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Showing posts from March, 2008

Stop Saving for Retirement

You aren't smarter than the market. It really is that simple.

No matter how often the financial services industry repeats the message, it is still a lie. Young people should not be saving for retirement. You have an entire life to live before worrying about what you will do when you have had bypass surgery and no longer have the energy to even go to the grocery store. While the financial services industry needs you, you don't need them.

That doesn't mean you shouldn't be saving money. You should be saving for your wedding and honeymoon, to buy a house, to send your kids to college, to take that dream vacation or to buy a new IPOD. Of course, you can also just borrow money to do those things and pay it off later. For most young people that is more realistic and, frankly, a better idea. You are likely to earn more as you get older and it will be easier to pay off the debt you took on than to save the money now to buy stuff.

Of course, what you buy matters. A house is a pret…

Your Social Security is more Secure than your Securities

You aren't smarter than the market. It really is that simple.

Allen Sloan over at Fortune Magazine is making the case that Social Security will run out of money in 10 years. His are the crocodile tears of the very people who have looted social security, using the excess social security taxes to provide themselves and their rich cronies with tax breaks. He makes clear his new-found concern for social security is really an excuse to further raid the treasury with his suggestion for a solution: "We can still buy time by investing current cash surpluses in non-Treasury assets." I.e. we should use social security taxes to buy some of his rich buddies' fancy financial products.

To understand how this really works you need to start with social security taxes. The original idea was that the taxes paid by current workers would pay the current benefits for people who were retired. In turn, the next generation of workers would pay the retirement of the next generation of retire…