Wednesday, August 22, 2012

Why Gen Y and Gen X Should Not Save for Retirement

Much as I dislike the OWS movement, hipsters and lefter-leaning youth who voted for Barack Obama, I do feel pity for them.  They were brainwashed after all (despite their claims they're so "intelligent" and "independent minded") with 13 years of indoctrination in the public schools, 18 years of left-leaning television and media, absentee parenting, government programs every step of the way, and so how do you think they were going to vote?  Additionally they're being dumped into the lousiest labor market in (truly) 50 years.  Of course, because of their brainwashing and mis-education about economics, they're clueless as to why they can't find jobs, and what's even more sad is it's actually by their own hand voting in socialist policies.  So I do have an element of pity for them.  Thusly, unlike my typical "tirade, yell, ridicule and mock" type approach I have to politics, with younger folk I've opted to engage them instead of ridicule them

This is evidenced by my book Worthless. Yes, I wrote it for money, but I also wrote it to explain to recent college graduates why they can't find employment and to prevent college-bound youth from making the same mistake.  I also have my seminar on youtube titled "Why Gen Y is Completely, Hopelessly and Totally Screwed."  Again, I was on book tour, but the reason I spent the time putting that together is to provide an explanation to youth as to what was going on and what kind of economic environment they are in.  To help them understand "why" things were happening instead of letting them suffer, cluelessly having no idea what was going on and what to do.

The good news is that I've found youth to be more receptive than say, an estasblished burnt out 65 year old hippie who's been set in their political ways since '68 and think "going green" is the latest indulgence to save their economic souls.  The reasons are multiple.  First, (frankly) I'm much better of a speaker than the average college professor and public school teacher.  I speak directly, bluntly, clearly and simply.  I don't talk over their heads and in my profession (unlike most liberal arts) my job is not to lie, pervert or distort the truth.  When I put together a book or a speech, it is based in reality, not a political agenda.  Second, in an ironic sense, the economy these youth voted in is making my job easier.  They did EVERYTHING they were told.  "Go to college."  "Follow your heart and the money will follow."  "It doesn't matter what you major in, it's to get your foot in the door." AND they voted how they were told.  "Hope and change."  "Diversity."  "Spread the wealth."  "Fair share."  "Bush's fault."  "Wage gap."  Blah blah blah.  And what they have to show for it is unemployment, crushing student debts and a quickly disappearing future.  In short, their entire reality is crumbling before their eyes and rapidly so.  One week you're a senior about to graduate with your BA in BS, the next week you're moving back home because you can't find a job and student loans are coming due.  They naturally are looking for an explanation why things aren't turning out the way their teachers and professors told them it would, and I give it to them.

And so, since I've found Gen Y, "Millineals" and even some Gen X'ers to be more receptive, allow me to provide another bit of advice in the hopes you will continue listening and thusly improve your life;

Don't save for retirement.

Of course, this is funny, because most of you guys (meaning Gen Y/X, Millineals, etc.) don't HAVE any money to invest anyway!  The economy has been so wonderfully managed previously that you have a bankrupt government, pending inflation stored up in the banking system, debt levels you simply cannot pay (be it personal debts or your share of the government debts), public employee pensions you can't pay, and health care/social security promises to other people you can't pay, all resulting in a lousy economy with no investment and an unemployment rate around 16% for you youth (around 50% underemployment in my estimation as well).  You don't have the disposable income to save for your retirement.

But let's play "hope and change" and IMAGINE you did have the money to invest in an IRA or a 401k. Just imagine.

First realize what you're going to be investing that "hopey changey" money in - retirement programs.  Retirement programs that were established by the government to give you various tax incentives to save for retirement, things like 401k's, IRA's, 403b's, etc.  The actual 'assets' you buy in these programs are stocks, bonds and mutual funds (mutual funds themselves being nothing more than conglomerations of stocks and bonds).

Now the first retirement program was started in 1978.  You were around then?  I was 3 at the time.  But certainly none of us were working and had the ability to start saving for retirement then.  So what happened over past 34 years?

