On Apr 12, 1:16 am, darknes...[at]yahoo.com wrote:

- quote -

Yes, but savings are always a voluntary choice. Even if you have a
home which is worth twice more than 10 years ago, this doesn't mean
that you should borrow to pay for some vacations in Tahiti on account
of your home.

In general, my feeling is that -maybe because of peer pressure-
Americans are making the choice to spend as much as they can, even if
they have to work full time till they are 65 to pay their lifestyles.
Europeans, in general, work less and save more. This could be due to
a cultural difference, or just a tax difference -taxes are higher
here, and if you work hard, you take home a lower percentage of your
salary than in the US. The Dutch, for example, work only about 1300
hrs/yr on average -50% less than the Americans-.

- quote -

Actuarially bankrupt means that, if you keep the current system as it
is -i.e., same contributions and benefits- the system will run out of
money in the future. This is correct, because the ratio of retired
people to working people is increasing steadily -due to higher life
expentacies- and therefore you cannot maintain the same pension
benefits unless you cut benefits (or raise social security
contributions).

Jose Bailen wrote:

- quote -

I recently read Ken Fisher's "The only three questions that count" and
he makes the same statement regarding savings, that 401(k) savings don't
get counted. I'd like to see a reference that states otherwise. I'd also
like to understand (from a series of posts a year ago) how putting $5000
in a CD is savings, but $5000 toward my mortgage principle is not. Both
acts to me have the same impact to my balance sheet. I'd love to see a
"Dummies guide" to this topic or at least an explanation I can comprehend.

JOE

On Apr 11, 6:22 pm, "Jose Bailen" <jose.bai...[at]gmail.com> wrote:

- quote -

So savings are correlated with the macroeconomic cycle. And
individuals count their entire balance sheet in savings ie including
their housing equity wealth.f
And borrowing markets have been deregulated.

So we are surprised, how?

So, despite the bad news about the actuarial
- quote -

It isn't but that is an argument that has been fought and refought
here.

people
- quote -

The data is bad. But savings rates usually fall if unemployment is
low.

On Apr 11, 3:45 pm, "jose.bailen[at]gmail.com" <jose.bailen[at]gmail.comwrote:
- quote -

Like rational economics - the assumption denies that businesses have a
vested manner beyond means profit motives derive -- to the community,
society, or any larger universal concern -- in any sense directly
accountable for other than the continued well-being of the business
interests. Businesses concerns are not overwhelmingly interests
concerned with fostering what is conducive to an overall condition of
competitive markets, apart from idealistically following in suit a
prevailing immedicacy impressed by political climates and ethical
industry standards. Business concerns overridingly remain their own.
Would a lottery ticket buyer be any more apt to pass along a purchased
ticket, knowing that slim chance it may benefit one poorer, perhaps
more deserving? Hardly. A role Keynesian economics and its influence
over the market, government intervention came to play is suited what
benefits society reaps -- if not in need be then to reign in
overbearing presences, unlimited profits businesses might otherwise
think cede, left unchecked and to their own devices. Gambling is
among such powers, as cousins alcohol, tobacco, and sex will attest,
within some distant tradition portrayed alongside Vices of Sin.
Invested in risks simply mollifies lottery misgivings, within a
commonwealth regulated for traded risks, today to derive, no matter
how negligible we all rationally know that extreme to be. And, still,
state proceedings in coffers fall, so oddly conditional, as if
humanity in all its glorious stupidity were lined up overwhelmingly
for a ticket to purchase, in so harmless an event, nothing short of
insured, indeed, nothing will ever come of it.


======================================= MODERATOR'S COMMENT:
Posters to this thread should relate comments to general financial planning.

On Apr 11, 7:42 pm, "rick++" <rick...[at]hotmail.com> wrote:

- quote -

Actually, it includes these income accounts. Just check the
methodology. In general, from a macroeconomic point of view, personal
savings includes total savings minus public savings (public investment
minus the government deficit) , corporate savings (undistributed
earnings by companies) and external savings (which equals the huge
external current account deficit of the U.S. economy).

- quote -

That statistic is flawed. It DOES NOT INCLUDE DEFERED INCOME
ACCOUNTS like 401Ks as savings. Savings is defined as unspent
take home pay. Many boomers I know are "saving" furiously and
invisibly.

- quote -

On Apr 11, 7:03 pm, "rick++" <rick...[at]hotmail.com> wrote:
- quote -

If this were the case, then people should be saving more nowadays than
they did before 1990, because they are now aware that their pensions
and future economic security is at risk. In fact, the opposite holds:
the personal savings rate in the U.S. is now at historical lows (it is
even negative). So, despite the bad news about the actuarial
bankruptcy of the Social Security system (which are correct), people
are not saving more but less.

On Apr 11, 2:35 pm, "Jose Bailen" <jose.bai...[at]gmail.com> wrote:
- quote -

That's hardly irrational!

