Tbh, in the current system (which is bad!), they are the "smart ones".
You have Alice, Bob and Charlie. They all earn the same amount of money.
Alice decides to take a loan and buy a 200k house. Bob stays at home and invests in stocks. Charlie stays at home, and puts the money in a savings account.
10 years go by, alice paid off 100k of the 200k loan, house is still worth 200k, bob has 100k of stocks and Charlie has 100k in the savings account (let's forget about the interest for this example).
They are technically all worth the same, just that their money is in a different form. And then one day, they all lose their jobs.
Alice gets social benefits, one time extra monetary help, loan refinancing and/or even a loan freeze in some cases, Bob gets nothing and is told to sell the stock (even if it's a bad moment to sell), and Charlie gets laughed at the social benefits office, because he has 100k in his account.
This might be our (slovenian) speciality, but the system is made to fuck with people who live responsibly and to always 'save' the people who spend all their money. Also houses are almost literally untouchable, even if you're a single person in a ~1mio city center apartment, and could move to a smaller one a bit further from the center for 150k.
In the U.S. this is often referred to as the "moral hazard". True they may be the 'smart' ones, but I can't help but think there's got to be a system that prioritizes the area of the Venn diagram where "smart" and "moral" overlap.
There's some irony in the phrasing used to decry the term "moral hazard" though in that it seems to hint of morals itself.
I think your example is not really a full picture, and I don't necessarily agree that the state encouraging home-ownership, and helping out home-owners who might be about to lose their home, is wrong.
To my eyes, Alice was living responsibly.
No one in this scenario likely to end up homeless in the near term, as they all have roughly equivalent net worths over $100k. The system just favors those with their assets tied up in housing rather than more diversified investments or liquid savings.
Bob and Charlie are the responsible ones.
1. Houses aren't particularly liquid, and in a debate about what is "smart" vs. "moral," and the fact that they don't always overlap, you're going to have a hard time arguing for forced eviction from one's primary (only) residence.
2. The 200k house ten years ago is going to be worth a lot more than 200k today. On average you're looking at 290k in a decade.
3. Bob's 100k in stocks would be 217k if he bought it one lump sum and got average returns, so let's say he purchased over time and is sitting around 175k.
4. Charlie's lost money because his 100k is somewhere between 105k and 110k now but he's lost 2-3 times that in purchasing power.
So they are emphatically not worth the same.
Alice owns an illiquid 290k asset for which she's only liable another 100k, so she's +190. She can refinance and lower her payment. She can get loan forbearance because we as a society have decided that it's immoral to immediately kick people out of their homes because they can't pay.
Bob is +75k and there are plenty of ways to make money off of a stock portfolio without liquidating it. You can even get a traditional loan using the portfolio as collateral but you're unlikely to get more than 40-50% of the value given the potential for volatility.
Charlie's lost money and yes, he's going to get laughed out of any assistance office because he's using a savings account - a vehicle designed mainly for emergency funds and short-term savings - for his life savings.
To your last point about the city center apartment, there is a huge difference between a reasonably intelligent person who just lost their job selling their apartment and moving somewhere cheaper, and a bank or government forcing them to do so.
Often, (in the US) retirement accounts are also sacrosanct, depending on the claim.
The issue of houses reminds me of how much of the US tax system is regressive. Electric car subsidies, special treatment for capital gains, mortgage deductions.
You have things like SALT tax deduction and mortgage interest tax deduction which are directly designed to benefit rich liberals in blue states by subsidizing their oversized government. Take these away and people get mad or move to TX/FL/NV because they actually have to pay their full taxes.
Also having a high state sales tax is much more logical if you don’t want to pay tax just don’t spend money.
It would make much more sense to just do a federal sales tax, totally eliminate the corporate tax as people are paying taxes anyway and it is just a disadvantage to us-domiciled corporations competitiveness, and also totally eliminate fed and state income taxes. Like purge them with fire, there’s way too much complexity and corruption built up over the last hundred years.
Then if you still care about people at the end just institute UBI and Medicare for all to eliminate the billing complexity and potential for discrimination. This policy would also be compatible with open borders and free movement of labor if we as a society decided we want that.
[1] https://www.ipe.com/nightmare-in-hungary-as-government-natio...
