'The 401k generation is beginning to retire.'

[bobalot]

Australia superannuation takes about 9%. Hell if I want them to take 20-25% of my paycheck, not because I want to spend my cash on the latest gadget or sci fi memorabilia, because I am using the excess cash responsibly in investments. My (pipe) dream is to do what Robert Kiyosaki claimed to have done. Have enough income producing assets so he could retire young and only worked because he (allegedly) loved his job.

Minor nitpick, it's going to rise to 12%.

[Starglider]

How are these investment plans going to fare if the US goes through a bout of double-digit inflation, with heavily lagging interest rates? Over three decade plus timescales a near-total devaluation of the dollar becomes a nontrivial possibility. Equities are in principle more robust but do you really want to buy in now when they're on a blatantly unsustainable quantitative easing powered ramp-up? One that could be almost expressly designed to sucker in and ruin dumb money?

[aerius]

How are these investment plans going to fare if the US goes through a bout of double-digit inflation, with heavily lagging interest rates?

TIPS is your friend if inflation is a concern.

[Starglider]

TIPS is your friend if inflation is a concern.

I didn't think you'd be one to trust the official inflation rate Aerius. The US CPI for the last two years averages to under 1%, does that match your actual cost of living?

[aerius]

I didn't think you'd be one to trust the official inflation rate Aerius. The US CPI for the last two years averages to under 1%, does that match your actual cost of living?

Hell would I know, I live in the glorious land of Canada.

But seriously, there's no surefire way to guarantee a future pension as long as our markets are as rigged as they are these days. If we actually did have a functional market the interest rate will closely track the inflation rate without too much lag, that's because lenders & bond buyers will demand an interest rate which covers the devalution cost from inflation over the course of the loan. Which means T-bill interest rates will track closely with inflation and give a positive return.

But like I said, functional markets, you might as well be playing in a casino these days.

[JME2]

But like I said, functional markets, you might as well be playing in a casino these days.

Which -- aside from why I never go to Reno or Vegas anymore -- is a good summation of why I've traditionally been wary of the stock market.

Unfortunately, I acknowledge that I will need to make some kind of investments to build a nest egg; I'm just not in a position to do it now...

[SirNitram]

TIPS is your friend if inflation is a concern.

I didn't think you'd be one to trust the official inflation rate Aerius. The US CPI for the last two years averages to under 1%, does that match your actual cost of living?

It matches how things have been here, outside of oil.

[PainRack]

Here's a question.

Robert Kiyosaki, Donald Trump and etc has been wailing about the retirement of the boomer generation and the impact it will has on the stock markets.

Doesn't that mean that equity is going to take a hitting in terms of price, as money is sucked out of the markets?

[PainRack]

If I had my way I'd take 20-25% off every worker's paycheque and automatically dump it into a national pension plan that holds nothing except T-bills and McDonald's & Coca-Cola company bonds. Cap payouts at $150-200k per year or 75% of average pay whichever's less and use the surplus to bring low income workers' pensions up to an acceptable minimum level. If someone doesn't feel that's enough to retire on then he can do his own savings & investment on top of that.

Some personal experience with the way Singapore works here.
We do something similar in terms of our CPF. Its a payroll deduction in the sense that the government deducts at the moment 34-36% of our pay(20% from employee pay, variable rate from employer depending on the budget and election bribery).
I'm not sure if you're including the current payroll taxes on top of your 20-25% paycheque but this should be comparable.

As Kernel mentions, there are significant......... issues with this for the lower income groups, especially when they retire. To put it simply, the fund role is to set aside sufficient money so that your account remains solvent even when you retire, not whether its sufficient to meet neccessity. The beeds of the people on the other hand....

Furthermore, Canada citizens doesn't have the same healthcare cost issues America and Singapore has.

Honestly, at this point I think punitively progressive taxation might be in order for almost any set of reforms designed to salvage the American economy. We need national health care worse than we need more hectomillionaires.

I hate to say this Simon, but given the needs of the US at the moment, I'm not sure progressive taxation would solve your healthcare problems. As the Boomer population retire and draw more on Medicare, you're going to take a severe hit in terms of a finanicial burden. Just as the US economy is faltering, combined with the whammy of an experienced workforce retiring or taking up lower payscale jobs which will further distort the jobs market........

