the savings nightmare

There is another answer - Marry someone 20 years younger than you, and let them keep working, and bringing in an income, whilst you are retired

OK, OK, I know its not the answer for everyone

Excellent thread.
The way I see it - if government policies made it easier to purchase investments (eg - an IP) , then the balance would swing over to worse than it is now (so more than 30% of properties are rented)....and there would be an imbalance similar to what we have had over the last 12 months.
Yields would go down, and investment in property would lose its gloss.
I cannot see how everyone can be well off in retirement??
At least the people here are one step ahead of this.

While I was out doing a bit just now I remembered the old term "Point of diminishing returns" which I have not heard for years.

In essence it says that if "X" is good "2X" is not necessarily twice as good. Indeed there comes a point where every extra "X" thrown at a problem gives very little return. Residential real estate has almost reached "The point of vanishing returns" so any "new converts" to the idea of saving to invest will find only very lean pickings there. Nor would I recommend the broad share market because it also suffers the problem of too much money chasing too little profits. The price/earnings ratio of growth stocks is pretty poor.

So if we are to save more, we need more, and safer, investment vehicles for the super funds. The first thing that comes to mind is for the Fed to sell 10yr bonds. They are not doing that now and that is a good thing because it means they are not going further into debt. But why not raise this long term money and use it for major infrastructure works? The benificiaries - the future generations - will then be paying off the debt on a useful facility instead of simply paying pensions.

It's a big leap of faith to trust the pollies to spend this money wisely but it is a risk we should take. We may even end up with another engineering scheme like the Snowy Project. Wouldn't that be great!

Thommo.

There's not enough large scale engineering going on in this country - the Alice - Darwin rail link is the closest we've come in years.

It's not about employment, capital spending, or anything to do with economics - it's all about large engineering projects being cool

(okay, so I'm a techo-geek, who'd have known ?).

Eco-friendly power....lots of projects in that area....whether you want to go hot rock, solar towers, wind farms or tidal traps.

Cheers,

Aceyducey

Good Thread. But if all of us have IP and save , will we all have more money to spend, then inflation goes up and our savings are worth less anyhow?

I'm with Acey. England, Europe are stuffed but we still have a lot of land and the right laws to encourage immigration.

Anyone else notice the recent Fed Gov backflip on temp visas. Why? Because these people are happy to pick fruit, dig holes and such in outback OZ. Now talk of OS doctors being helped to retrain. Immigration already happening

Also 65 retirement will become 70 and progressively rise IMO as heathier olds (thats us) remain in the workplace.

And the GST will go to 15% to cover the loss in PAYG.

Lastly, only 5% ever retire wealthy. That will always be the same.

My two cents, Peter 147

Driving into Julia Ck you think you're close when you can see the water tower but it is still a long drive into town.

Just can't imagine how far out you'd see a solar tower!!!!

T

savings nightmare

The whole point of my post and infact what I do is to help people invest. If I was to lobby and speak every day to groups of people wanting to invest I would still only make minor changes to the number of people who will retire and ber able to be self surficant. People here keep referring to everyone being wealthy. Most people will not achieve this my interest is in helping people to improve there net position.

By making some changes we might encourage some people to invest, surely that the purpose of this forum. In New Zealand as I mentioned before the incentages to invest are much better than in Australia, however there would be less investors and home owners than there are in Australia.

So let us take a positive approach, to suggest that if we make it easier to invest the market would suddenly be swamped is simply not true.

Regards

Nigel Kibel

Property Know How

ps the information on the usa is great, thanks for that, I am studing that market at present

In the UK they are currently debating raising the age you can receive a pension to 70. One newspaper crunched some numbers and worked out that the savings to the government would be massive as a significant percentage of the population, especially blue collar working males, die before they turn 70. This journo was not to impressed as he thought it an attempt to deny many people their 'god given right' to a pension. Uk is a different situation but I thought it was interesting that they were openly discussing it.