> Tbh, in the current system (which is bad!), they are the "smart ones".
I've had people tell me I'm a fool for saving for retirement, because when the time comes, the people who haven't saved will massively outnumber the people who have, and they will simply vote to fix it. Spend it now on BMWs and fancy vacations because "Our future government will not let 90% of their population starve on the street because they didn't save."
If we're talking dollars, then it would be incredibly unwise to save them. The very fact that the fed targets some level of inflation at all makes this incredibly unwise.
Housing would never be worth just 200k 10 years later as long as population is increasing and the dollar inflating.
Stonks are stonks. They're fine, but they don't provide the (at least) two fold benefit of buying a house in American society.
1). You pay a high cost for housing either way--might as well have _some_ of it go toward principal.
2). A mortgage allows you to highly leverage an appreciating asset against a depreciating dollar.
The reliance on the state's pension scheme is also terrifying as the schemes tend to increase (if at all) under the inflation of true cost of living.
All that said, I have a mortgage and stonks and crypto (metals soon), but I'll never hold more dollars than I need for a month (I have credit cards if it really came to it.)
Edit: Why downvote? If you disagree, please say why.
> Why downvote? If you disagree, please say why.
Sure, so
> Stonks are stonks. They're fine, but they don't provide the (at least) two fold benefit of buying a house in American society.
If you look at averages (across multiple areas, over many decades), you get:
* stonks yield somewhere around 6% above inflation (so 9-10% before inflation).
* houses yield somewhere around 1% above inflation, after including all the other random incentives plus taxes and upkeep costs, (not including multi family rental properties, which is a different matter)
There are localities in which houses do much better (say the bay area), and there are localities in which houses do much worse (Detroit).
But on average, it's a massive opportunity cost vs investing in equities. Which is fine, because there's other benefits to owning a house, like not having to move if someone jacks up your rent.
While we're at it, other reasons for downvotes may include:
> metals soon
These yield also ~1% above inflation
> I'll never hold more dollars than I need for a month (I have credit cards if it really came to it.)
In 2008, the banks slashed my credit to <10% of what it was in 2007. Don't rely on credit cards for emergencies.
Please hold more than 1 month in savings.
But buying a house is the only way I can leverage such a massive amount and I have to have housing anyway. It also fixes my housing costs in contrast to renting.
Further, I can sell my house and take gains without paying taxes on the gains. I can't do that with stocks.
> Don't rely on credit cards for emergencies.
I'll also be able to sell metals/stonks/cryptos if need be, but overall I'm just not risk adverse. If I end up selling to get by and lose some, I see that as just making up for what I would have already lost by holding too much cash.
I strongly, strongly encourage you to put aside at least 3 to 6 months' worth of expenses outside of risky investments.
If you're at the point where you need to dip into an emergency fund, it's possible (maybe even likely) that the entire financial market is burning. You will need access to capital when nobody has access to capital, which will make borrowing very expensive or impossible.
Putting money in a savings account is actually losing value at the rate of inflation - interest. Inflation is usually around 2-3%, interest is a point or less. (last time I checked).
I think the downvote was the comment wasn't entirely relevant to what the OP was trying to demonstrate and might have gotten into the weeds a bit, but I don't know why people downvote. Who knows, it could have been a mis-click. Just say what you want to say, downvotes be damned.
https://www.zillow.com/refinance/
> gotten into the weeds a bit
Fair
> downvotes be damned.
Good advice.
None of this happens in a vacuum. Their contributions multiply our income.
If we work with someone on a project, we don't expect them to work for free do we?
Well, look around. The machinery of society was not, and is not free. "Your income" is the product of many people over a sustained amount of time.
Doing it all on your own looks very different.
That said, the only reason pensions are under discussion is the very wealthy take too much value and are not required to help fund the system.
In the US, the cap is something over 100k. Raise that and the funding problem goes away. That cap should be raised because everyone benefits from the labor products and fertile society we live in today.
Those of us who end up with huge benefit and who do not contribute in like kind are literally diluting the future for those to come for arguably self serving in the now. I have no problem with self serving choices either. Work hard, play hard, change the world.
All good.
This is about net good, and talk of ending retirement is talk that completely ignores why we have Social Security and work until we drop is as negative as child labor is.