Well, millions of people who WERE working over those past 34 years invested TRILLIONS of dollars into these various stocks, bonds and mutual funds.  IF (and that's a big IF because I know the quality and caliber of college economics courses) you remember Econ 101 correctly, when a market is flooded with TRILLIONS of dollars that means demand has gone WAY UP.  And when demand goes WAY UP, so too does the price.

We see this when new shoes hit a store or perhaps you remember the PS2 being bid up to insane prices.

Well that's the same thing happening in the stock market today.  Even if you had the "hopey changey" money to invest, you would be investing in an overpriced market (here is a lengthier and statistically backed post you can read if you want the numbers).  Worse still is you will have the baby boomer pulling their money out of the market which (again, IF you were listening in Econ 101) will have a negative effect on prices.  In short, generational factors are making the market a bad deal for younger investors.

Second, let's talk about that lack of money.  If you were like me when I was younger, you have some kind of guilt or shame that you aren't investing in a 401k or saving something for retirement.  Stop worrying and stop feeling guilty.  If you don't have the money, you just plain don't have the money.  I starved myself to save up a whopping $2,000 in my IRA back when I was (about) 23.  That's not enough to retire on.  Besides, there are more important things you should be spending your money on that would help you more financially.  Paying off student debts or any debts is a good thing.  Getting a REAL trade or a skill at a tech college isn't bad either if you've majored in Fluffy Bunnies and Chocolates.  And heck, you might as well take what little money you have and enjoy life.  Life is not meant to be slaving away working all the time, investing your disposable income into bubbly stock markets.

Third, let's talk about confiscation.  Your professors never called it that.  They called it "social justice," "nationalization," or "the rich paying their fair share."  In reality it's nothing more than theft.  It is one person or a group of people stealing the money and time of others. But as it pertains specifically to your theoretical retirement program, there is a chance that after you slave away, save your pennies and dimes, invest religiously in your 401k or IRA, the government will simply at one point in time decide to take it.  And not only is there a chance, I fear given the ENORMOUS debts of the federal government, it's almost a guarantee they'll confiscate or at least rescind the preferential tax treatment of those retirement plans.

Oh, I know, I know.  I'm just this "radical crazy, right wing blogger" stirring up the rhetoric and hate-speech pot.  But realize it has happened already before. In Argentina and in Bolivia.  And if you don't think it can happen here, well, again, I'm just a right wing kook

Fourth, let us talk about death.  You are going to die.  I know your professors may have told you differently, but then again, I'm sure their arguments against mortality were just as convincing as their arguments for socialism, but I'm so sorry to have to say this, you are going to die.  However, unless you get in an accident, it isn't going to be POOF, you're dead.  There will probably be a deterioration in your health.  And that deteriorating period will not be a pleasant time.  It will also be a VERY expensive time for you.  The vast majority of your medical expenses in your life will be incurred in the last 6 months of your life.  The price tag will of course vary, but it can easily be $200,000 or more.

So let me ask you this.  You slave away today in your health and youth.  And by "slave away" I mean sacrifice your time to build up the money to pay for your last 6 months of life that is going to really suck.  And because those last 6 months of your life are going to be so expensive, you have to sacrifice much more time TODAY to work up the money to pay for those last 6 months.  To save up $200,000, heck, that's going to take at LEAST 5 years.

So, if I understand this correctly, you're going to sacrifice 5 years of your HEALTHY YOUTH to live another 6 painful, rotten, bed-ridden months.

I got a better plan.  I call it the "Smith and Wesson Retirement Plan."  It costs only 33 cents. (Ah ah ah.  Think it through before knee-jerking a reaction).

