Source|Old Money Day Talk Cover Picture|Pexels has been paying more attention to pension recently, and recently read two more books, and I will write back to you. First of all, I will send you a verbatim transcript of the previous podcast on pension, this issue is a relatively complete summary of my thinking about pension: pension is everyone's own business, but I want to talk about the macro first, the more you understand the overall situation, the easier it is to see your own problems, and then realize that the problems you face are actually very common and not special.
Macro-level pension is actually a proposition involving three generations.
The grandparents of the 40~50s, the fathers of the 60~70s, and the 80~90s.
There are two main threads hidden here: these three generations are slowly aging, and China's modernization.
China's modernization is a compression-type modernization, which is rapidly advancing from the primary industry to the secondary and tertiary industries, and has completed the modernization of Europe and the United States for hundreds of years in a few decades.
This means that the world is changing faster than people, the outside world is turned upside down, and the concepts of marriage, family, ethics, etc., are changing slowly. Perceptions are largely shaped by the experiences of youth, and the experiences of the three generations are very different:
When their ancestors were agro-oriented, they had a survival instinct and the experience of not having enough to eat;
The fathers have enjoyed the glory of the working class, and faith in labor is the most glorious;
My generation has been engraved with the ideological steel seal that knowledge changes destiny and hard work can lead to a good life.
Because of this asynchronicity, our families are bound to blend or clash with tradition and modernity, especially between generations.
Let's talk about the Spring Festival:
Wearing a little genius phone watch and holding an iPad in their hands, the post-10s children sat in the new energy SUV newly bought by their parents in the 80s and 90s, and went to the train station to return to their hometown together.
In the train, my generation has to educate my children to speak quietly, and at the same time, I am worried about unemployment from time to time, or how to write OKRs after the holidays.
When you arrive at your parents' house in a lower-tier city, time seems to stand still here, with familiar tastes, TV shows and home-cooked food.
At the dinner table, the fathers said that the pension had risen by dozens of dollars every month.
On the first day of the Lunar New Year, you have to drive to the grandparents' house who live in the town or village, and you may stop on the road to buy roasted seeds, rice and flour oil, and by the way, you also buy Honey Snow Ice City for the children.
The grandparents' house is a little broken, the house is not hot, they don't talk much, just sit there and bask in the sun, you look at the grandparents' days, feel strange and a little pitiful, but what can you do?
Just thinking about it, whose house did your parents tell you to go to, how many portions you wanted!
All of the above is the epitome of China's compressed modernization, and the Spring Festival has become a rare window period for various generations to meet.
More specifically, the variance between households that have become increasingly fragmented with urbanization is also enormous.
Each family's income level, lifestyle, geographical location, pension resources, and population structure are very different.
Therefore, the Chinese-style pension problem is complex, fluid, full of differences, and is also full of conceptual conflicts and compromises.
Another great feature of the Chinese style of pension is the concept of "Confucian filial piety" (I know you are speechless, but you are speechless for now).
"Filial piety" is ingrained in our beliefs, and we are accustomed to it. But when compared horizontally, its connotation is not the same in the world, at least there are huge differences between us and Western families.
In the words of Mr. Fei Xiaotong, the intergenerational relationship in the West is: the relay model of generation A raising generation B, and generation B raising generation C. In mainland China, it is a feedback model in which generation A raises generation B, and generation B supports generation A.
Although many people, such as my mother, are very disdainful of the concept of raising children to prevent old age. However, we must admit that raising children and preventing old age is indeed in line with the national conditions and has its historical experience.
Perhaps, in countries that have long since completed urbanization, are more towards welfare fiscal expenditure, and have higher per capita disposable income, pension can be regarded as an independent proposition for each generation.
But Chinese-style pension, I think it must be the common proposition of two costs.
Perhaps this conclusion will change as the economy develops further.
For example:
I see a lot of one-family buildings in Japan, that is, small detached houses, which may have two generations of people living in it, but there will be two entrance doors, which are actually two completely independent living spaces. Parents over parents, children over children. You say that I stewed a bowl of soup and want to send it to the child, but you have to put on your shoes and go out, go around to the child's entrance door, and send it to someone.
Doesn't seem unacceptable, right?
The post-80s and post-90s, if possible, are definitely willing to live independently and have their own space.
It's true that it will change, but when and how it will change, I don't know.
