Non-Believers(podviaznikov.com)
podviaznikov.com
Non-Believers
https://podviaznikov.com/writings/non-believers
17 comments
This is why I have avoided Roth IRAs.
The deal with IRAs is "put in pre-tax money; we'll tax it when you take it out". The deal with Roth IRAs is "put in post-tax money; it won't be taxed when you take it out". My fear is that the deal will change by the time I'm ready to take it out - that Roth IRAs will in fact be taxed on withdrawal a decade or two from now.
The deal with IRAs is "put in pre-tax money; we'll tax it when you take it out". The deal with Roth IRAs is "put in post-tax money; it won't be taxed when you take it out". My fear is that the deal will change by the time I'm ready to take it out - that Roth IRAs will in fact be taxed on withdrawal a decade or two from now.
That would still be beneficial
6 years later after writing this post it is still mind blowing to me how stable US is/was. That you could plan something for the life.
Maybe it is changing now, but the positive thing is that we can build societies that are stable for few generations. I find this bit aspiring in general (but obviously doesn't help much when thinking about your own pension and financial security).
It's a reminder for myself mostly, because again I'm originally from Ukraine and Ukraine didn't have stable peaceful period that lasted even one generation (at least in the past 150 years).
Maybe it is changing now, but the positive thing is that we can build societies that are stable for few generations. I find this bit aspiring in general (but obviously doesn't help much when thinking about your own pension and financial security).
It's a reminder for myself mostly, because again I'm originally from Ukraine and Ukraine didn't have stable peaceful period that lasted even one generation (at least in the past 150 years).
Interesting that when the two loudest political stances are "tax billionaires" and "kick poor people off welfare", someone who will probably have at least a million for retirement is worried about a hypothetical tax policy nobody is proposing.
We already had a policy spanning two separate administrations that punished financially-reponsible people with savings: inflation.
I recall there being some sort of mitigating circumstance to that policy, which might indicate that inflation’s not some sort of punishment being meted out by an omnipotent, sadistic ruler.
Ah, that's a separate discussion. As it stands, financially responsible persons' savings were devalued, and whether or not you agree such a heavy hammer was justified, simply from a game theoretic standpoint, per the current thread of discussion, you might expect similar policies in the future to also affect the value of your 401(k) savings and might reconsider whether locking up the prime earnings of your labor in a stagnant account until you are 65 years of age is an optimal strategy for retirement when hedging against ever-increasing prices of everyday necessities. That's just being rational.
> The speed of history is increasing with each new generation after all.
This is the only statement in the post I honestly disagreed with. Anton is trying to talk about how his coworkers have lost historical perspective and that he, because of the geopolitical situation of the space in which he was born, has more historical perspective and therefore believes that everything might got s**. It's a very valid argument.
Yet, I have 2 questions: - Doesn't the fact that there's a large group of people in the world (in North America, Europe, and other places) that believe in the stability of the system indicate that maybe they're actually experiencing history at a slower pace than their ancestors? - More importantly, isn't the intent to predict history by claiming to understand a change in the way it operates (in this case its speed) also a lack of historical perspective?
Otherwise completely understood the point + liked the idea.
This is the only statement in the post I honestly disagreed with. Anton is trying to talk about how his coworkers have lost historical perspective and that he, because of the geopolitical situation of the space in which he was born, has more historical perspective and therefore believes that everything might got s**. It's a very valid argument.
Yet, I have 2 questions: - Doesn't the fact that there's a large group of people in the world (in North America, Europe, and other places) that believe in the stability of the system indicate that maybe they're actually experiencing history at a slower pace than their ancestors? - More importantly, isn't the intent to predict history by claiming to understand a change in the way it operates (in this case its speed) also a lack of historical perspective?
Otherwise completely understood the point + liked the idea.
> The speed of history is increasing with each new generation after all.
Ok, maybe it's only for Ukrainians or something like that. Probably this statement is even more true than when I wrote it.
> therefore believes that everything might got s*
I don't believe in that to be honest. It might be one of the more pessimistic essays. But in general I do not try to connect the speed of history, the direction (going to s* or otherwise). I think it's very possible to be optimistic about future.
PS And fun fact I have 401K for 5(?) years now. So we all change all the time. But reflecting on history is interesting anyway.
Ok, maybe it's only for Ukrainians or something like that. Probably this statement is even more true than when I wrote it.
> therefore believes that everything might got s*
I don't believe in that to be honest. It might be one of the more pessimistic essays. But in general I do not try to connect the speed of history, the direction (going to s* or otherwise). I think it's very possible to be optimistic about future.
PS And fun fact I have 401K for 5(?) years now. So we all change all the time. But reflecting on history is interesting anyway.
>the probability of change in each system might not be high, but overall probability of general change is much higher - because it's multiplication of individual probabilities.
I get what the author is trying to say, but they had this one backward. Probabilities get smaller by multiplication. What he probably had in mind is :
- The probabilities of change events C1,...,Cn is P1,...,Pn
- The probability of no change at all is therefore (1-P1)(1-P2)...(1-Pn), which does indeed become smaller as more (independent) events C1,..., Cn are accounted for. And therfore the probability of change increases, but not because its a multiplication of probabilities, the exact opposite in fact, its because 1 - <multiplication of multiple probabilities>.
