people having to pay extortionate rents to retired landlords.
after three major financial crises in the past 20 years, it’s hard to call private finance “safe” from ponzi-like risks. more than a quarter of Americans have no retirement savings at all, and the 401(k) balance for near-retirees often falls well below $100,000.
but it's the logic of the argument that is faulty: declining birthrates also hurt private markets, which rely on a growing workforce just as public pensions do. do you think finance is somewhat magical? if there is no growth also the financial markets won't grow. pensions shouldn't be about growth, but they are mainly about redistribution.
if we dismiss public pensions as a ponzi scheme, then by the same logic, private plans—completely at the mercy of market swings—could be called ponzi too, except they often leave those who earn less with nowhere to turn when things collapse.
I agree, but the German one is also pretty dodgy: Basically pay the rents of the old generation from a share of the working one. It's already coming apart due to demographic change and the next few years will be disastrous.
If there's an approach to model imho it's the Norwegian one: Actually backed by stocks, but managed and distributed by a central investment fund. It's far easier if the country is smart enough to centralize oil profits as well though...
The pension system still works, as long as the pensioners accept that at some point there will be less money to divide between them. Demographic changes don't necessarily cause the pension system to collapse as long as the pensions are adjusted to the income generated by the working generations.
That's the part that causes friction, because (soon to be) pensioners don't want to accept lower pensions, and they still have voting rights, voting in politicians that cater to pensioners over workers.
> pay the rents of the old generation from a share of the working one.
That's what Norway does too, just less directly. The $1.75T that Norway has in their sovereign wealth fund is just a claim on future output. Germany's taxes are a claim on future output.
Or to look at it at a micro perspective. Suppose you have $10M saved for retirement, but need to hire a personal care nurse. But there aren't any and you get in a bidding war with someone who has saved $100M.
Failure in most of these systems were that original contributions were never sufficiently high to actually cover the future outgoings. Whatever those boomers that think they paid say...
Yeah, like the other model where you pay people to invest money for you that makes everything more expensive (housing, healthcare) and shittier (jobs, concerts, games) or disappear for the sake of ROI that you don't even get the majority off.
PAYGO-style is definitly the more sustainable approach.
Around 2011 a report from the CBO came across my desk. It was a study regarding how long US military retirees lived after retirement.
Two key findings were in the report:
Career Military lived (this is from memory but should be very close to accurate) 7-15 years longer than their civilian cohort.
The difference in longevity tracked so strongly with rank they had to run the numbers several times and make sure there weren’t errors. As in, E5 retirees were the shortest lived, while O6+ were the longest.
They identified several possible reasons for the longer lifespans including availability of care and adherence to care. They also identified several possible reasons for the difference between ranks including obesity, smoking, and alcohol use (all had the same trends).
That report likely led to us reducing the military pension, which has had a fairly impressive negative impact on retention.
All of that to say that defined benefits plans are EXPENSIVE and they cut those benefits 20% due to people living ~40 years retired vs the budgeted ~25.
Funny that I know quite a few baby boomers and every single one has a pension, a 401k, maybe a roth AND gets social security and medicare.
Not a single one has a college degree. All life long factory workers. Some alcoholics. All they did was show up to the factory job. I know my father hasn't read a book in at least 50 years and he might not have read any in school either.
They have no real expenses either besides going out to eat, vacations and sports gambling.
Legal structures in place so that the nursing home will be on the tax payer if needed.
Anyone of retirement age right now that is not doing well in America REALLY fucked up in life.
Of course, this is all being paid for on the tab of younger people. It is a brilliant system if your old.
>They have no real expenses either besides going out to eat, vacations and sports gambling.
Then you don't really "know" boomers. First, there are tax expenses on the pension/401k/Soc Sec. Rent or homeowner maintenance/taxes/insurance are huge, even without a mortgage. Transportation--how do they get to the eat-out place? Medicare does not cover dental or vision, and you can usually expect several crowns/root canals and eye cataracts during this period. Electric/natural gas/internet utilities, even water and trash collection, are all rising faster than inflation. Add in possible veterinary bills, and financial aid to adult children who need it, and you have plenty of expenses.
>Anyone of retirement age right now that is not doing well in America REALLY fucked up in life.
