In between the happiness of Christmas and the promise of the New Year, permit me to introduce a sour note, a hint of a scold. If you're like, well, almost everybody, you're not saving enough. 15% of each paycheck into the 401(k) is the bare minimum you can get away with, not some aspirational level you can maybe hope to hit someday when you don't have all these problems.
I mean, obviously if one out of two workers in your household just lost their job, or has been stricken with some horrid cancer requiring all sorts of ancillary expenses, then it's okay to cut back on the retirement savings for a bit. But let's be honest: that doesn't describe most of us in those years when we don't save enough.
What describes most of those years when we aren't saving is normal life. We moved. We got married or had kids. The kids required entirely expected things like food, clothes, and schooling. Work was hard and we felt we wanted a really nice vacation. Friends and family went through the same normal life stages that we were, requesting that we travel and bring gifts to the happy events.
These things are not an excuse to stop saving, for all that I have used these excuses myself from time (and regretted it later, at length). The recession should have driven home some hard facts, but the nation's 3.5% personal savings rate indicates that these lessons haven't quite sunk in, so let me elaborate some of them.
1. You cannot count on high asset growth rates to bail out a low savings rate. In the 1990s, we believed that we could guarantee something like an 8% (average) annual return by pumping our money into the stock market and leaving it there. The problem is, this may no longer be true. For the last few decades, there have been a number of factors pushing up the price of stocks:
a. Low interest rates on bonds prompted investors to look for higher returns elsewhere
b. People started believing that over the long term, equities offered a low-risk opportunity for higher returns. Unfortunately in finance, many things are only true if no one believes they are true. If everyone thinks that equities are low risk, they will bid away the "equity premium"--which is to say, the discount that buyers expected for assuming greater risk. At which point, stocks no longer offer a low-risk excess return.
c. Baby boomers who had undersaved started pouring money into the stock market in an attempt to make up for their lack of savings.
However, stock prices cannot indefinitely grow faster than corporate profits; eventually, you run out of greater fools. And future corporate profits are going to be constrained by slower growth in the workforce as baby boomers retire, and by the taxes needed to pay for all the bailouts and stimulus we just did. Unless there's a sudden boom in productivity--entirely possible, but entirely impossible to predict, or count on--there's every reason to expect that stock markets performance will continue to grow more slowly, and be more volatile, than we got used to.
We saw a similar cycle in houses. A mortgage used to be a form of forced saving that gave you an (almost) free place to live in retirement and a little bit of value when you sold the house. We didn't realize that a number of developments had been pushing up the price of homes:
a. The development of the 30-year self-amortizing mortgage, which enabled people to pay a much higher price for a given house than they would have in the era of 5-year balloon mortgages.
b. The baby boom, which increased demand for houses as they aged
c. The run-up in inflation in the 1970s, which gave (relatively inflation-proof) real estate a boost--and then the subsequent decline in inflation (and interest rates), which gave people the illusion of being able to afford more house because the up-front payments were lower.
d. More widely available credit, which let more people take on bigger loans
e. The increasing value of (and competition for) a small number of slots at selective colleges, which put a rising premium on houses in good school districts
These trends gave people the illusion that houses were, in some fundamental way, an "excellent investment". But they're risky in all sorts of ways: neighborhoods can get worse rather than better, local economies can stagnate, the style of your home can go out of fashion.
Moreover, like the stock market, houses are still pretty expensive by historical standards, as this chart from Barry Ritholtz shows:
If you can't count on a steep run-up in asset prices to build up your retirement savings, that leaves you with one alternative: save a much bigger chunk of your income.
2. People are still living longer in retirement. The increases in life expectancy post-retirement aren't as dramatic as they were in the antibiotic era, but they're still creeping up. That means that you have to take smaller sums out of the kitty each year, so that what you have left will be enough to live on.
3. Government finances are extremely strained. The Baby Boomers are about to dump an even heavier load on them. That means yes, higher taxes--but it also means that despite their formidable voting power, retirements financed mostly on the public dime are very likely to get leaner. Especially because birthrates are falling everywhere--which means that the supply of young, strong-backed immigrants to man the nursing homes will not be as ample as it is now.
4. Employers are not kind to older workers. I wish this weren't so, but I'm very much afraid it is. People who say "I won't be able to retire" may not be given a choice in the matter. Like most modern economies, we've cut a societal deal where you're underpaid in your twenties, and overpaid in your fifties and sixties . . . and as a result, it's very tempting to fire those overpaid oldsters when times get tough.