I think a lot of good points have been raised in this thread and this is a really difficuly problem. Encouraging saving would be a good start. I read an interesting article were they were discussing how current people in their 20's want to start were their parents finished. By that they meant they wanted their first home to be of the same quality as their parents current home, they also want brand new cars, furniture etc. The buying an expensive house is not a bad thing as it can help create wealth but the expensive furnture and toys are another. It's hard to save when peoplesexpectations are so high, what's the old saying champagne taste on a beer budget.

Who knows what the answers will be just as long as they don't overly tax those of us who have made the effort to be self funding to supports those who blew their money.

Darryl

RPI,

This concept has been discussed in Australia as well.....but at the moment the're principally considering 'encouraging' people to continue working.....

The rationale used is that many experienced people retire & their knowledge can be of enormous benefit to business.

I can see handouts to employers for putting on older workers coming in sometime in the next twenty years...........

Remember who has the votes!

Cheers,

Aceyducey

savings nightmare

Yes Acy

That is true, the reasons that they are encouraging people to work longer is because we will also have a shrinking employment base, which means less money in the systen to pay for pentions and services. What a turn around from the 1980s, when you were 45 you were on the scape heap.I agree with your earlier points that we must look at immigration, we need younger people. But if we can convince even an extra 10 % the importance of saving and investing we will dramatically improve the long term position of the economy.

Regards

Nigel Kibel
Property Know How

I just did a cut 'n' paste about
PERSONAL FINANCE
Boomers better off than expected
from http://money.cnn.com/ but it was a bit long winded so I'll provide the link only.

Nigel; You did not explain the anomoly here "In New Zealand as I mentioned before the incentages to invest are much better than in Australia, however there would be less investors and home owners than there are in Australia." Why then are you suggesting our Gov go down this failed path?

I put a lot of thought into my recent post trying to demonstrate that our investment markets are indeed becoming swamped with excess liquidity yet you dismiss this by saying "to suggest that if we make it easier to invest the market would suddenly be swamped is simply not true." without giving me the courtesy of any supporting facts or hypotheses.

In my previous post I have refrained from questioning your motives out of courtesy but I get the strong feeling your interest is more commercial self-interest than general concern for your fellow pilgrims.

I have no self-interest in either side of the discussion.

Thommo

nkibel said:

But if we can convince even an extra 10 % the importance of saving and investing we will dramatically improve the long term position of the economy.

Click to expand...

You must stop presenting opinions as facts without a shread of evidence in support.

An extra 10% saving to invest will not address the "huge" shortfall you are on about. While saving is good for the individuals concerned, treasurers and central bankers don't really want the idea to catch on. Why on earth are they printing so much money if they want us to save for the good of the ecomomy? Who would borrow the money?

Thommo

Hi all,

Nigel, this is an interesting topic, but where you mentioned

"However if by encouraging people to save we reduce the number of people who will need government support by 10-20% we will make a huge difference to our long term economy."

I have to disagree. It makes no difference as to where the money comes from, either private super or govt, the fact is that the exercise looks to increase the share of the pie for the retired.

If the burden is too great on other sectors of the community, something will give.
I see the following scenarios as possible;
1/ We have more and more savings directed into limited markets, which leads to greater asset prices and lower yields. Then at some point we get to the Japanese situation of deflation in asset values as the money is trying to be used by the retirees.
2/ We have an increase in inflation and a corresponding(though lagging) rise in interest rates and yields on assets. This effectively destroys the value of savings.

Nigel, do you really mean "savings" when you are talking about savings, or do you mean "borrowings" as well??

I also think this forum is about helping those who wish to be helped, not "encourage some people to invest".

bye

2 points are apparent to me:

1.
One of the reasons younger ppl aren't having as many babies is because they don't have the same economic freedom older ppl experienced pre 70s, or the same grip on personal finance, nor social conscience. Back then, if you lost a job, you got another one the next day (even if it was with a bloated public service), and didn't lose your house or end up at the Salvos to feed your kids. Today, kids are encouraged to get more education so they can compete for a smaller no. of jobs, so we now have lots of university qualified burger flippers. Females are now competing for elite jobs (law, dentistry, medicine, management) only to revert to part time work after 35. This is depriving a greater no. of families from being supported, while focusing more wealth and choice into the hands of fewer. Through a combination of changed values (cafe lattes rather than tea and home made scones) and a poorer economy, personal saving has decreased to unsustainable levels. This along with the ease of credit availability has biased property ownership into the hands of a few. A loans manager at a bank told me the other day first home buyer loan applns have all but dried up in the last 9 months. the market is dominated by investors and upgraders.

