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Rich or poor

Discussion in 'News and Weather' started by Happy Camper, Sep 19, 2020.

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  1. NowandThen

    NowandThen DI Member

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    The Dutch pension system has previously been described as one of the best internationally.

    Sure it is a good system. But moneywise not outstanding. In Switzerland the state pension after 44 year contribution is max. CHF 2370 and min. CHF 1185.Like in the Netherlands there are also deductions for every missed year. But if somebody had a more or less average salary and paid in the full 44 years it is very likely she/ he will get the maximum. Additionally we get a company pension. This one is caluclated indvididually. Depends on the income over the working years. It can be very high or low. So this might look all positive. But Switzerland is a very expensive country and let's say somebody only gets a total pension of CHF 3000 the person is considered as poor. No wonder there are a lot of retired Swiss in South East Asia or cheaper European countries.

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  2. djfinn6230

    djfinn6230 DI Senior Member

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    Having a state pension is one leg of the 3 legged stool. Your company pension would be the second leg. What would be the 3rd leg? Do you have company sponsored investment plans like US 401k where you invest part if your salary tax-free and company might even match your contributions, or tax-free savings like IRA?

    It sounds like CH and Netherlands cannot quite makes it on state pension alone, which surprises me. It seems many times I was told differently.

    Your situation sounds very similar to the US but I always thought US was thought to be very low compared to EU, UK and EFTA.


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  3. NowandThen

    NowandThen DI Member

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    We have the 3rd leg as well. This is voluntary. The maximum amount allowed is around CHF 7,000 p.a. and is deductible from the taxes. Banks and insurance companies offer various investment plans for these deposits.

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  4. djfinn6230

    djfinn6230 DI Senior Member

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    That sounds pretty good. Your voluntary plans are likely high risk/high return for your younger years and low or fixed return with less or zero risk for your later years just like in the US. What we have watch out for with these is high commission fees but there are a few places to go where those fees are reasonable. Anyway, for the same reasons you see a lot of Swiss expats going elsewhere fir retirement, you see plenty of US expats too, sometimes in S.E. Asia but also in Mexico, Central America (Panama, Costs Rica, Belize) and for some reason, Equador in S. America. ,Some Europeans also seem retire cheaply in some S. American countries that have Euro culture such as Argentina, Uruguay and Paraguay but not Equador which uses the US Dollar. Americans used to go to Venezuela too, mainly Caracas, until certain political events ended that.


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  5. Rye83

    Rye83 with pastrami Admin Secured Account Highly Rated Poster SC Connoisseur Veteran Army

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    These are largely things of the past. Even the military has moved away from the old pensions format to more individualized (and privatized) plans that are fully dependent on the stock market. This may work out for some (it definitely will benefit those that don't plan on doing a full 20 years) or it may screw over others, depending on how the stock market and tax laws are when they decide to retire.

    I am 37 and know there is basically zero chance of getting in with a company that provides a pension (I know of none that even offer one any longer). 401ks are ok but when you are finished with your employer (or they are finished with you) you need to roll it over to a personal IRA as the investment platforms offered by employers are usually complete garbage, have very limited investment options and have high fees.

    The laws in the US really need to change around personal retirement accounts (IRAs). I have rollover, Roth and traditional IRA accounts but I am not allowed to put any additional money into them since only "earned" income is allowed to be put into them. Money from capital gains/dividends is not considered earned income. I am also only allowed to put 6k/year into these accounts (not each account, but total for all of these accounts). That is ridiculous. If employers and the government are abandoning pensions (or continue to raise the age at which you can receive benefits) then they need to open up laws that allow people to invest in their own future. This "trickle down" experiment has been a massive failure and the scum in Washington (from both parties) are cutting social programs left and right because they refuse to tax their campaign financiers, the super rich and massive corporations. The younger generations are going to be completely screwed if things continue down the current path.

    Note: I'm not trying to make this political, both parties are guilty of this and I consider them all treasonous cowards that should taken to the nearest tree and hung. I know it is hard to remove politics from finance law and social programs but I think most, regardless of political opinion, would agree that the average person should be able to put as much as they want (or can afford) towards their future retirement. I find it disgusting that there are laws that limit how much the average person can put into their own retirement accounts.
     
