Posts filed under “Mathematics”
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Source: The Motley Fool
“The entire concept of retirement is unique to the late-20th century. Before World War II, most Americans worked until they died.”
The quote above is from Morgan Housel. He has become the most consistently interesting writer on Motley Fool (a site I never really grokked).
I was reminded of this over the weekend when I finally got around to reading a post of his on the flight back from the West Coast. The chart above is from a longer piece on savings for retirement — and we all know all the usual memes on that subject all to well.
But here is the crazy thing we often forget: Throughout history, most people never really got to retired. Men typically were working at age 65 and beyond. In 1880, 78% of Men over the age of 65 were still working. Most men worked til they dropped. Only recently — since the 1940s — have less than a majority of over 65 year old men not been employed in some capacity.
That is an astonishing data point. Retirement as we know it today is a less than century old phenomena. The truth of the matter is that most Humans (particularly males) never had the opportunity to retire. They simply worked until they died. You could not work, but then you wouldn’t eat — leading to the same resolution.
The combination of Social Security, private pension funds, IRAs and 401(ks) are the funding mechanisms. They are quite imperfect, but what they require is tweaking, not undoing. Raise the FICA cap on Social Security, and that becomes financially sound. In IRAs and 401(k)s, you can replace high cost under-performing active funds with low cost passive ETFs and see an immediate improvement in returns. There are simple fixes for what are essentially actuarial issues.
One last thing: Note that after 120 years of the labor force participation rate dropping for the over 65 male, it has begun ticking up again. The key question is whether this is merely a post-crisis catch up caused by 3 crashes — Stocks, houses & stocks again — or whether it represents a fundamental change in society.
We probably won’t know for another 5 years or so, but it is worth watching closely.
The Biggest Retirement Myth Ever Told
Motley Fool May 2, 2013
My afternoon train reading: • Your Brain in Love (Scientific American) • Big Wall Street Buyouts Might Be a Bullish Sign (The Slant) • Less-Trusting Millennial Investors Pose Challenge to Advisors (Advisor One) • The Biggest Financial Asset in Your Portfolio Is You (NYT) • Why Inflation Doves Are Really Hawks (Employment, Interest, and Money)…Read More
I love the way this unfolds: Someone did a study — I have no idea if its serious or not – that suggested eating more chocolate improves a nation’s chances of producing Nobel Prize winners. One of the Nobel prize winners responded with the appropriate amount of snark: “Eric Cornell, who won the Nobel Prize…Read More
Longtime readers will recall that I find the Uncertainty meme to be mostly silly (see this and this). The foolishness continues to come up amongst allegedly serious people. I find many of these folks (mostly) devoid of original thought, choosing instead to repeat things pundits of questionably insight have previously said (PoQI™ is a registered trademark…Read More
“He can take a model and turn it into a narrative” Right after the election, Felix wrote a post “When quants tell stories.” Clever as it was, I had issues with the underlying premise – namely, that the value of Nate Silver’s modeling lay more in the narrative tale as told by Silver…Read More