1. when your income is uncertain, safety is going to matter more.
Hence demand deposits. Liquidity risk is very real for a person on a
low income (and they don't have capital to tide them over income
volatility). A person who has a very low income, with the same
volatility of income as someone on a higher income, will, ceterus
paribus, have a much higher orientation towards safe assets.

2. they don't have access to low cost consumer debt (eg mortgages).
They borrow, if they can, at very high rates.

These are the folks who also buy lottery on a
- quote -

Again there is an enormous economic literature, of which you must be
aware, why it is not 'irrational' to buy lottery tickets, if in your
lifetime you will never accumulate much capital.

And of course there is the marginal utility gain of 'having a
flutter'.

It's much harder to understand why wealthy people gamble away millions
in casinos: Kerry Packer, Bill Bennett etc.


and waste their (low) income in other non-productive
- quote -

Again I don't know of any evidence that they 'waste' their income more
unproductively than other people-- they just have less of it. They
smoke more, but then on average they have more boring, more stressful
jobs and smoking is a stress reduction mechanism.

Even many well educated middle class folks don't do the math
- quote -

Money illusion. Investors don't carry around asset returns in their
heads, and they overweight the recent past.

Also of course there is a utility gain in having a second home for
holidays, etc.

instead of investing
- quote -

Strangely, very few investors alive in 1871 are still alive investing
now ;-).

One of the iritating things about investors in the real world is that
that they have finite time horizons (they do underestimate those time
horizons, typically).

I suggest an additional factor is an economic system that
changed "under the feet" of the baby boomers.
Being one myself, you didnt think much about saving
for retirement before age 40 because (1) pensions were plentiful
before 1990 and (2) no one then really thought that much
about it. In the 1990s many of the good white and blue
collar jobs with benefits disappeared and boomers had to
wake up to a different reality. The post-boomers berate
the boomers for being shiftless in their youth, which I dont
think is fair.
On the other hand, the boomers have had an unparalleled
era of prosperity- a quarter century- in which set their house
straight. I recall the last time there such a long upward period
was after the US civil war. If the boomers grabbed hold of
just half or 2/3rds of this prosperity period, then they'd be OK.
Some did and some didnt.

On Apr 11, 3:22 pm, "HW \"Skip\" Weldon"
<skip5700removet...[at]hotmail.com> wrote:

- quote -

I don't think that the society- or the government- should do anything.
People should face the consequences of their lifestyles: if you don't
save or don't save enough, then you should know that this means that
you have to work till retirement or even beyond retirement (if the
Social Security pension is not enough). For those of us who saved
enough and invested relatively well, it would be unfair to pay more
taxes to provide for those who didn't follow a prudent lifestyle. We
should pay taxes to support those people who don't have (or had) a
choice and cannot support themselves -disabled people, for example-
but we shouldn't pay for the mistakes of others.

On Apr 10, 11:11 pm, "Lon" <alonzotan...[at]yahoo.com> wrote:

- quote -

I agree. Low income people typically invest in the wrong type of
assets (low risk-adjusted return assets) and get the wrong type of
debt (credit card debt). These are the folks who also buy lottery on a
regular basis, and waste their (low) income in other non-productive
ways. Even many well educated middle class folks don't do the math
and prefer to buy a second home (despite the fact that houses have a
long term real rate of return of just 1 percent) instead of investing
in stocks, which a real rate of return of 6.8 percent (average for
1871-2005).

On Sun, 8 Apr 2007 18:38:38 -0500, "Lon" <alonzotanner[at]yahoo.comwrote:

- quote -

You are correct that lifestyle choices (cars, homes, vacations, number
of children, etc.) greatly affect our ability to save for the future.

However, my experience is that appreciating these factors is not the
problem.

A typical example is where people under 50 agree to enjoy life now
with the understanding that they will work to age 65 to make up for
not saving enough now.

Problem: Somewhere around 55ish, nature intervenes in the form of
reduced physical energy (slowing down), coupled with a reduced ability
to put up with stress and change in the work place. (I wish I had a
nickel for each time a 50-something said, "I'm tired up putting up
with the crap.")

Those folks begin to insist on early (soon, way before 65) retirement.
But they haven't saved enough to do it.

How do we address that?


-HW "Skip" Weldon
Columbia, SC

On Apr 10, 10:11 pm, "Lon" <alonzotan...[at]yahoo.com> wrote:
- quote -

I think I read that 80% of all financial assets (non house equity) are
held by the top 10% of American income earners-- stocks, bonds,
savings accounts, insurance etc.

For most people, their major assets are in order: their pension (if
they are still members of a defined benefit scheme), their housing
equity. The average 401k has $25k in it I believe (although
individuals may have more than 1).

Typically,they might not have medical or disability coverage
- quote -

It's very hard or impossible (at least in the UK) to insure against
the income loss a major disability might inflict. The insurers just
won't sell you that level of insurance.

