Why this one financial trend in South Africa is so terrifying

[Johnatan56]

Yeah, also with reasonably low (for wealthy people) 401k contribution limit, the tax saving on that small amount hardly even registers as a blip on their effective tax rate.


I’ve been happy with my 401k so far - around $900k after 12 or so years of contributions into the most basic Vanguard products, and our company matches at 50%, so pretty much everyone from the receptionists and up have been doing this.

Not disagreeing, it's another retirement vehicle, but it's not as good as the pension system before it was, you used to have it so the company pension fund had to give a fixed amount monthly, regardless of what happended to the funds over time, this is nearly always backed by government's pension benefit guaranty corporation if you pay the premium (you'd be dumb not to imho).

This means things like being unlucky enough to retire at a bad time won't destroy your income, and you can be pretty sure what your income for retirement will be, rather than hoping that markets don't crash.

I looked at this quite a bit, since I want to go to the US for a few years, but I have no intention to spend my 40's/50s there since I'd rather build a pension fund here in Austria/Germany depending on how job seeking goes, since I'd rather get less but be sure of it than get more and hope it was enough.

 

[noxibox]

Inflation in South Africa is the lowest it has been in decades, but just like other countries incomes have lagged behind inflation.

 

[noxibox]

Agreed, but point being that everything is getting expensive globally. 40 years ago, everyone was buying a house in their 20's. Nowadays, you'd be lucky if someone in their 30's can afford to buy a small apartment.

It's because we have to spend so much money on things that previous generations never had - we have access to everything... internet, TV, technology, computers, software, video on demand, consoles, gadgets, phones, apps, modern transport, advanced healthcare, insurance, policies, education... everything is convenient and takes our money on a monthly basis. And what we subscribe to is all disposable. It continuously needs to be updated or replaced. Everything these days has a cost and an expiry date associated to it. Typewriters lasted decades. A laptop maybe a few years at best.

We live in a complex expensive world that never existed in the boomer generation - so their money and expenditure was more focused on the core function of their future. Modern society dictates that the future is "now", so you need to keep up with the now. In the 1980's your telephone lasted you 20 years. Now it gets replaced every 2 years on average. There is a financial drain on modern comfortable living.

It is also because houses have become much more expensive. Even if I spent money on nothing else I wouldn’t be able to buy a house like the one I grew up in. The house I actually own would be a stretch, because incomes have not kept up with property prices.

On the other hand things like televisions and audio equipment were expensive luxuries. But health care was relatively cheap compared to what it costs today. And it was cheaper because prices were regulated.

The problem today is that the entire system is built on consumption. If everyone did actually stop buying constantly the elite would have a nervous breakdown. There’d be panic in the markets because they’re not based on long term value.

I also don’t know that people’s retirement savings turned out well in past generations, because most retirement funds were little more than scams set up to enrich the people who ran them. The fees ate up a major chunk of the returns.

 

[zerocool2009]

It is also because houses have become much more expensive. Even if I spent money on nothing else I wouldn’t be able to buy a house like the one I grew up in. The house I actually own would be a stretch, because incomes have not kept up with property prices.

On the other hand things like televisions and audio equipment were expensive luxuries. But health care was relatively cheap compared to what it costs today. And it was cheaper because prices were regulated.

The problem today is that the entire system is built on consumption. If everyone did actually stop buying constantly the elite would have a nervous breakdown. There’d be panic in the markets because they’re not based on long term value.

I also don’t know that people’s retirement savings turned out well in past generations, because most retirement funds were little more than scams set up to enrich the people who ran them. The fees ate up a major chunk of the returns.

Your last section in your post is the “key”... as in fees!

It doesnt help you save and enrich others!

Sit and review every single policy & savings account, and look what you can change to make things work for you! (And that it benefit you... not the firm “holding” the money)

 

[LetsDance]

Give a thought to the sandwiched people - paying their family and parent expenses because the parents were f-ups in saving for their retirement or were just unfortunate in the way things panned out.