[vkou]

> Social Security in the USA, for example, has a negative ROI. For it to work the government has to take money from younger working people in order to pay for older retired people. As the population shrinks you have less and less young people being forced to support the larger number of retired people.

You can solve that entire problem with a few years of inflation. There's nothing, in principle, wrong with a guaranteed return-until-you-die investment, as part of a retirement strategy.

It's a smart part of a diverse retirement portfolio (Especially when compared with a 100% commitment to the guaranteed-contribution, variable-return investments of 401ks). I wish I could invest more than 3% of my income into SS - and I expect to take a haircut on that investment.

[jtuente]

SS isn't an investment though, even says so in its name -- Federal Insurance Contributions Act -- and like most insurance, it's expected that you will pay more into it than you receive in benefits.

[bluGill]

There are inflation indexed annuities that you can invest in. Most 401ks don't have them directly, but when you retire I advise my friends to move some of your saving into them: enough to cover the basic life expenses (insurance, food, rent). Because they are for life they are typically lower return on investment, but they lower the risk of living wrong so they should ensure you can afford at least the basics of life.

[vkou]

Sure, and I'll probably look into them, if, by retirement, the world doesn't turn into a Mad Max hell-scape. (Which I am not optimistic about.)

The thing is, all the same risks of Social Security (People living longer than expected, investment returns being lower than expected, a prolonged recession emptying out the fund, inflation turning your guaranteed returns into 'only-good-as-toilet-paper-money') apply to them, but even moreso (Because they cannot count on continued buy-in, unlike Social Security).