On Apr 11, 6:35 am, "rick++" <rick...[at]hotmail.com> wrote:

- quote -

The key point of the article in my view, is the educational level of
the individual. Low income and lesser educated folks will always have
a more difficult time saving/investing or doing any financial
planning. Typically,they might not have medical or disability coverage
so of course a major illness or disability would impede any financial
planning. This is really a no brainer.
Many of my peer group as well as this writer have had major illnesses
(cancer) and thanks to private medical/disability those illnesses
became merely a bump in the road to our respective financial planning.

- quote -

This is not the top-ranking savings obstacle.
For a quantitative look:

http://articles.moneycentral.msn.com...urNestEgg.aspx

Health crisis and disability is highest problem.
People between 50-65 have 50-50 chance of encountering one of
the major savings obstacles.

"The Henchman" <heyhey[at]isforhorses.com.easynews.com> wrote in message
news:FKxSh.157820$Ts6.58007[at]fe12.news.easynews.com...

- quote -

Yes, I believe that is true -- a tithe is 10% of one's earnings (not
estate). That is sort of like paying a 10% front-end load to the church
before getting on with the business of personal investing and seeing the
investments come to fruition. If one both tithes and buys a load fund, that
fund better be a real winner if you want to get ahead financially!

"Don" <dwzimm[at]telus.net> wrote in message
news:jTwSh.56966$__3.28021[at]edtnps90...
- quote -

The religion issue you mention is a entire host that affects more than
procreation....

Some religions ask for a "tithe". Sorry still new to English. Is that the
word? Something like 10% of estate.

"Douglas Johnson" <johnson[at]classtech.NOTPARTOFADDRESS.com> wrote in message
news:6luk139ifdpvr3uc1d1gu90ljufa3enm5g[at]4ax.com...

- quote -

All excellent points. Furthermore, "making a decision" as to how many
children to have and implementing it by medical means is a procedure that is
approved by some religions and moral codes but not others. So, one could
take this whole issue a step further and say that one's religion has an
impact on one's financial success. This is another indication that financial
advice has to be given in the context of a person's entire life style. If
these issues are not considered, that just means they are left to chance.

"The Henchman" <heyhey[at]isforhorses.com.easynews.com> wrote:

- quote -

Yes, but the cost goes up as the number of people increases. The oft-quoted
Scott Burns had an article that indicates the cost goes up roughly with the
square root of the number of people. Two people can't live as live as cheaply
as one, but they can live as cheaply as 1.4. Three people cost about 1.7 times
as much as 1 person and 4 people cost about 2 times 1 person.

- quote -

All these things may reduce the net cost of a child. It is hard to suggest
children become profitable.

- quote -

The same argument applies to home ownership. Again a cost reduction. A $3,300
exemption could translate to a $495 tax savings for a family in the 15% bracket.
There are others, of course.

- quote -

I went through something like this with my dad. While he was glad of the help,
and I was glad to help, the return on investment for him was pretty low.

- quote -

My grandson is an absolute delight, that I wouldn't trade for anything. But he
is an expensive delight for both his parents and me (I get to spoil him,
expensively).

Most of the arguments you present are quality of life issues. Nothing wrong
with that. A balance must be struck between quality of life and financial
issues. All I was saying is that children are a major league financial
decision, but rarely viewed as such.

-- Doug

"Douglas Johnson" <johnson[at]classtech.NOTPARTOFADDRESS.com> wrote in message
news:15ok13h6tmdbqi58j0gpn7j96ih3gmkk0h[at]4ax.com...

- quote -

I'm not saying you are wrong or right but I would like to explore this issue
further:

Wouldn't the cost of children be factored into the original post across all
those budgetary criteria? It seems to me that you would factor to list the
cost of children as a single line expense on a budget worksheet for example.
The cost of housing, automobiles, plus the other contributions posters have
made would be for a family unit, whether it's one person or the brady bunch.
That was my view on the original post for this thread.

Children are an extremely complex financial situation. Some children work
on the family farm and contribute to the financial health (although those
days are disappearing fast), Teenagers often work and bring in their own
money for entertainment and school lunch and clothing and cell phones
etc.for example. I don't think it's as simple as calculating or listing an
up-front cost to raise a child

Also governments often give subsidies and tax breaks to those with children.

And one other note: When you are 78 and your wife is 80, who will help you
through those tight economic times when your retirement portfolio runs low?
When you become frail or sick?. When the cost of medicines becomes high?
If you develop a disability during the coarse of your lifetime? When you
lose eyesight and unable to drive? If you lose the ability to maintain your
own home? If one spouse dies leaving a funeral expense and the other the
unability to maintain a home? Loniness? Grandkids can do amazing things
for your entertainment. Do we not need entertainment when older?

There was a previous post on people over 50: something like 50% of that age
group having less than $100 000 to retire on. Couldn't you consider
children, if raised properly of course, a kinda sorta insurance policy?

And for the record I'm a step-dad of 3 children and none of my own. Simply
put: I cover less than 50% of their financial requirements.