I even think that if the problem of pension is prominent in the future, it is not impossible to return to the big family model in stages. You see, stay-at-home children are not a new word, are they?
Another underestimated force in relation to pension is "policy".
As mentioned earlier, Chinese-style pension must be installed in the framework of the family. Policies can intervene directly or indirectly in the family in a variety of ways, and this force may be greater than everyone thinks.
For example, the prohibition of arranged marriages and buying and selling marriages is due to the first Marriage Law in mainland China in 1950.
For another example, the events of the sixties and seventies of the last century directly had a strong impact on the unwritten family system of families and clans. I won't go into any more specifics.
In addition, the family planning and eugenics policies that began in the 70s have completely changed our conception and behavior of childbearing.
Other policies related to pension include: population flow and household registration system, 98 years of housing reform policy, and the first pillar of pension that everyone is most concerned about, that is, the pension system.
The sustainability of the first pillar of pension is essentially a policy issue.
What is the rate at which the pension of the post-60s generation will increase every year, and the accounting interest rate of our pension personal account is essentially a policy will?
For example, how old is the delay in retirement, these policies will have a huge and direct impact on the pension.
What I want to say is that when we plan for the elderly and reasonably imagine the future, we must give a certain weight to the policy, not to underestimate, let alone deny its impact.
The above is my combing of macro issues related to pension, they are not the whole of pension issues, but they are indeed an indispensable part.
Maybe you will encounter some pension difficulties in the future, but please believe that this is not necessarily a difference in personal destiny, but more likely to be a common proposition of a generation. Next, I will share a few concepts of retreat that I personally think are important for retirement.
Substitution rate
When it comes to pension issues in the financial industry, they generally talk about the "replacement rate".
It is an indicator of the standard of living of our old age, and this indicator is a relative number.
The numerator is the income after retirement. The key is the denominator end, which indicator is better? When you usually see the replacement rate, the denominator is "the salary level before retirement" by default. Is this really realistic?
Here are two examples:
My dad's pension replacement rate is 400%, because he received labor insurance before retirement, do you say this replacement rate still makes sense?
There is also a very strange phenomenon: in many economically underdeveloped areas, such as the Northeast, many parents want to do everything possible to retire early, why?
Because wages are paid by enterprises, and pensions are paid by the state. The efficiency of many enterprises is really not good, and wages may not be paid, but pensions must be paid. So this leads to the fact that once you retire, your standard of living immediately goes up a new level.
The replacement rate of these people is definitely super high, but this is an abnormally high due to abnormal circumstances, and it doesn't really make much sense.
Another reason why I don't agree with the replacement rate is that big brother, I don't really care how much I earned in the year before I retired.
What I care about is: whether I will have a job in 5 years and how much I will earn. Can I still have a job when I am 50 years old, and how much will I earn?
In addition to those who are close to retirement, let everyone estimate that their income before retirement is really a bit difficult for others. The income peak of ordinary workers in China is generally early, and the peak is around 30~40 years old. A self-employed entrepreneur and small boss like me who earns operating income will be like opening a blind box next year.
According to the "China Pension Actuarial Report" edited by Zheng Bingwen, a teacher from the "World Social Security Research Center" of the Chinese Academy of Social Sciences, it is estimated that in 2019, the number of employees participating in social security payment by the nature of the unit is about 191 million, which translates to 191 million people in the class. The number of people insured by individuals is 80 million, and the number of people who participate in personal identity insurance, to put it bluntly, is the number of flexible employment.
This is the case in 2019. What now? The number of flexible workers has long exceeded 200 million, and the Chinese Academy of Social Sciences predicts that the number of such groups will expand rapidly and will greatly exceed the number of workers in the future.
Then you ask what is the pre-retirement income level of flexible employees, let's say is it a bit of a burying person?
So what kind of people are suitable to use the traditional replacement rate as an indicator to measure the pension?
I think there are two categories: (1) there are only a few years before retirement, so it is easier to estimate the salary before retirement; (2) People who are employed in the system, with clear income expectations, as long as you don't want to leave, the duration can be seen for a long time.
I've been reading a lot of information in Japan recently, and there was a very famous workplace system called lifetime employment and seniority in the Heisei era, which is to rank seniority according to seniority and determine income according to the number of years of work.
This is very similar to the mainland's system and business editors, and it can even be said that they are the same kind of thing.