Now, as is usually the case when I talk about the financial, economic and mortality aspects of life, people get all upset.  I see this when I teach my classes and I tell people, bluntly, not to major in the liberal arts.  They take it personally, when in reality I am trying to explain to them the REALITY of the labor market and GENUINELY help them.  When I have the 58 year old divorcee who never thought about saving for retirement come up to me and say, "Well, I finally paid off my childrens' student loans, and I'd like to start saving for retirement.  I'd like to retire at 62.  I have $4,000 and some cats as assets."  I tell him/her they're going to have to work till they're 75 and will not be able to retire at 62.  It's the truth, but again, they get very upset.  And it is here I want you to (for your own good) to be able to set aside your emotions and your feelings and approach this in a logical, reality-based, mathematical manner.

This is reality.

The markets are overvalued because of previous generations' trillions of dollars flooding the retirement plans.

The government has debt equal to 100% GDP and it's only going to grow because of all the government goodies we've promised us and everybody else on the planet into the future.  This not only means impaired economic growth, but a very increased chance the government will simply confiscate your retirement plans.

It is infinitely cheaper to knock yourself out when you find out your terminally ill, not to mention you'll leave a lot more to your family, or at least not be a fiscal burden on the tax payer.

Dark, macabre, yes, but truthful.

There is however, some good news - freedom.

Understand to save for retirement is a huge fiscal burden, and like end-of-life medical care, it requires you sacrifice a lot today for relatively little tomorrow.  Additionally, in today's debt-ridden, socialist-leaning economic and political environment, saving for retirement is proving more and more risky.  Not that the stock prices won't go up, but that your hard-earned money will simply be confiscated.

So what is the logical thing to do?

Enjoy life now.  Spend your money on you now.

As I mentioned before, some of you, like me, felt guilty if you didn't start saving for retirement at 22.  You even spent money you couldn't afford on an IRA or 401k because it was "what you were supposed to do" (just like going to college or "following your heart" and other advice you've received).  You didn't go out, you stayed in, you didn't enjoy life.

But that is not what life is about.  If you don't go and have fun every once in a while, then why be alive in the first place?  Working to simply to finance your last miserable 6 months on this planet or to pay for other people's stuff is not "life."  That's slavery.  And you're already going to be paying enough in taxes to pay for other people's mistakes or laziness to the point you're effectively a slave 40% of your working hours anyway.  So why risk slaving away more?  You're here on this planet this one short period in time.  Do yourself a favor.  Forget the retirement plan.  And MORE IMPORTANTLY, let go of the guilt. Go live life.

Because I guarantee you now, if you slaved away only to have it all confiscated as you lie on your government financed death bed, you'll have more regret and guilt then than if you had actually lived life.


34 comments:

Christopher Phillips said...

Amen!

NotaYokel said...

No need to say more other than: I completely agree. Brilliantly blunt- yet oh so true.

Anonymous said...

Why not do what Jacob of ERE (early retirement extreme) and mr.money mustache do? Save a huge percentage of their income and in 5-10 years, be financially independent and free. 'Sacrifice' 5 years of your life for 30+ years of freedom is a far bigger payoff than the whole 401k BS. You can also focus on your health as your first step by cooking for yourself. Jacob did it with a very small income too.

Anonymous said...

I have a liberal arts degree and just paid off all my student and credit card debt at 29. I use skills that I obtained while seeking my "BS" degree every day and have held three jobs directly related to it (I majored in English, I'm a writer and editor.) Guess I'm the exception to your rule? Or maybe you've got a book to sell and overlook data that runs contrary to your thesis/ideology/worldview, much like the liberals and academics you despise.

Anonymous said...

I got a BS Liberal Arts degree (in English) and it's paid off handsomely. I'm 29 with no debt and have had three or four jobs directly related to what I majored in. Right now I'm taking time off just to relax and enjoy life, and I have plenty of job offers. Maybe I'm the exception, but I don't think so. I think you have a book/message/ideology to sell and reflexively discount anything that goes against your thesis.

Captain Capitalism said...

Sure you do Anon,

And even if you're speaking the truth, you are the exception to most people who major in English. Starting salaries prove it. You're anecdote does not "debunk" my thesis.

Clash1e said...

Expatriation is always a good alternative to living in a debt burdened socialist country.

William said...

One of your best, Cap'n. It also shows how you can deliver reality in a positive manner. I have spent my time on this earth pursuing this approach, and have not one single regret.