And once you're forced out in your fifties, it is very, very hard to find a new job of any sort, much less one that pays what you're used to. Even if you're willing to take a big paycut to work a less prestigious job, employers are reluctant to hire the overqualified--particularly since 99 times out of 100 the overqualified 55-year old simply does not have the stamina or the life flexibility of the single twenty-somethings who are applying for the same job. And physically, you may not be able to do many of the low rent jobs that paid your way through college: by the time you're sixty, you're quite likely to have back, joint, or skeletal problems that make it hard to stand on your feet all day or lift heavy objects.
The upshot is that you can no longer plan on "making up" anemic retirement contributions later. You have to start making them--right now.
5. Emergencies seem to be lasting longer than they used to. Before the 1990s, unemployment used to crater sharply during recessions, then recover quickly along with demand. We had our first "jobless recovery" under Clinton, and now we've got two more under our belt. That means that the old advice of three to six months worth of emergency funds are no longer enough. 8 months to 1 year is more realistic.
When I write these posts, I generally get two types of responses: people who smugly tell me that they are saving 30% or more of their income (way to go!) and people who tell me that it is simply not possible for them to save t15-20% of their income.
You know better than I, of course. But most of the research on consumer finance shows the same thing: people can usually save a lot more if they make saving a priority. Most people don't. Savings is an afterthought--it's the residual of whatever hasn't been spent on clothes, groceries, cars, dinners out, school trips, travel soccer team, college tuition, vacation, etc. Unsurprisingly, there's frequently no residual. However, if people decide how much to save, and then budget their consumption out of what is left, they suddenly realize that they could drive an uglier car, take the kids out of dance class, live with the kitchen the way it is, stay home for a week in August instead of going to Disneyworld, and so forth. And those people are not, as you might think prospectively, made desperately unhappy by these sacrifices. Savers are actually happier than the general population--in part, one assumes, because they're less worried.
Many people tell me they can't save because children are so expensive. Children are indeed very expensive. But they're getting more expensive every year, and that's because we're spending more money on them. We're spending more money on houses to get them into good school districts, on activities so that they have every chance to get into Harvard (or the NHL), on clothes and cell phones and video game consoles and the list is endless, plus then there's that tuition to Harvard or some sort of even-more-expensive smaller private college.
These expenses are optional, not mandatory. And before you tell me about how unhappy your child will be if you do not buy him all of these necessities, think about how unhappy he's going to be if you have to move in with him. Better yet, volunteer for some outreach to the bankrupt seniors whose kids wouldn't let them move in, and see how their lives are going.
This is not to criticize. Saving is hard, which is why, just like you, we're trying to figure out how to hit even more ambitious savings goals in the New Year. And consumption is fun. That's why most people struggle to save very much.
But a lot of people are going along on autopilot; they're saving 5% because it seemed safe when they were 25 and so what if they're now 37? They look at the neighbors spending a fortune on cars and school activities and figure that if it's safe for them, it must be safe for me too. But this is the opposite of the truth. If your neighbors aren't saving much (and trust me, they aren't), that means a less productive economy in the future--and more people trying to claim a very limited supply of public funds. You don't want to be among them.
It helps to remember that the object is not to turn yourself into a miser; it's to make your spending patterns sustainable. Your splurges will actually be a lot more fun if you know that they aren't putting you at risk of bankruptcy, foreclosure or a retirement in poverty.
If you're not saving enough--and you know who you are--don't decide today that you're going to save 15%, and then forget about it tomorrow when you realize how daunting a task that will be. Instead, try this: divert an extra 5% of your income into a 401(k), IRA, or other tax-advantaged savings plan. If your 401(k) is stuffed but you don't have much of an emergency fund--or if, for some reason, you don't qualify for tax-advantaged savings--have 7% of every paycheck diverted to a bank account which isn't linked to your other accounts. It's a slow week at work, the perfect time to fuss with HR paperwork.
The important thing is to pay yourself first. Savings should be the first thing you do, not the last. After you've saved, then you budget your consumption. I won't tell you what to cut, because when you confront your new, slightly leaner budget, you'll be perfectly able to calculate what's no longer worth the money to you. I think you'll be pleasantly surprised to find that after a few weeks or a few months of initial pinch, you won't remember that you miss the money much.
If at the end of the year, you still aren't saving enough, then you can do the same thing again--pull another 5-7% out of every paycheck. Within a few years, you'll be at a healthy level of savings, without excessive fiscal pain.