I would like to remind you that this arrangement is essentially a form of "ex post facto compensation".
In the early stage of your career, when human capital is most advantageous, you have a low salary, and the company takes advantage of you. And the more talent you have, the more advantage the company will have, because it retains talent at a low cost.
And in the later stages of your career, when the human capital advantage is not there, in turn, the company will compensate you for taking advantage of you.
But the premise of this game is that the enterprise must be stable, and the business cycle of the enterprise is longer than the individual career. In this way, the enterprise can fulfill the contract, increase its performance, and hold up the higher and higher labor costs.
Saying so much is to tell you that if you see someone using the replacement rate to stimulate pension anxiety in the future, you must be able to realize that this concept is relatively virtual and the scope of application is also very limited.
It's not that the replacement rate is an indicator that can't be used, but I think it's better to change the denominator to use your local average social wage instead of the pre-retirement salary level, which is a better measure of whether you can live the average local standard of living after retirement.
Time train
The second important concept is called the "Time Train".
To explain: To a certain extent, the role of finance is to use money as a medium to complete the allocation of resources in time and space. One example that I particularly like is like what the big takeaway brother said: "I am in the prime of life now, and working more and saving more is equivalent to saving up the current life energy." When you can't do it anymore, you don't want to do it, you can take out the previous life energy." Another example is taking out a mortgage: on the surface, I borrowed money from the bank to buy a house, but in fact I borrowed money from my future self, because it was my future self who eventually repaid the money. Similarly, all pension savings and pension investments are essentially money for the future self. You do this not for the sake of others, but for yourself.
So how do you give your purchasing power now to yourself in 30 years? It is still used as a medium, but it can be different manifestations of money, such as financial products or houses. For example, I raised a house for the first 30 years, and the house supported me for the next 20 years. These mediums are like the time trains. And because, money has a time value, and money in the present is worth more than money in the future, so:
If I'm going to borrow money and divert future resources to the present, I have to buy a ticket (pay interest);
If I want to save and send the resources of the present to the future, the time train will have to pay me the ticket (get interest).
And the fare is the interest rate.
The fare varies depending on the route. Theoretically, the more dangerous the journey, the more volatile it is, and the more expensive the fare.
Again, all pension investments are essentially giving money to their future selves.
But how to send it specifically, you have to study it.
Is it to send an account that can be withdrawn at any time?
Or do you want to give a monthly cash flow?
I think it's probably the latter.
In real life, we can see that a large number of elderly people who have houses and large savings are still reluctant to spend money. Therefore, compared to how many assets you have, a stable cash flow can make an elderly person dare to spend money.
Another problem with the time train is that the more long-term the investment, the more variables you have to face in the process, such as the most intuitive feeling of the stock crash.
Here's an example that I really like:
If you live in the U.S. and hold U.S. stocks, which are key national assets in the United States, the main starting point is the S&P 500, which Buffett admires the most.
In order to prepare for the retirement, you have been investing regularly since 1994, 500 yuan per month, rain or shine. After 15 years, you've invested a total of $96,000.
But the year was 2008, and there was a subprime mortgage crisis.
Because of this crash, your pension account is only $94,000. After a total of 15 years of investment, he lost 2,000 in the end.
At this point, if you continue to work and can continue to vote, that's fine. But what if you happen to be retired at this time and need to withdraw money from your pension account?
You know, the U.S. pension system is dominated by the DC model, not like China's DB model, the state does not manage much, and the pension mainly depends on withdrawing money from the personal pension account - but at this time, your pension account has not made any money at all!
Some people will say that this idea is too much!
But if you think about it, as long as it's long enough, isn't it certain that you will encounter a stock market crash?
Even in a country like the United States, which has a long economic cycle, 08 years have been avoided and 2020 is still in 2020.
If it is a A share, 4~5 years is a cycle.
And what about inflation? Will it break through moderate inflation and enter hyperinflation?
What if you encounter a situation similar to the 2022 UK pension that was almost broken down?
Again, the more long-term the investment, the more variables to consider.
It seems that this risk can only be hedged through effective diversification.
Process-oriented, not result-oriented
In a paper by Professor Li Ling of Peking University, there is a set of data:
Roughly speaking: for the elderly aged 65~67, if the average life expectancy of the mainland is more than 80 years old in the future, their remaining life expectancy is about 16 years. And these 16 years include:
(1) The time of complete self-care is about 10 years (accounting for 63% of the remaining life).