No need to explain how completely wrong and ignorant this assessment is.
With a pension system, if I die shortly after retiring, my heirs and I get nothing. Whereas if I save for my own retirement with a 401k, my heirs would get that money.
>>But the data showed that losses were concentrated among those in the upper 25% of wealth distribution who were unaware of their cognitive decline and reported being active in the stock market, the paper said.
Less likely that your elderly relatives get scammed and more likely they yolo some crazy thing like quantum computing triple levered etfs
My prediction: scams that target this are going to massively increase.
The majority of people I know are not planning on having kids. There’s a huge percentage of my generation who are the last of their family and will have nobody to manage their estate when they start declining cognitively. There’s going to be a big opportunity for scammers and even legit businesses to vacuum up all of their wealth.
Though birth rates are declining, also age of mothers having their first child is increasing so depending on your friends' ages, it might not be as bad as it seems. They may say no up to their early 30's but change their mind by their late 30's. For fathers, who are generally older, that could happen in their 40's. It did for me.
I wonder what proportion of women would naturally want to have children if there was no social or economic pressure either way. I suspect it's higher than the proportion of professional women who have children because low-income women do so at a higher rate. So we may have a generation of lonely old people sitting on a pile of money and being doubly vulnerable to scams.
Readit News
I've also got elderly relatives, and even with their pensions secure (European-style pension system), there's lots of people going after their money. Trying to prepare them for encounters with online and real world scammers is an ongoing process, e.g. by recounting the cases that I read in the news to foster mistrust.
I've lost count how often an elderly family member (who is still sharp as a tack fortunately) told me that the "police", "your beloved niece", or "Microsoft" called them.
It's very sobering when we realize that we too will one day be just like them.
Local attorneys / solicitors already provide such services but one has no way of knowing whether they are trustworthy or will remain trustworthy (think Lionel Hutz from the Simpsons) whereas a larger scale business can afford to do internal auditing and integrity checks and make them public to ensure trustworthiness. A large enough scale business can also afford to maintain specialists on hand to handle things like managing online social media accounts that a local operation wouldn't be able to afford.
You either need strong societal values that can stop this (and a business structure that keeps reasonable people in control) or a government that legislates to stop it. We currently have neither in the US, which is one of the reasons we’re in this jam.
https://archive.today/20241103152858/https://www.wsj.com/per...
I’ve pitched a similar idea to dang maybe a month ago, he said it’s probably best left for humans. (Personally, I still think it would be useful tho!)
Deleted Comment
relying on private savings to finance retirement is highly risky, and this is the crux of the article in question.
pension systems should be administered through public programs, not turned into moralistic contests in which individuals are penalized if their investments fail for any reason (and it's only their fault... while it's clear it's a social failure).
basic solidarity is essential in ensuring both the health of retirees and the fulfillment of reasonable expectations for a secure retirement.
Wealth creation requires work. Retirees don't work, but still require a portion of the wealth that workers create to live.
It doesn't matter if it's a government pension or a 401K investment, a declining worker population will mean that you'll have the exact same retirement problem. Government pension require people working and being productive and paying taxes. Your investments will only produce returns if people are working and being productive (in which case they are also probably paying taxes).
Unless, you know, you do some wealth redistribution, away from people who own all the means of production, to the people who don't. Then they former will be the ones with a problem. It won't generate more net wealth, but it would certainly prevent a large portion of it from being locked up in the hands of a small elite.
Or, alternatively, more automation and high taxes on robots.
Privatizing the problem of pensions is just an accounting trick. It doesn't actually solve the problem.
These can be delivered on enormous government scale, potentially bringing unit costs down far below what individuals can achieve.
It could be an effective way to create an evergreen economic engine in regions that have had poor development-- dropping a community of 200,000 retirees into a Rust Belt city creates tens of thousands of infrastructure and support jobs.
Private retirement schemes could, of course, deliver additional luxuries, but it would be a huge stabilizing influence to know that nobody is going to have to try to drag themselves back into the workforce at 92 because their 401(k) ran out and they can no longer afford their rent.
Deleted Comment
US social security and Medicare are a great example of this but you'll find similar examples throughout the western world.
In contrast private retirement plans put the individual in charge of their own retirement (why should the government be telling you when to retire?) and doesn't put a financial burden on unborn generations.
