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by _cbsz 2683 days ago
> Inflation will eat most of your savings

What? This is why investment advice for retirement generally revolves around allocation into stocks and bonds while leaving only an emergency fund plus regular expenses in more liquid assets like savings accounts. Inflation will only eat your savings if you fail to invest. If you want to talk about risk, well, inflation is why a total failure to accept risk is extremely risky!
4 comments
iguy 2683 days ago
Every service you buy with your savings has to be provided by people working at that time. More savings competing for fewer workers will cause inflation until your savings are reduced to match.

To take the extreme example, if everyone tried to save up and then take a sabbatical year in 2025, they would all find that their money became almost worthless -- they could buy capital goods (made before) but nothing else.

Before Paul Krugman metamorphozed into a political hack, he wrote some quite solid stuff about economics. His famous baby-sitting co-op [1] runs into this problem: Everyone wishes to earn tickets on weekdays / winter and spend them on weekends / summer, but this is impossible:

[1] http://www.pkarchive.org/theory/baby.html

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polskibus 2683 days ago
Sure, this advice seems ok in current economic setting, where workforce size is replenished by newer generations.

Now think about what would happen if there are a lot of old retired people but the number of people willing to work for them is 50% of what is required, in most branches of the economy.

Money will start chasing the workers, and they pay will sky rocket. It's more like SV skyrocketing housing prices and total compensation, bit wider in scope.

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_cbsz 2682 days ago
> pay will sky rocket

Why do you think that this will entirely fail to incentivize prospective retirees to work for more total years of their lives in order to benefit from increased pay?

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watwut 2683 days ago
I think that he is talking about average person and you have rich classes in mind. Most people dont have money to invest in bonds.
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InitialLastName 2683 days ago
"Most people" down into the middle classes (at least in the US) have money invested in the market already, through either an employer-related pension or a 401K-type plan.
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sevensor 2683 days ago
And you expect your investments to continue to increase in value with a shrinking population?
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