(2) The duration of mild disability was 4.5 years (27.6%)
(3) Moderate disability was less than 1 year (5.5%)
(4) Severe disability lasted for more than half a year (3.9%)
As older people age, the proportion of expected disability time in their remaining life will also increase.
Getting older means that there is a high probability of chronic disease. This probability is more than 80%, and it is even possible to have two or three chronic diseases at the same time.
Getting older also means that your life needs to be taken care of.
The meaning of the "honeymoon period" mentioned in this number is to take care of one's own life. And once you gradually enter a state of disability, you objectively need someone to take care of it.
Getting older also means a significant increase in medical spending.
Medical expenditures in the last years of our lives account for more than half of the total lifetime medical expenditures.
The experience is very bad, and it means that the hard-earned money from the past is likely to be spent in the last few months of life.
When I saw Professor Li Ling's paper, the first thought that flashed through my mind was: life is not result-oriented, but process-oriented.
Since disability and dementia are impossible to avoid, since it is inevitable that life will end up burning many years of savings (many people don't even have much savings at the end of life), since the end is not very decent and inevitable, since leaving is inevitable... It's all inevitable, so does the ending matter?
It was so much easier for me to figure this out because I realized that the process is important, even, the only thing that matters!
Therefore, I advise you not to lose too much in the process for the sake of the final result.
Focus on quality of life, not at the expense of health.
Don't patronize the rolls, but also let yourself relax.
Don't be a Grande guy who treats his family and friends badly in order to have money to burn in the last few months.
Be aware that all short-term overdrafts are secretly priced, and you will have to pay off your debts when you get older.
Realize that health comes from exercise, not rest. If you don't exercise, sitting for a long time and lying flat for a long time will cause muscle atrophy, muscle weakness will make the stability of the joints worse, the friction between the joints will be aggravated, the arthritis will progress faster, and the pain will become more obvious and frequent, so you will not dare to move and fall into a vicious circle.
Pension must be prepared for a rainy day, but the outcome will not change in the end. It's the experience and sense of value in the process that matters most – and that's the source of regret for old age. We should pursue the density of life rather than the length. Because the former is more controllable, it is more related to happiness. The last concept of old-age care is for myself, and also for my peers born in the 80s and 90s.
My parents were not as weak as we thought
That's one of my big feelings this year.
Not to mention others, at least myself, in the face of my parents, there will be a natural self-righteousness.
So far, Mianji has recorded a total of three episodes of programs related to my mother, one of which is stand-up. Originally, I was looking for Ms. Yang's water two episodes, which may be too familiar, I really think it is unremarkable, but the results are unexpected, and the interaction volume of these two episodes is surprisingly high.
There are also many people who criticize me for being too self-righteous and always trying to change my mother. The most classic comment is: This kid talks to his mother, and he smells of a daddy.
We have to admit that our parents are really not as weak as we think. I particularly like the concept of "proximity" proposed by Mr. Xiang Biao. In this regard, our fathers are much better than us.
We live in the grand narrative of the distance, in the small happiness and small sorrow in the heart. But there may not be enough awareness and exploration of the world around you.
And the fathers seem to be good at dealing with the neighborhood. For example, when I went home a while ago, I didn't bring an access card when I walked my dog, so I couldn't enter the community. In the end, I was put in with the security guard to see the dog's face...
What about me, do you say that you are the son of Sister X, have you come back from Beijing?
It's the same when I go to my daughter's bricklayer's house, my mother-in-law always greets others when she goes downstairs, and she is familiar!
I accompany her to buy vegetables, she will go to a fixed stall, if it is not fresh today, the boss will say it directly, and tell her to go to other stalls to buy fresh.
These are experiences that I have never had before.
I've never made the familiar stranger-like friends near home, and I haven't said hello to anyone other than to say thank you to the delivery guy, and I feel a little embarrassed to even think about it.
But for retired parents, "nearby" is especially important to them, because retirement life is built in the neighborhood.
I don't see my children a few times a year, but for my mother, the doorman, my uncle and my aunt, the sisters in the gym, the supermarket owner who has nothing to do with the community group buying, the neighbors... These people are seen every day.