The money always has to come from the labour of the future somehow. So you get the same burden laundered through the private sector, such as young people having to pay extortionate rents to retired landlords.
after three major financial crises in the past 20 years, it’s hard to call private finance “safe” from ponzi-like risks. more than a quarter of Americans have no retirement savings at all, and the 401(k) balance for near-retirees often falls well below $100,000.
but it's the logic of the argument that is faulty: declining birthrates also hurt private markets, which rely on a growing workforce just as public pensions do. do you think finance is somewhat magical? if there is no growth also the financial markets won't grow. pensions shouldn't be about growth, but they are mainly about redistribution.
if we dismiss public pensions as a ponzi scheme, then by the same logic, private plans—completely at the mercy of market swings—could be called ponzi too, except they often leave those who earn less with nowhere to turn when things collapse.
What countries let you do this? I thought 401ks, for example, do not generally allow tax free early withdrawals.
Deleted Comment
If there's an approach to model imho it's the Norwegian one: Actually backed by stocks, but managed and distributed by a central investment fund. It's far easier if the country is smart enough to centralize oil profits as well though...
You just need to have a tiny population and be the 3rd biggest gas and 5th biggest oil exporter, easy peasy
That's the part that causes friction, because (soon to be) pensioners don't want to accept lower pensions, and they still have voting rights, voting in politicians that cater to pensioners over workers.
That's what Norway does too, just less directly. The $1.75T that Norway has in their sovereign wealth fund is just a claim on future output. Germany's taxes are a claim on future output.
Or to look at it at a micro perspective. Suppose you have $10M saved for retirement, but need to hire a personal care nurse. But there aren't any and you get in a bidding war with someone who has saved $100M.
PAYGO-style is definitly the more sustainable approach.
Two key findings were in the report:
Career Military lived (this is from memory but should be very close to accurate) 7-15 years longer than their civilian cohort.
The difference in longevity tracked so strongly with rank they had to run the numbers several times and make sure there weren’t errors. As in, E5 retirees were the shortest lived, while O6+ were the longest.
They identified several possible reasons for the longer lifespans including availability of care and adherence to care. They also identified several possible reasons for the difference between ranks including obesity, smoking, and alcohol use (all had the same trends).
That report likely led to us reducing the military pension, which has had a fairly impressive negative impact on retention.
All of that to say that defined benefits plans are EXPENSIVE and they cut those benefits 20% due to people living ~40 years retired vs the budgeted ~25.
Not a single one has a college degree. All life long factory workers. Some alcoholics. All they did was show up to the factory job. I know my father hasn't read a book in at least 50 years and he might not have read any in school either.
They have no real expenses either besides going out to eat, vacations and sports gambling.
Legal structures in place so that the nursing home will be on the tax payer if needed.
Anyone of retirement age right now that is not doing well in America REALLY fucked up in life.
Of course, this is all being paid for on the tab of younger people. It is a brilliant system if your old.
Then you don't really "know" boomers. First, there are tax expenses on the pension/401k/Soc Sec. Rent or homeowner maintenance/taxes/insurance are huge, even without a mortgage. Transportation--how do they get to the eat-out place? Medicare does not cover dental or vision, and you can usually expect several crowns/root canals and eye cataracts during this period. Electric/natural gas/internet utilities, even water and trash collection, are all rising faster than inflation. Add in possible veterinary bills, and financial aid to adult children who need it, and you have plenty of expenses.
>Anyone of retirement age right now that is not doing well in America REALLY fucked up in life.
No need to explain how completely wrong and ignorant this assessment is.
Less likely that your elderly relatives get scammed and more likely they yolo some crazy thing like quantum computing triple levered etfs
The majority of people I know are not planning on having kids. There’s a huge percentage of my generation who are the last of their family and will have nobody to manage their estate when they start declining cognitively. There’s going to be a big opportunity for scammers and even legit businesses to vacuum up all of their wealth.
I wonder what proportion of women would naturally want to have children if there was no social or economic pressure either way. I suspect it's higher than the proportion of professional women who have children because low-income women do so at a higher rate. So we may have a generation of lonely old people sitting on a pile of money and being doubly vulnerable to scams.
(Paywalled unfortunately)