But the most important thing is this: don't start looking for reasons you can't. If you hunt hard enough, you'll find them. Unfortunately, those reasons aren't going to do a damn thing to pay your house payment if you get laid off, or keep you in prescription drugs when you retire.
When the government shuts down, the politicians pipe up.
No sooner had a midnight deadline passed without congressional action on a must-pass spending bill than lawmakers launched their time-honored competition over who gets the blame for their collective failure. The Senate floor became a staging ground for dueling speeches early Saturday morning, and lawmakers of both parties—as well as the White House and political-activist groups—flooded the inboxes of reporters with prewritten statements castigating one side or the other.
Led by President Trump, Republicans accused Senate Democrats of holding hostage the entire government and health insurance for millions of children over their demands for an immigration bill. “This is the behavior of obstructionist losers, not legislators,” the White House said in a statement issued moments before the clock struck midnight. In a series of Saturday-morning tweets, Trump said Democrats had given him “a nice present” for the first anniversary of his inauguration. The White House vowed that no immigration talks would occur while the government is closed, and administration officials sought to minimize public anger by allowing agencies to use leftover funds and by keeping national parks and public lands partially accessible during the shutdown—in effect, by not shutting down the government as fully as the Obama administration did in 2013.
The website made a name for itself by going after Aziz Ansari, and now it’s hurting the momentum of #MeToo.
Fifteen years ago, Hollywood’s glittering superstars—among them Meryl Streep— were on their feet cheering for Roman Polanski, the convicted child rapist and fugitive from justice, when he won the 2003 Academy Award for Best Director. But famous sex criminals of the motion picture and television arts have lately fallen out of fashion, as the industry attempts not just to police itself but—where would we be without them?—to instruct all of us on how to lead our lives.
The Golden Globes ceremony had the angry, unofficial theme of “Time’s Up,” which quickly and predictably became unmoored from its original meaning, as excited winners tried to align their entertaining movies and TV shows with the message. By the time Laura Dern—a quiver in her voice—connected the nighttime soap opera Big Little Lies to America’s need to institute “restorative justice,” it seemed we’d set a course for the moon but ended up on Jupiter: close, but still 300 million miles away. And then Oprah Winfrey climbed the stairs to the stage, and I knew she wouldn’t just bat clean-up; she’d bring home the pennant.
Allegations against the comedian are proof that women are angry, temporarily powerful—and very, very dangerous.
Sexual mores in the West have changed so rapidly over the past 100 years that by the time you reach 50, intimate accounts of commonplace sexual events of the young seem like science fiction: You understand the vocabulary and the sentence structure, but all of the events take place in outer space. You’re just too old.
This was my experience reading the account of one young woman’s alleged sexual encounter with Aziz Ansari, published by the website Babe this weekend. The world in which it constituted an episode of sexual assault was so far from my own two experiences of near date rape (which took place, respectively, during the Carter and Reagan administrations, roughly between the kidnapping of the Iran hostages and the start of the Falklands War) that I just couldn’t pick up the tune. But, like the recent New Yorker story “Cat Person”—about a soulless and disappointing hookup between two people who mostly knew each other through texts—the account has proved deeply resonant and meaningful to a great number of young women, who have responded in large numbers on social media, saying that it is frighteningly and infuriatingly similar to crushing experiences of their own. It is therefore worth reading and, in its way, is an important contribution to the present conversation.
Stories of gray areas are exactly what more men need to hear.
The story of Aziz Ansari and “Grace” is playing out as a sort of Rorschach test.
One night in the lives of two young people with vintage cameras is crystallizing debate over an entire movement. Depending on how readers were primed to see the ink blot, it can be taken as evidence that the ongoing cultural audit is exactly on track—getting more granular in challenging unhealthy sex-related power dynamics—or that it has gone off the rails, and innocent men are now suffering, and we are collectively on the brink of a sex panic.
Since the story’s publication on Saturday (on the website Babe, without comment from Ansari, and attributed to a single anonymous source), some readers have seen justice in Ansari’s humiliation. Some said they would no longer support his work. They saw in this story yet another case of a man who persisted despite literal and implied cues that sex was not what a woman wanted.Some saw further proof that the problems are systemic, permeating even “normal” encounters.
An infamous gap in Interstate 95 will finally be closed this summer.
PENNINGTON, N.J.—The past few years have been thick with promises of shiny new infrastructure and the revival of American greatness.
Funny, then, that so little has been made of a quiet victory for U.S. infrastructure due later this year. By September 2018, one of the country’s most famous civil-engineering projects will finally complete construction, six decades after work on it began.