Mianji has a friend called Xiaoba, he used to work hard outside, and later returned to his hometown in Zhengzhou. He told me that when he returned to his hometown in Zhengzhou, he would deliberately go to his parents' siblings' homes to walk around and keep in touch. In fact, he himself may not be indifferent to these elders, but these people are the most important social relationship and emotional bond of his parents, so he feels that he has an obligation to help his parents maintain them, so that their retirement life will be happier.
Well, I think we should really have more empathy for our parents and believe that they can live their lives well.
Of course, I won't give up on influencing my mother, although this is very daddy, I hope she will explore more and go out more, especially in the honeymoon period of retirement, maybe she will be older in the future, and she will not be able to do so.
Decent Retirement Readiness Checklist
Let's talk about some practical ones:
Decent pension, how many kinds of resources are needed, I put the list in shownotes for you
may also be the most practical picture in this episode:
The main types of resources are as follows-
✅House.
I'll just talk about a few plus points about pension housing!
- Because the medical resources on the mainland are distributed in the Matthew style, if the city where the house is located, the hospital resources are abundant, it will definitely be a plus.
- Close to the hospital, plus points!
- Elevator room, definitely a plus!
- Staircase, lower floors below three floors, plus points!
- Ion Woman's housing is near, plus points!
- The product strength of the community is good, such as high property fees, diversion of people and vehicles, and good greening, plus points!
- The supporting resources around the house are mature, plus points!
- The house has been renovated for the elderly, which is an absolute plus!
Regarding the renovation of the elderly, it is not ideal to introduce the effect with text or podcasts, and the most intuitive thing is to find a high-score renovation house to see, so I found a set for everyone on station B, and I highly recommend you to read it, and I have learned a lot myself: ✅ stable cash flow
Xingquan Fund has translated a book called "Pension Portfolio", and there are two insights in the book that I am very impressed:
(1) The biggest difference between pension investment and ordinary financial management is that financial management needs final value, while pension needs cash flow.
The real need of the elderly is to spend money, because spending is rigid, so they need enough cash flow every year.
The elderly are also human beings, and if they are human beings, they will have a higher level of desire to consume. Therefore, stable cash flow is very important for retirement. (2) This cash flow has to be stable
I don't know if you have ever thought about it, since the expected rate of return of equity assets such as stock funds is significantly higher, why in the orthodox pension investment we see at home and abroad, the mainstream is a combination of debt-biased, high-certainty and low-expected returns?
Because the cash withdrawal for the pension is rigid.
With this hard constraint, it is not enough to look at the average rate of return or the compound annualized rate of return. Because the order of returns is just as important and can have a big impact on retirement.
For example, in 08 you retired, or in 2024 you retired...
This is the reason why pension portfolios generally attach importance to risk control (drawdown): on the one hand, it is convenient for everyone to prepare for continuous buying during the retirement period; On the other hand, the right way to do this is to build a "guaranteed asset" that can avoid most of the accidents.
In other words, income is not the primary pursuit of pension investment.
It's easy for an older person to accept this. But for us at an age when we are still fighting and always thinking about pursuing something, it is really difficult to accept because there is no empathy.
In fact, regarding the stable cash flow of retirement, I recorded a program specifically for my mother ("Noodle Base" Issue 24).
The gist of this episode is to say:
I suggested that my mom use her pension as an anchor and stock up on a portfolio that would steadily release a cash flow similar to her pension each year.
My mother's pension is less than 3,000 yuan per month, even if it is 3.5W per year. In fact, a combination of 50~70W can release similar cash flow. The holdings of this portfolio can be dividend ETFs, bank stocks, and a hydropower stock (not as investment advice).
In addition, I am keenly aware that my parents' generation is actually more well-equipped than us to embark on the path of long-term investment and asset hoarding. Because they are better at controlling their desires and living a life of self-denial, at least in our opinion, like a puritan. Because of this lifestyle, it is easy for them to raise their savings rate, which is a very certain cash flow if they have a pension.
Then there is the cash flow derived from assets.
A house that can be rented can be about equal to 1/3 of the local average salary.
If you buy increased life insurance and annuity insurance, you can lock in the current income level, compound interest and appreciation, and become the bottom line of our future pension income.
✅Manpower.
To put it bluntly, pension mainly depends on people and money.
And in the foreseeable future, I believe that the cost of labor will become more and more expensive.