I'd back away from the sudden retirement plan myself - I am going out fighting and I sure as hell do not intend to meet my maker resting on my back. But I see your point.

Anon almost pinned my irony meter. Anecdotes do not beat data. Confirmation bias rather depends upon where you are looking from.


Unknown said...

Exceptional anecdotes don't disprove statistical trends. I'm guessing philosophy and logic weren't part of Anonymous' liberal arts education.

John Hay said...

im 19, and so far made up my mind about: not owning a house (being stuck in one area is risky), not saving for retirement (if i cant hold an easy part time job, hell i dont wanna live), not compete with the jones (my life, not my things, are more important ex: career success and happiness), not get married (50% divorce). Every time i read your blog, i read more about my life that i never knew. Thank you alot captain. Oh and also, going through for accounting, no liberal arts crap

Elusive Wapiti said...

Great post. On top of the very significant threat of peoples' 401(k)s and IRAs being confiscated as part of some Social Security overhaul (click here to read some rumor-mongering), we have the specter of inflation eroding our savings as well.

In an environment like this, it is difficult to find a safe store of value.

Why indeed should Xers and Millenials adhere to such bourgeois values like saving and delaying gratification, if confiscation and hidden taxation is their reward?

Captain Capitalism said...

Atta boy John! Tell friends about Cappy and Worthless. Make sure you youth have it better than we did!

PersonofInterest said...

Saving up a pile of gold and burying it like a pirate isn't a good retirement plan??? It's pretty hard for the government to confiscate what isn't in their system. I won't put another penny in a retirement account in a bank, but you have to save for a rainy day somehow. I don't want to have to activate that "Smith and Wesson retirement plan" before I'm ready...

Anonymous said...

The government is not going to confiscate 401k plans.

It's simply going to inflate the debt away by printing more money.

Just like they've been doing for the last 100 years.

MarkyMark said...

Cappy,

Not only have South American countries gotten into the act (of seizing retirement accounts); European nations have as well. You can read this Christian Science Monitor article about it. It's happened there already, so it's only a matter of time before it happens here...

Anonymous said...

This is one I realized a while ago, even though I am burdened with a humanities degree.

Anonymous said...

How does the saying go. No man on his death bed look back and wished he had spent more time working.

Anonymous said...

As the old sayimg go, no man on his deathbed wished he had spent more time working.

Anonymous said...

Here is something to ponder if one is under 40 years of age and is wondering if all these social programs passed over the past 80 years will be there for him when he retires:

One thing to remember about Medicare--the average beneficiary, to date, gets about $100,000 more out of the program than he ever paid in through payroll taxes. I'm a nephrologist, and most dialysis patients are Medicare beneficiaries--CMS (Centers for Medicare & Medicaid Services) has paid for dialysis since ~1973. The average hemodialysis patient costs ~$80,000/year; the average peritoneal dialysis patient costs ~$60,000/year; and the average transplant patient costs ~$25,000/year. While the total end-stage renal disease (ESRD) patient population is <1% of the total CMS patient population, the ESRD population is very expensive. Approximately 6 to 8% of the total CMS budget pays for dialysis and transplantation (~$30,000 billion/year). This is just one illustration why anyone who isn't already elderly is completely screwed. By 2022, the CBO estimates that Medicare/Medicaid expenditures will be ~$1 trillion, and unfunded liabilities (Social Security, Medicare, and Medicaid) are estimated to top $100 trillion. I expect major cracks in health care to appear in the next couple of years. Death panels will be a way of life in the very near future (aka Independent Payment Advisory Boards). Things always go full circle--before CMS starting paying for ESRD care, dialysis was rationed through death panels.

http://www.aei-ideas.org/2009/08/have-seniors-really-paid-for-their-medicare-benefits/

Anonymous said...

I just wanted to say I'm so glad I came across your blog. I'm a college student and I always felt guilty for not saving for retirement when everyone told me I should. But I feel like a huge weight has been lifted off my shoulders.
And by the way, I read worthless and it changed my life. I'm studying Management Information Systems and I convinced a friend to go into Nursing. You are reaching people Cap.