[The Kernel]

Here's a question.

Robert Kiyosaki, Donald Trump and etc has been wailing about the retirement of the boomer generation and the impact it will has on the stock markets.

Doesn't that mean that equity is going to take a hitting in terms of price, as money is sucked out of the markets?

Not necessarily, boomers may be retiring but they are still greedy. Everyone knows that you should diversify when you get close to retirement but very few people actually follow this advice as they need equity returns to make up the shortfalls in their retirement accounts. Most likely people will simply only convert their equities to cash at the last possible moment and only then in stages.

Also remember that there are still plenty of people who like to use dividend paying blue chips as an alternative to annuities.

[The Kernel]

I hate to say this Simon, but given the needs of the US at the moment, I'm not sure progressive taxation would solve your healthcare problems. As the Boomer population retire and draw more on Medicare, you're going to take a severe hit in terms of a finanicial burden. Just as the US economy is faltering, combined with the whammy of an experienced workforce retiring or taking up lower payscale jobs which will further distort the jobs market........

The US doesn't have any problems that can't be solved by increasing taxes across the board. Really our taxes are just ridiculously low right now. Take a look at our top marginal tax rate:



Granted that's just the top but income taxes are absurdly low right now. What we need is to increase taxes for a decade, bring the deficits down and then slowly ease off the tax burden. It sucks but we really have no choice. Ditto for Social Security--a small adjustment to the payroll taxes will make it sustainable for the next millenium.

Granted Medicare is still a problem, and there aren't any easy fixes. In my opinion the biggest fix that needs to be made is going to be the least popular: reexamine end of life care. It's still at least 30% of Medicare's expenditures and it's also the fastest growing segment. No one wants to talk about it but spending $50,000 on needless procedures just to add a few extra days to life is not helping anyone.

Pharma costs are the other big problem and here is another area where there aren't any easy fixes. The new wave of biological drugs are horrifically expensive (such as Adalimumab which costs tens of thousands of dollars a year) and can't be made in generics.

It's not clear what there is to do about this except that the US is going to have to realize that medical care needs to be rationed one way or the other. No one wants to talk about the fact that there already exists formulas that calculate cost vs. life expectancy increases that insurance companies and Medicare use but it's there. Sarah Palin may not be so stupid after all with her "death panels" rhetoric as it may need to come down to that as expenses for end of life care spiral higher and higher.

[PainRack]

Granted Medicare is still a problem, and there aren't any easy fixes. In my opinion the biggest fix that needs to be made is going to be the least popular: reexamine end of life care. It's still at least 30% of Medicare's expenditures and it's also the fastest growing segment. No one wants to talk about it but spending $50,000 on needless procedures just to add a few extra days to life is not helping anyone.

Pharma costs are the other big problem and here is another area where there aren't any easy fixes. The new wave of biological drugs are horrifically expensive (such as Adalimumab which costs tens of thousands of dollars a year) and can't be made in generics.

It's not clear what there is to do about this except that the US is going to have to realize that medical care needs to be rationed one way or the other. No one wants to talk about the fact that there already exists formulas that calculate cost vs. life expectancy increases that insurance companies and Medicare use but it's there. Sarah Palin may not be so stupid after all with her "death panels" rhetoric as it may need to come down to that as expenses for end of life care spiral higher and higher.

Granted, i'm not speaking from any hard data but a gut feeling says otherwise.
http://www.bls.gov/news.release/cpi.nr0.htm
Medical inflation is rising at rates faster than normal inflation with 3-4%.
The US doesn't have a graying population unlike the rest of the developed world, but it is facing a baby boomer retirement which will mean a spike in demand for healthcare. Increased consumption will most likely lead to increased inflation, since healthcare supply isn't very responsive to demand.

Improving the capability for seniors to pay for healthcare is one thing, whether the US budget can sustain this increase in spending even as her economy falters and her budgetary mistakes from previous years kick in is another.
A possible scenario may be that any increase in revenue is quickly offset by increased expenditure in the form of Medicare and paying off the interest rates.