I also believe that when our generation is old, maybe there are L4 autonomous vehicles running on the road, and there is a humanoid robot or mobile robotic arm based on large language model interaction at home.
At least I don't have any doubts about that.
At the same time, referring to Japan, there may be the emergence of "long-term care insurance". If you buy this insurance, you can enjoy 1~2 hours of home service from the nurse every day, cooking, and cleaning. Moreover, the cost of caregivers, the government or insurance companies pay a large amount, and individuals pay a small amount.
✅Insurance.
I said in the middle class program that the main role of this kind of protection consumer insurance is to protect financial assets.
We have also seen a lot of cases of returning to poverty due to illness and selling houses due to illness, and insurance is the lower limit of family wealth, so that it will not fall through because of the crit of life.
Here's one example that still stands out to me:
There is a reader of Knowledge Planet, his parents are in the countryside, there is no source of income, and he relies on him for support. And only one old man has NCMS, which is a bit of security, but it is also a drop in the bucket.
This reader friend Beipiao often feels bottomless in his heart, worried that if he can't do it one day, what will his parents do?
Later, he bought himself a term life insurance, which was almost enough for his parents' subsistence and clothing living expenses in their later years, and it was not expensive, with a premium of several thousand yuan per year. After buying it, he was mentally steady.
This example made me realize that buying insurance (especially this kind of consumer insurance) mainly gives psychological added value in the early stage, and only when the insurance is really out will you enjoy the use value.
Of course, this use value may not be used all the time, and the premium paid will be wasted, but of course it is not a bad thing that it has not been used?
My mother too, when I forced her to buy insurance, she complained a lot, and complained a few words when she deducted the money every year. Later, my sisters got breast cancer, and a few friends chattered, and my mother said that her son had bought insurance, and Bei'er had a sense of superiority.
In addition, many insurances, such as medical insurance and critical illness insurance, can indeed help you win a certain amount of high-quality medical resources.
For example, medical insurance and critical illness insurance will now try to provide you with some additional medical services, which has nothing to do with the sum insured.
There is also a mid-to-high-end medical insurance like the one I bought for myself, which is six or seven hundred yuan more expensive than ordinary million medical care, mainly to reimburse the treatment costs of special needs and the international department.
Return to the framework of pension, because most people's pension cash flow is not very abundant. Therefore, the large expenditure caused by major accidents and diseases is a stumbling block on the road to the elderly, and it is easy to make all the pension plans meaningless.
So we need insurance to reduce this potential impact.
✅ In the rightmost column of the table above, I have also listed several major risks of retirement:
(1) Larger-than-expected inflation, which means a significant loss of purchasing power. (2) The price of individual factors has risen too fast, especially the needs of the elderly, such as medical expenses. I have reviewed the consumer items with the fastest inflation rate in the United States over the past few years, and found that there are two scenarios where the price increase rate far outperforms the CPI, one is the hospital, and the other is the university, like this:
(3) Personal loss of wealth
Isn't there a saying that no one goes bankrupt because of inflation, but many people go bankrupt because they want to outperform it.
Therefore, when you are old, you really have to serve the old. It is important to understand that taking high risks for high returns is no longer what should be pursued at this stage of life. For some large expenditures, investment and financial management, you should communicate with your children in a timely manner and listen to persuasion, because there is indeed a lot of information in this field.
I've repeated these clichés many times on the show, and I've told my mom many more times.
The three pillars of the mainland's pension
One point to emphasize:
The three pillars are not independent of each other, but overlap. Some people have both three pillars, and some people have both the first and three pillars.
There are also people who only have the first pillar and are unable to support themselves.
✅ The first pillar
Overall, I have a strong personal opinion, but what can I do?
Really, what can it be?
I can't say a lot of words, everyone looks at the data for themselves and thinks about it more.
I'll just say one thing:
The first pillar is divided into two types –
136 million people receive pension insurance for urban workers
164 million people receive pension insurance for urban and rural residents
How big is the difference between the average amount of the two types of insurance?
18 times!
Yes, you heard it right! 18 times!
The average monthly pension insurance for employees is 3,600 yuan
The average monthly pension insurance for urban and rural residents is only more than 200.
I think it's a huge structural inequality!
This is very uncommon.
Of course, our pension system is pay-as-you-go, and it is natural that people pay more and now receive more.
No problem! I agree.
