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Drawing early and losing later

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@tarazkp
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4 min read

Well, I called this one.

Sure, superannuation might be a scam and is likely to end up amounting to nothing due to governmental mismanagement, but the majority of people who were encouraged to take the option to withdraw 20,000 early to "cover expenses" during the early days of Covid, pulled out and sold at the bottom of the market.

36 billion dollars was pulled out and;

According to an analysis from the Australian Institute of Superannuation Trustees, it is estimated one million workers under the age of 35 had either closed their super accounts or had less than $1000 left.

They withdrew the maximum 20k, or the most they could. Now they are missing out on the average 18% gains on Superannuation accounts due to the stupidity of the markets.

While some did spend what they withdrew on paying down debts, almost the same amount (and the second highest spending point) was on gambling. Not investing... GAMBLING. Just behind this was almost the same amount spent on groceries and again, almost the same amount spent on clothing and department stores. Twice as much of the money pulled out of retirement funds was spent on alcohol and tobacco than home improvement and alcohol and tobacco also amounted to significantly more than what was used to cover rent.

You see, given a lumpsum that can be spent on anything - the majority of people waste it on entertainment. Investing wasn't even specifically listed on the expenditures list. Financial understanding and hygiene is alive and well obviously.

People have such short outlooks on the future that the majority have trouble seeing what the real costs of their actions are going to be. Not only this, we aren't built to understand things like the effects of compound interest intuitively and, we are very bad at predicting our future needs and wants, especially when something like our retirement is half a lifetime away. We put far too much weighting on our current conditions and far too little on what the future can hold, which is always an unknown, which is why we should probably overprepare for it.

While it might be better to be late than never, it is also better to cut a little too long, than a little too short. This is especially true when the preparation time is exceptionally long, which in this case is literally two-thirds of a lifetime before the cutoff point. Forty years might sound like a long time to collect for our needs and we might earn more later in life than earlier, but the earlier takes the benefit of time into consideration, where even though the amounts contributed are lower, they are in there for significantly longer accruing interest.

Millions of people effectively wiped out years of their superannuation savings effort in a matter of a couple months and for most, all they have to show for it is nothing much. I kind of don't blame them though, because these centralized schemes only work when people are working and acting in a way that supports them, which people are unlikely to be doing going forward, since people are more interested in what they play, wear and drive today, than whether they will have the capability to buy food in the future.

I am sure that some percentage of people used what they withdrew to effectively build their personal wealth, the vast majority spent it on what has effectively driven more money into the pockets of the people who have no worries about their own futures, because they own stake in the goods and services that the people are buying.

Even those who used their withdrawal for buying houses, were buying from people who bought far earlier and encouraged the forming of a housing bubble, meaning that the purchasing power on real estate was low and the level of debt needed to get in was very high. Then, because so much debt is being used to purchase, the inflation rate is going to head up rapidly, causing the interest rates to increase to counteract it, meaning that all that debt that was "so cheap" is suddenly very, very expensive and the bubbles will pop, leaving people with a lot of debt to service, and not enough collateral to cover it.

Not only this, because many people have been spending their retirement funds, their future wealth is also going to be lessened, affecting their financial capabilities for the rest of their lives and taking away resources that could have been used to take advantage of future opportunities.

As I have said before, this is the largest and fastest wealth transfer from poor to rich in the history of the world, but the knock-on effects of this are going to be monumental and monstrous for the majority of people, largely because most weren't paying attention to the economic conditions and acted on impulse instead. It is going to be incredibly painful once the real repercussions of how we have acted start coming into affect.

Will the short view have been worth it in hindsight?

Taraz [ Gen1: Hive ]

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