2.
Encouraging immigration is not a solution. If we do not invest capital in works that create true wealth, then it doesn't matter how many hard working immigrants come here. They will be restricted in economic opportunity by the laack of wealth and consumption habits of the rest of the population; just as the younger generations now struggle to compete to get ahead.


IMHO, the only way for us to move forwards is to focus aggressively on becoming world leaders in 2 or 3 industries, as has Finland, Ireland, Sth Korea, and Sweden; then export our asses off to compensate for the appallingly stupid lack of investment in capturing global markets over the last 30 years- a high price to pay to focus instead on saving trees and giving people money to go surfing; and even purchasing investment property rather then creating export opportunities and sustainable jobs (outside cyclical domestic housing construction).

Being good hole diggers ain't gonna save the majority of us either. Hopefully, the media and dill elites that have been pro conservation and anti commerce, anti economic dev't, will make job creation as cool as tree hugging soon.

savings nightmare

Bill

Surely if people have more money in retirement and they are not relient on the government it takes pressure off the system and government funds can be used to assist where they are needed. There fore if 10% more people can fund there own retirement and maintain a better lifestlye it not that a benifit.

As for Thommo

I am involved in the industry, I do a number of things however there are easier ways to promote my services than discuss openly a touchly subject. I find it insulting to suggest that I will personally benefit from the outcome. I will operate here and off shore and whether the government makes changes to make it easier to invest in Australia will make no difference to me.

We all have different reasons for what we do, if I can assist people or bring about change then I believe that what I do is worthwhile.

Regards

Nigel Kibel
Property Know How

My diletant view is that having savings in retirement helps only if there are products / services available to spend them on. As the situation stands, we are not going to have enough people producing those products / services, and you can't eat the money or wear the bank statements. So the only way the savings will be any good to us is if they are invested to develop business activity, maintain and increase production which would require improved productivity and / or 'creating' more people. Since the birth rate is falling, immigration seems the only answer. The only problem with increased immigration is that it requires resources to integrate new migrants into the community, especially as most will be from non-English speaking countries. Even migrants with very good qualifications that are in demand often still require some help at the beginning with job search etc. So I guess the government could use the savings we can make now to fund these programs. Trouble is, in the last 10 years they have been cut, not improved. Also, if throwing more money on families could encourage them to have more children, it would help the problem. But I don't think finances are the only reason for the low birth rate.

That's my layman opinion anyway.

Nic

Nigel my questioning of your motives was only one of four para's. You have not addressed the other three and, in fact, gone further by saying ...... "Surely if people have more money in retirement .....etc" which is the opposite of what Bill and I are saying (hey! You could be right) but still without any argument to support your case.

I hate prejudice presented as fact!

Please tell us why you think as you do.

Thommo

thefirstbruce said:

One of the reasons younger ppl aren't having as many babies is because they don't have the same economic freedom older ppl experienced pre 70s, or the same grip on personal finance, nor social conscience.

Click to expand...

Bruce,

I think you need to carefully rethink your assumptions.

You're falling into the ageist us versus them trap.

Firstly accusing younger people of having less knowledge about personal financial is factually incorrect.

Given their age, young people today have a much stronger grasp of personal finances then did their parents or grandparents. You may have trouble seeing this due to the changes in the economy that have meant that different personal financial behaviour is prevalent, or it may be due to your own filters, but whatever the reason research indicates the opposite.

Secondly accusing young people of having less social consciousness is a classic ageist remark that's been thrown around literally for centuries. Every generation regards the next as less socially aware, more concerned with money, sex & partying than with important issues that more 'mature' (older) individuals believe are a concern.