However, you can't deny that a pension of 200 yuan a month can't solve the most basic food and clothing problems!
This is also the reason why I hate a lot of economics, that is, if you encounter any problems, I will give you the theory, this term, that coefficient, who who says it... Quickly complicate the problem.
Can we confront the problem itself?
Or I put it this way, a lot of questions, and it's not a question of who is right and who is wrong in economic theory.
It's a question of values, and the first thing that values need to answer must be who is more important.
Then I have to ask, 164 million elderly people receive a meager pension of a few hundred yuan a month-
Is it a problem?
If it's a problem, does it matter?
If it's important, should it be addressed?
Please put aside economics, put aside the fog of language, school, and theory, and think about these three questions directly.
Isn't it a problem? If yes, is it important? If so, should it be addressed? Only by acknowledging that it is a problem and wanting to solve it can there be a way.
For example, in the case of pensions for urban and rural residents, can the financial expenditure be advanced?
Those in their 60s may still be able to earn some labor income, but what about those over 70? Can you give them a cushion with finance?
Anyway, it's all transfer payments, can we transfer some from the second pillar with a scale of nearly 5 trillion but only covering tens of millions of people?
For the second pillar of payment, individuals can pay up to 4%, and units can pay up to 8%. Can the unit give some to urban and rural residents?
Don't discuss with me, right, should or shouldn't.
Again, there is no right or wrong, and it is unlikely that any policy will achieve better Pareto improvements.
It is nothing more than a question of who bears the cost.
Only by acknowledging it and trying to solve it can there be a so-called solution.
Okay, not much more.
✅ The second pillar
The second pillar, let's look at the picture and see who is receiving it.
If there is a second pillar, the first pillar will certainly not be bad.
There is no need to worry about the pension of these people, okay!
Just one piece of advice: keep a low profile and don't show off on the Internet.
That's it.
✅ The third pillar
A personal pension account that is already about to be said to be rotten.
In fact, I did this episode of the show, and at the beginning I mainly wanted to talk about personal pension accounts, why?
Because the personal pension has been one year old, in fact, it should be done in November.
But I want to wait for some official data, and when the data is updated, I'll do it. As a result, I didn't update it, so I simply didn't wait.
A few of the "new" data in quotation marks that can be seen so far look like this:
At the end of June 2023, the number of personal pension accounts opened will be 40.3 million;
The number of depositors and the scale of deposits were not announced. It is only known that the number of depositors at the end of the first quarter of 2023 is 9.53 million, with an average of 2,000 yuan per person.
Personal pension accounts buy four types of products: deposits, wealth management, insurance, and FOF funds.
Among them, the scale of deposits and insurance has risen slightly, and the scale of pension financial management has fallen slightly.
The FOF fund, which was launched in November 2022, has been declining in size
The reason is very simple, everyone knows how the market will be so far in 2023, the income is not good, so I don't buy it.
As for the third pillar, I would like to say a few more frustrating words, which I only realized recently:
There is no doubt that there are a number of limitations to individual pension accounts:
You can't receive it before retirement, and you have to postpone it, the variety of products you can buy is limited, there is a 3% individual income tax when you withdraw it, and the tax-saving effect is limited.
Its biggest attraction should be tax saving, right? This is also true overseas.
What kind of tax is saved?
Personal income tax.
So the question is, how many people in China pay individual income tax?
According to data from the Ministry of Finance, the number of people who paid individual income tax in China in 2022 was 65.12 million, accounting for 8.4% of the country's employment.
Let's call back the latest number of personal pension accounts opened, 40.3 million.
You use a tax base of 40.3 million/65.12 million, and the penetration rate has exceeded 60%.
Then the real number of depositors was about 10 million, and the average person saved 2,000 yuan.
I read the above data at the time, and suddenly realized that, at least in terms of numbers, this thing may be almost saturated.
I have also talked to some people inside the fund company about this privately.
They say that, in theory, it should be those who have a stable and high income to buy a personal pension account, such as:
Doctors, teachers, programmers, executives...
Actually? The main contributors are all in the financial industry.
Part of the reason is that the financial industry knows a little more about this and recognizes the value of individual pension accounts.
Part of the reason is that it may be to complete the task.
So I don't have any expectations for personal pension as a whole now, it's just a game for a few.
However, referring to overseas history and experience, it is not excluded that it may develop greatly in the future.