- Another way of phrasing the above is that, although each Pi might be small, their sum represents a sizable chunk of 1,therefore a significant probability. This only holds if events intersects minimally or not at all. This is a different assumption than that of independence.
I get what the author is trying to say, but they had this one backward. Probabilities get smaller by multiplication. What he probably had in mind is :
- The probabilities of change events C1,...,Cn is P1,...,Pn
- The probability of no change at all is therefore (1-P1)(1-P2)...(1-Pn), which does indeed become smaller as more (independent) events C1,..., Cn are accounted for. And therfore the probability of change increases, but not because its a multiplication of probabilities, the exact opposite in fact, its because 1 - <multiplication of multiple probabilities>.
- Another way of phrasing the above is that, although each Pi might be small, their sum represents a sizable chunk of 1,therefore a significant probability. This only holds if events intersects minimally or not at all. This is a different assumption than that of independence.
thank you! You are absolutely right. The idea I wanted to write is ok, but I’ve used different terms. I need somehow to rephrase it.
I understand your unique perspective regarding long-term stability but that risk isn't limited to 401Ks as it extends to a person's overall investing strategy whether in stocks, bonds, cash, precious metals, real estate, crypto, etc. I use a 401k as one element in my overall investment portfolio but that portfolio is diversified and layered with overlapping time horizons. I reassess my strategy yearly and update the risk profile and time horizons as needed based on my age, life plans and market volatility.
For me, a 401K was good way to optimize the 'very long-term' part of my portfolio because the 401K is mechanism to allow that portion of your investments to grow pre-tax. Of course, when I was in my 20s I put very little (or zero) into the bucket labeled 'very long-term.' By the time I was 40, I was putting the maximum amount allowed in my 401k every year because it basically worked out like a tax discount. However, the cost of gaining that tax discount is locking up those funds behind a penalty for early withdrawal. The chances I might need that money sooner must be weighed as a cost/benefit analysis.
But that's really no different than many investment vehicles which have varying degrees of liquidity (T-Bills, bonds, real-estate, startup, etc.) The market prices the assets accordingly and it's not hard to construct a portfolio to match any risk/reward and time horizon you think is best for you.
For me, a 401K was good way to optimize the 'very long-term' part of my portfolio because the 401K is mechanism to allow that portion of your investments to grow pre-tax. Of course, when I was in my 20s I put very little (or zero) into the bucket labeled 'very long-term.' By the time I was 40, I was putting the maximum amount allowed in my 401k every year because it basically worked out like a tax discount. However, the cost of gaining that tax discount is locking up those funds behind a penalty for early withdrawal. The chances I might need that money sooner must be weighed as a cost/benefit analysis.
But that's really no different than many investment vehicles which have varying degrees of liquidity (T-Bills, bonds, real-estate, startup, etc.) The market prices the assets accordingly and it's not hard to construct a portfolio to match any risk/reward and time horizon you think is best for you.
Surprised nobody has mentioned the fact that 401(k) funds are often invested into a US index fund, and nobody can guarantee the past trend of exponential growth in value will continue. As an example of such a disturbance, consider the Japanese Nikkei market index which still hadn't recovered from its crash in the late eighties.
The US as a world superpower could very well be at its peak, marking the beginning of a never-ending decline, much like the Roman Empire, the USSR, the Mongol Empire, etc. That's probably the riskiest thing about a 401(k) fund IMO, much more than possible increased future taxation.
As an aside, I really start to worry given the ongoing American brain drain. We're discouraging skilled immigration while simultaneously condemning domestic gifted education and making university degrees cost prohibitive. Other countries see this and laugh as they begin to run laps around us.
The US as a world superpower could very well be at its peak, marking the beginning of a never-ending decline, much like the Roman Empire, the USSR, the Mongol Empire, etc. That's probably the riskiest thing about a 401(k) fund IMO, much more than possible increased future taxation.
As an aside, I really start to worry given the ongoing American brain drain. We're discouraging skilled immigration while simultaneously condemning domestic gifted education and making university degrees cost prohibitive. Other countries see this and laugh as they begin to run laps around us.
As someone who can relate to the author in many ways, I'd argue you should consider stability more objectively. You compare states that have dissolved multiple times in a century against states that have been stable (relatively). Your own argument can be used to make the opposite point, judging by results alone.
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[2016]
I really worry about that. I have been steadily saving in my 401(k) for my entire working life, and while it is not a huge amount, it is a few years’ wages. Meanwhile, plenty of people have saved nothing for retirement.
I have no assurance that a wealth tax will not be imposed on that 401(k) to fund others’ retirements; I don’t even really have any assurance that income taxes won’t be imposed on Roth IRAs or 401(k)s, despite that being their whole reason for existence.
I can easily see some demagogue riling people up and calling me a wrecker or a hoarder because rather than spend my income today I have been saving it for the future. I can easily see a more restrained demagogue calling for me to pay ‘my fair share,’ defining that as some increased amount because I had the foresight and discipline to sacrifice for decades.
I can see that money I have been carefully husbanding through financial crises and wars taken from me, and I can see being told that I should be grateful to keep any of it.