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  6. Dutchie

    Dutchie DI Forum Adept Showcase Reviewer Veteran Army

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    Let me say this for starters, politicians are by nature not well endowed with ability to make decisions on pension systems (and some are said to be not well endowed otherwise also :wink:). Why? Because pensions need a very long term view, and the political horizon never reaches beyond the next elections (that's also a major reason why many politicians are weary of "reverse climate change policies", but that's a story for another day).
    In "no state pension" land, there's basically two ways to fund a new system
    1. you make a law that says everyone over the age of (Netherlands and most other countries 65, France 60, for some even 55, Italy I think 60 initially also) as from next month will receive a pension (most popular with politicians, because it'll make people/voters happy next month). Problem with that is the only way to finance such a system is by making those who work now pay (through taxes and/or through premiums) for pensions given to other people (65+) now.
    2. you make a law that says everyone will get a pension once they turn 65, but only to the extent they've been paying premiums under the law. Problem with that is none of the current 65+ population will be happy, and neither will the ones who will turn 65 before having paid sufficient premiums to receive the full state pension.
    So almost all countries ended up with a state pension with system 1, even though experts warned of future problems.

    In fairness, in a country with widespread poverty among the elderly, but with a fast growing economy and little or no unemployment you'd be hard pressed to find any reasonable person to advocate system 2 from the start because that would perpetuate that poverty to a substantial extent for another 30-40 years or so.
    And yes, while the demographics of a country look somewhat similar to this (pretty much everywhere in the early fifties)
    upload_2020-9-20_7-38-55.png
    it is easy to see that financing the few current old age pensions from current taxes/premiums doesn't create a big burden.

    However, once the population pyramid starts looking like this
    upload_2020-9-20_7-39-42.png

    it gets hard to change to system 2. because the burden on the economically active to provide for the state pensions of the elderly is already a large multiple of what it was at the start, so making them pay double that to build up some reserves in a "state pension fund" is politically not viable.
    For the Netherlands, the start was 1956, so my grandfather, born 1900, who only paid the state pension premium from age 56 until 65, then received a full state pension (on top of what he'd been saving/investing because he never expected to get a state pension until he was 56). Needless to say my grandfather was among the first working class citizens to buy a modest car in the mid 1960's. He wasn't an average example though, most elderly citizens didn't have much savings if any, ww2 hardships took care of that for many people.

    Currently in Europe and Japan/Korea the population graph starts looking like this already.
    upload_2020-9-20_8-5-20.png
    Too late to fix the pensions, you'd have a revolution on your hands when trying to fix the pension system from system 1 to system 2.

    The problem with all this is that demographics is the only social science with impressively accurate long term forecasts, in other words, politicians knew this was coming for a long long time, and did nothing.
     
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  7. Notmyrealname

    Notmyrealname DI Forum Luminary Highly Rated Poster Showcase Reviewer

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    What you (and @Dutchie) wrote about politicians, it is obvious they have two things in mind - Power (influence and cash) and Glory (other rewards and cash again). In the UK hardly a senior politician misses out on a Knighthood or membership of the House of Lords (almost 400 GBP a day and you go straight home immediately after signing in!) and they get the pick of roles within companies where inside knowledge of the government department(s) they worked for is what is being bought. One totally useless person recently bagged 100,000 a year for 7 hours a week (with 'holidays' and lunches I wonder how many weeks a year he will actually work) - and he is still working as an MP!

    Doug Casey has much to say about politicians, although he does have a slight leaning towards one party, and makes very interesting reading.
     
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  8. Dutchie

    Dutchie DI Forum Adept Showcase Reviewer Veteran Army

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    Ah well, let's hope they don't go home early on the day they're supposed to stop the government from breaking international law :wink:
    It's a shame banana's don't grow on the British Isles, else the UK could go down the history books as the first banana kingdom :angelic::biggrin:
     
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  9. Notmyrealname

    Notmyrealname DI Forum Luminary Highly Rated Poster Showcase Reviewer

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    And a great place for dodgy Russians to money-launder! Just give donations to Tories, pay £135,000 to meet the PM and Cabinet and you're off! You can move £1 billion it seems with no hassle. But be an ordinary person, not donating or meeting the top echelons of government and you get asked strings of questions when trying to move a few thousand!
     
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  10. john boy

    john boy DI Forum Luminary

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    Great expos'e of the Government and Banking fraternity by the BBC as seen last night.
     
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