W.C. Varones said...

Very good stuff.

I agree, some form of confiscatory taxes are likely on retirement accounts.

Even more likely is means-testing of Social Security: if you're "rich" enough to have a nice 401(k), you don't deserve any Social Security.

I recommend putting your retirement in gold and silver OFF THE GRID. The government doesn't have to KNOW you're rich.

Anonymous said...

Sounds like the captain discovered YOLO!

Anonymous said...

Ah, you're too young. Go get a long term chart of the Dow - back to 1913 - and look at it. You'll see six rough periods - expansion from 13-29, contraction from 29-46, expansion from 46-66, contraction from 66-82, expansion from 82-00, and contraction from 00-12. Do you see a pattern here, boyo?

As stock market watcher Joe Granville once said "You can't just breathe in; you have to exhale sometimes". So it is with markets. As new technologies are introduced, markets fly up; as those technologies are absorbed, markets go sideways (which, if you factor in inflation, is down). It's a cycle.

By my count, we have 4-5 years left in this down cycle. Then, some new technology - whether it's transportation, health, or something else - will appear, and things will start to move again. Of course, it will be rough four years in the meantime, with markets crashing everywhere, turmoil, dogs and cats living together, etc. But at the end, we'll survive and better days are ahead. That's the real virtue of capitalism.

Where I feel sorriest for this generation is there is no frontier left for them. Even up to the 70's, you could still move to the southwest or northwest, which were relatively underpopulated. Not any more. (Newt may be a fool, but his moon base wasn't as off base as some think; at least it would have given people something to yearn for.) Frontiers mean opportunity, hope, and growth. The lack of them stifles all.

Saving during stagnant markets always seems stupid (unless you're a nimble trader, a profession now made extinct by HFT's). On the other hand, anyone who bought the Dow at 1,000 in 1982 feels pretty good today. Timing is everything.

My elder daughter starts university this year. She may watch as the world stumbles while she learns, but I'm willing to bet she'll have great opportunities when she gets out.

Like the new layout, Cap'n. Much easier on the eyes.

Derrick Bonsell said...

I'd really love to see how Anonymous liberal arts major has been so successful.

I won't get a liberal arts degree 'cause they worthless, but if some dude can be successful with one, maybe there's a secret young folks like me can use.

Either that or he's a troll.

Anonymous said...

I get a modest SS check. In my opinion, they are paying us too much. It really irks me to see a gigantic motor home on the highway, pull into an eating place, and the owner demands a senior discount, while the just-above-minimum-wage employees pay full price. I have tried to refuse senior discount, the day I can't pay the same as anyone else means I don't buy it. They won't let me refuse it.

It is true SS is one of the very few payouts that were totally funded by the recipients, and yet it is the first program everyone wants to stop, even before baby mommas.

Yet, reality is the legislators did steal around a trillion dollars from that fund, and there is no way to pay it back. So, now we have to deal with the fact of successful and final theft. Don't cancel the program. Each month have the computers pay out to recipients what was taken in the previous month, not a penny more.

Oh, and put the legislators who stole the SS money on SS, not a cent more than SS recipients get.

Anonymous age 70

FSK said...

If you expect the financial system to completely collapse, any savings plan is useless. You have to buy gold and silver and hide it.

Over the past 10-15 years, the stock market has not kept pace with true inflation.

If you invest in the stock market, you get robbed by corrupt CEOs. If you invest in money market or bonds, you get robbed by inflation.

Anonymous said...

Nephrologist 6:49 pm:

I can tell you how to sharply reduce medical costs. The first paper reporting the need for low starch (carbohydrates) for health was printed, not in 2004, nor in 1973, but in 1804. Others in 1864.

In the early 1970's, about the time Atkins proved one needed low carb to be healthy, a group of influential idiots in the AMA decreed they were going with low fat; high carb. Since then their clever work has destroyed the health of an entire nation.