In fact there's written comments to this effect complaining about the younger generation that date back to ancient Greece....unfortunately I couldn't locate the quote, but it's saying a very similar thing to your comments.

What you regard as social conscious may have been appropriate for your times, but times HAVE changed.

IMHO young people have significantly more social consciousness and are significantly more aware and active than their parents in these areas. However the areas of social consciousness have changed, and it would be very limiting and short-sighted to state that any generation's social concerns were THE MOST IMPORTANT FOR ALL TIME.

Think about your attitudes a little more. In your post you accused young people of having insufficient social conscious and then called them tree huggers and called for more focus on economics & less on social consciousness - your definition of social consciousness may be at variance with society's

Cheers,

Aceyducey

Acey, there very well may be research advocating what you state. however, opposing research exists. AFR and BRW have published contrary articles to yours on generational consumer habits. Plus I keep in touch with the advertising industry, and know the trends and preferences advertisers exploit amongst various demographics. Believe me, teenagers and 20 somethings are significant consumers, moreso now then in the 60s and 70s. That's why so much advertising is aimed at that them. there is more to consume and many feel it is pointless saving for a home when prices grow faster then they could possibly save. Hence my concern with property investors inflating the market.

As for my ageist attitude. Quite the contrary. I am sympathetic towards younger generations, and recognise they are doing it tough. I see them competing harder at school and uni. I see them struggle to get meaningful jobs. It is certainly a more difficult world then when i grew up. And yet they are nothing more than the product of their parents. I get frustrated with baby boomer parents who turn a blind eye to all this, while indulging in hedonist gratification. I also blame baby boomer idealism and pixiesville thought for nurturing kids unprepared for the reality of today, which includes poor financial consideration of long term needs, more concern for saving trees and expecting the government to sort out everything, and being totally naive about economic realities. One can be a good Buddhist and still budget intelligently and strive to be an employer.

As for social conscience, to me it means more than hugging trees and hating America. It means recognising you are part of a society, and taking an active interest in that society, especially on a local level, where you are more inclined and obligated to act. To me, going to demonstrations and protests about global or national issues is easy. Making a commitment to do volunteer work through Lions or Scouts every Sat morning for your local community is hard. But which demonstrates more social conscience?

I don't know too many teenagers or 20 somethings involved in local community projects, but the need is there. THe fact that many are unaware of the needs is why I say the younger generations have less social conscience. As I said, tree hugging and chanting hate mantras about conservative politicians doesn't cut it as acting with a social conscience.

All charity organizations are suffering from reduced membership. That is a fact. The apparent reason for this is that much of the charity work and volunteer labour was instigated via church groups. With the falling church attendance, charity organizations have diminished. Modern societies have yet to replace organized religion with a better option when it comes to the glue that holds the social fabric together. We have more freedom, but we are still using that freedom as adolescents.

yes Acey, I know the old arguments that every generation thinks the younger ones are less moral etc. Nevertheless, I think it is a mistake to oversell cynicism re that outlook. Great empires fall, usually preceded by a decay in morality and enterprise, and an increase in pursuit of hedonist pleasure.

You state that younger ppl have greater social conscience then their parents. I'd agree that baby boomers are amongst the most self absorbed. However, I think we need to clarify what we both mean represents social conscience. I have tried to illustrate my perspective above.

In using the provocative language that I do, I am no less concerned about the environment than Bob Brown. However, I also recognise that homo sapiens have evolved to a point where we cannot help but impact the planet. For me, too much of the sociopolitical debate these days is slanted towards unrealistic ideals, and mindlessly despises the wealth creation process that provided the education necessary for the masses to undersstand these issues. This form of ignorance cannot help us intelligently find a sustainable balance between conserving nature and evolving as a species.

I don't hate the younger generations. I wish to see them succeed, to find an intelligent balance towards moving forwards. But it is difficult when they have been conditioned the way they have by baby boomers.

Hope you can see the subtlety of my stance, despite my tired and unsubtle expression....