Some of us may choose to do that. I might!
But to make excuses for what is basically unbridled greed and largess impacting so many other people unnecessarily?
Not all good.
The deep problem is we developed expectations and made promises when there were 6 people of working age for every retiree, and the ratio is going to fall to 2-to-1 or worse. Money can't bridge that unless we invent magic ai robots in a hurry.
Either we are willing to accept the full cost of that, which means taking care of our own, or we're going to pay hard because of what happens when we don't take care of our own.
So which is it?
Getting 1x social security is not going to work when you get rent that is going up 2x as fast. But somehow the market basket of goods will still stay at 2%yoy…
Or we could just start having large families again like some groups (Hasidic Jews, Amish, some Evangelicals) do but I don’t think there’s much political will for that.
Just caring for one another is one of those labors and it is significant. Enabling our elders to have income lifted a heavy burden off the middle class. Having enough buying power to support the whole family, whether cohabiting or not was and remains a big deal.
We did that for our parents and their Social Security made a huge difference in how our kids grew up and our overall quality of life.
On a side note, universal health care would have a similar, positive impact on all but very large business.
We are going to need to value things differently.
We can pay people more, have them work fewer hours, allow flex in work time, place, manner.
It simply is not necessary to force everyone to work until they drop.
Again, taking the value out of everything has skewed things toward an artificial scarcity of time. Does not have to be that way.
I do not believe it should be that way.
If we somehow insist, fail to value things in ways that help us live better, the ripple impacts will just cost more.
A whole lot boils down to what we value and why.
Right now, for example, we do not value taking care of our own, instead focusing on money. We do not value basic labors well either.
These two have a serious, negative impact on things like social security, our general ability to compete with other nations and more.
Those basic labors save us doing not so basic labor a ton of time, for example, yet we pay a pittance, shame those performing them, and somehow expect the some 40 some Trillion those people did not take home to pass unnoticed?
We can run the nation leaner than we do, and we should. And those lower numbers mean those doing the labor should live well, seeing as how there is plenty to do.
If we do that, their buying power will grow our economy nicely. Liquid dollars and high demand are good things.
If we raise and or had raised our contribution caps, the program would be running just fine.
If we need to run a deficit on that for a time, so what?
Maybe we can cut back on endless war.
There are enough people, is enough technology to do just fine.
All of this is a priority problem and our priority at present is not well aligned with our people's needs and that can amd should change.
Say we do need more labor.
Fine, make being an American easy again. Plenty of people will step right up and do it.
Bring us your tired, your poor...
That's why I won't be retiring.
This is all a priority discussion.
It is not for some real constraint or other.
And simply making that choice for everyone is not necessary, and is poor policy that will cost us a whole lot more than getting our priorities right would.
> I'm being forced to pay over half of my income into a ponzi scheme
You are making shit up - where in the world does 50% go towards retirement funds?
Unless you are talking about real estate, which is a Ponzi scheme where children pay some of their ancestors for the privilege to own their own land and a home.
I mean other people’s ancestors (not their own where the wealth is often passed from ancestor to child).
It's not a lack of empathy, it's an understanding of the pernicious incentives you are creating with such a system.
I'm being forced to pay over half of my income into a ponzi scheme that i am and will never get anything worthwhile out of. This isn't good for anyone, and it certainly isn't good for the people who are working and providing value and having that value thrown into a raging fire.
This is nothing more than theft from the responsible to the irresponsible, with the associated long term issues.
When you have support these policies you need to understand that they will not and cannot help the people you seek to help.
All that happens is remove the need for people to be responsible and make good financial decisions, for the fact that "the state will save me".
But of course, the state can't, because social security in most countries is no more than very large ponzi schemes, supported by ever growing tax revenues and increasingly high retirement ages. But even that is not enough, in Portugal retirement benefits are expected to fall by half in the next 20 years.
And don't think these pernicious incentives don't exist and that peoples reliance on social security doesn't happen. That quote of "The state will save me" is almost word for word out of the mouth of friends and colleagues, with children and families, who despite being very well paid refuse to save and invest for their retirement, choosing instead to spend what they have today and only rely on social security for their retirement.
These are terrible incentives, and they will and have had predictable results.