I bought a 2005 physiology text book used at some medical schools, Guyton and Hall. That book describes perfectly the low carb; low protein; high fat diet. Yet the doctors who used that textbook will preach to their grave, low fat; high carb, because that is what they are told.

When you go low carb, and take a few vitamins, your need to go to a doctor virtually disappears. Type II diabetes; gone. Infarctions; gone. Alzheimers: gone. Cancer; mostly gone.

But, mention low carb to a stupid doctor and they whine, "Oh, that is an extremist diet."

An extremist diet is a diet which has destroyed the health of an entire nation.

Another thing we need to do in the US is let people die when it is there time. A fortune is spent on people who are ready to die. Here in Mexico when an elderly person achieves "train wreck" status, they tell the family, "Here are some pain pills. Give them if she needs them. But, keep her at home, and let her die in her own bed with her family around her." That is how any thinking person wants to die.

There is no CODE BLUE for elderly people in Mexico, and there should not be in the US either.

Code Blue among elderly people means their body knew it was time do die, not write another check for $100,000. Code Blue is for otherwise healthy young people who can be cured and live another ten or fifty years.

Anonymous age 70

FSK said...

Health "insurance" encourages wasteful spending on near-death people.

They spend $100k to keep someone alive another 1-12 weeks. You aren't spending your own money. You're spending the insurance plan's money.

If you were spending your own money, the elderly person might say "Go ahead and let me die. Give the extra $100k to my children."

With "insurance", you're spending other people's money. There's no incentive to keep costs down, because the cost is socialized.

T. A. Hansen said...

This dosen't seem like good advice to me. People have been saying the markets are overvalued since the "courretiers de change." How can Capt. Capitalism say not to save money? Isn't saving one of the rails of capitalsim?

Unknown said...

Thus spake the Captain "It is infinitely cheaper to knock yourself out when you find out your terminally ill, not to mention you'll leave a lot more to your family, or at least not be a fiscal burden on the tax payer."

Leave a lot more of what for your family? This implies you saved and put your savings in something. What would that something be? Certainly not securities. Real estate? Mattress padding? Not a business because that's struggling and not Enjoying The Decline.

I thought I understood the Captain to say that having a family was a trap for stupid and gullible men.

Now I'm confused.

Anonymous said...

Good post. Seems like most people forget that money is time, not the other way around. Sure you need some money but you don't need as much as you think, especially if you take the time to take care of your health and avoid all the crappy food products pushed by the food industry giants and the government.

Most institutions, public, private, doesn't matter, are there to suck the time out of your time wallet and turn it into financial benefits for them. What you're left with is very often not worth the time you paid for.

The best example: wasting years of your life in school to earn a semi-worthless degree that could have been earned in 1/2 the time if you weren't stuck in the mass schooling system. It's a time confiscation racket: the time you waste in school is converted into paychecks for teachers, administrators, public workers, etc.

A guy I met recently dropped out of school at 13 and started working in the landscaping business and he's way ahead of me financially. I'm kind of jealous, I should have done something like that.

Dr. Kenneth Noisewater said...

I never finished my degree, but had an aptitude for computers since age 6 (1978) and had earned money with them since age 10. I never had student loan debt, but I did run up credit cards during the dotcom days, so I never bought a house or stocks during their bubbles (aside from employer-matched 401k). I guess I just lucked out! In the last year I moved from the liberal coast to TX and got my series 7 to work in computerized trading systems, and have never made more from a job in my life. With that, I am fixing to buy my first house at less than 2x income @3.375%, with a total PITI that's about $200 more than my current rent. If we get inflation I'd rather have cheap 2012 money to spend on stuff now and use worthless 2014 money to pay it off. Plus with an 'owned' home I can do upgrades and prepping that are pointless to do with a rental.

odds said...

your words have echoed in my ears for many many years now:

ENJOY THE DECLINE.

We can't stop it. So enjoy it!!

Gwyddion Flint said...

You're the exception to the rule. Unless you're middle class, in which case you are a hypocrite.