Interstate 95, the country’s most used highway, will finally run as one continuous road between Miami and Maine by the late summer. The interstate’s infamous “gap” on the Pennsylvania and New Jersey border will be closed, turning I-95 into an unbroken river of concrete more than 1,900 miles long. In so doing, it will also mark a larger milestone, say transportation officials—the completion of the original United States interstate system.
The national-security adviser is one of the biggest hawks in the Trump administration.
In the increasingly urgent, dramatic debate about the North Korean nuclear threat, National Security Adviser H.R. McMaster stands out in the Trump administration as the strongest advocate of a hawkish position. But where do H.R. McMaster’s views on North Korea really come from? Why, to pose a question The Atlantic’s Uri Friedman recently did, is he so worried about North Korea? Notwithstanding the suggestion, in Friedman’s piece and elsewhere, that McMaster’s views represent some kind of heresy of nuclear deterrence, his worries must be seen in light of how he views Kim’s motives. Indeed, those motives mean the possibility of military action against North Korea could be understood not as a “good thing,” but as the “least bad.”
Advocates are tracking new developments in neonatal research and technology—and transforming one of America's most contentious debates.
The first time Ashley McGuire had a baby, she and her husband had to wait 20 weeks to learn its sex. By her third, they found out at 10 weeks with a blood test. Technology has defined her pregnancies, she told me, from the apps that track weekly development to the ultrasounds that show the growing child. “My generation has grown up under an entirely different world of science and technology than the Roe generation,” she said. “We’re in a culture that is science-obsessed.”
Activists like McGuire believe it makes perfect sense to be pro-science and pro-life. While she opposes abortion on moral grounds, she believes studies of fetal development, improved medical techniques, and other advances anchor the movement’s arguments in scientific fact. “The pro-life message has been, for the last 40-something years, that the fetus … is a life, and it is a human life worthy of all the rights the rest of us have,” she said. “That’s been more of an abstract concept until the last decade or so.” But, she added, “when you’re seeing a baby sucking its thumb at 18 weeks, smiling, clapping,” it becomes “harder to square the idea that that 20-week-old, that unborn baby or fetus, is discardable.”
In transcending left-right divides, the French president may be creating a monster of a different sort.
Foreigners are fascinated by French President Emmanuel Macron. And why shouldn’t they be? He’s the youngest-ever president of the French Republic, elected with no party and no previous electoral experience, a virtual nobody just two years before he leaped to the forefront of the French political scene. Of course people are curious.
But there’s another reason my non-French friends bombard me with questions about my president. Like myself, most of them have advanced degrees and upper-middle-class backgrounds. This sort of socioeconomic status correlatesstrongly with affection for Macron.
His views mirror those held by most of this “elite” class. He thinks the left-right divide should be transcended. He doesn’t care about outworn ideologies, but about solutions that work, wherever they come from. He thinks startups are cool and the economy should be generally entrepreneurship-friendly, but he also wants some sort of welfare state. He’s got no problem whatsoever with gay marriage. He believes immigration is desirable for both economic and moral reasons.
How men and women digest differently, diet changes our skin, and gluten remains mysterious: A forward-thinking gastroenterologist on eating one's way to "gutbliss"
Robynne Chutkan, MD, is an integrative gastroenterologist and founder of the Digestive Center for Women, just outside of Washington, D.C. She trained at Columbia University and is on faculty at Georgetown, but her approach to practicing medicine and understanding disease is more holistic than many specialists with academic backgrounds. She has also appeared on The Dr. Oz Show (of which I’ve been openly skeptical in the past, because of Oz’s tendency to divorce his recommendations from evidence).
In November testimony, Fusion GPS’s Glenn Simpson outlined a potential scheme to the House Intelligence Committee, but it hasn’t pursued the line of investigation.
So far, the release of transcripts of Fusion GPS founder Glenn Simpson’s interviews with the House Intelligence and Senate Judiciary committees have provided rich detail to obsessives but few major headlines for the average reader. The interviews give some more clarity on how Fusion came to investigate Donald Trump; who was paying the company; and how it gathered information, but they offer much help in assessing the Trump dossier.
Perhaps the most interesting thread is Simpson’s suggestion that the Trump Organization could have been used by Russians to launder money—an arrangement that would have both allowed Kremlin-linked figures to scrub cash and would have created possible blackmail material over the now-president, since the Russian government would be aware that a crime had been committed.