The promotion of personal pensions in the United States back then also had few responders, and no one cared about it. Why did the scale grow so fast later? If you don't want to buy, you have to sign all kinds of documents, so that everyone buys, you don't buy, this is a very scary thing - you don't follow the crowd. Moreover, the United States can also transfer the money from the second pillar to the third pillar.
In this way, the third pillar developed very quickly and the scale was large enough.
Including our enterprise occupational annuity, so many people in a unit, all of them have their own ideas.
It stands to reason that it shouldn't be possible.
How?
A leading group for enterprise annuity with a scale of several people was set up within the unit, and the matter was decided.
This is essentially a decision made by a few people for the majority, and there is no resistance.
Therefore, it is uncertain what the third pillar can develop into in the future, mainly whether it wants to be promoted.
If the current strength is maintained, the effect is not expected to be ideal.
Then I will quickly go through the four types of products that can be bought in personal pension accounts:
✅ Pension deposits, savings,
There are two points that need to be paid attention to:
First, yields will be affected by interest rate cuts, which may be the narrative for a longer cycle ahead. Cutting interest rates means that every time you reinvest at maturity, you have the potential to face a lower yield.
Therefore, if you just want to buy a deposit, then I think you should buy the one with the longest term.
Second, you have to pick a bank, because the interest rate given by different banks is not uniform, so there is a difference between high and low.
For example, for the longest 5-year deposit, IB can give up to 3% annualized, while Bank of Communications can only give 2.25% at the lowest.
Note that the above data is time-sensitive, for reference only, and the actual situation you see shall prevail!
✅ Pension financial management
Penetrating to the bottom, it is a combination of high-proportion fixed income products + low-proportion equity products.
It is not capital protected, and the net value fluctuates, but the drawdown is well controlled.
However, the bond market will be under pressure in 2023, and the income of pension financial management is not ideal, so in fact, the scale has not risen so far, and it has fallen slightly.
The overall annualized return for 2023 is 2.49%, with a maximum drawdown of 1.18%.
One of the best-performing products achieved an annualized return of 4.33% and a maximum drawdown of only 0.56%.
But past earnings don't mean the future, right, it's impossible to say, so I won't say the specific name.
I would like to emphasize that many pension wealth management products have introduced a "return smoothing mechanism". When the cumulative annualized rate of return of this product is higher than a certain upper limit, a part of the excess return will be transferred to the "smoothing fund". Conversely, when the return falls below a certain set lower limit, part of the funds will be transferred from the "smoothing fund" to the product.
The biggest advantage of this is that the variance of returns from year to year will not be very large, and the holding experience is good.
Many people buy public foundations and scold their mothers is also related to this-
Even before you buy it, you will look at its compound annualized return, assuming that it is 10%.
Its subtext is that the cumulative gains of so much in the past are converted into annual returns, which is 10%.
But if you take this rate of return as an anchor and do buy it, you will find that the level of return actually varies greatly from the anchor of that expected rate of return every year.
Because the returns of equity assets are non-linear, especially the cyclical nature of A-shares, this means that the distribution of returns presents:
A handful of cool crit moments + most of the very hard garbage time.
Taking the cycle from the end of 2018 to the present as an example, once you miss the 1 year of 2020, you will almost want to scold your mother for the remaining 4 years.
What's even more painful is that you're on the bus in 2020! Pull it back, so I think the income smoothing mechanism is a very good trick, if you have a friend who manages money for your family, you can learn it. It's just that your smoothing fund may not be the excess return generated by the investment, but the salary of your own hahahaha.
✅ Pension insurance
When you buy endowment insurance, you will find that each product will give you two numbers:
One is called "previous year's settlement rate", and the other is called "guaranteed interest rate" or n% yield is written into the contract. The interest rate written into the contract for different products is quite different - some only guarantee you 0.5%, and some dare to guarantee you 3%. This is because of the current mainstream pension insurance, its income is composed of guaranteed income + floating income.
The endowment insurance on sale, we divide it into stable and aggressive, how to distinguish? Look at its "guaranteed rate", or how high is the yield written into the contract?
The guaranteed interest rate is less than 1%, which is aggressive - the minimum guarantee is low, but as long as the investment income is okay, the settlement interest rate given to you is not low.
And those with a guaranteed interest rate of more than 1% are generally stable - although the guarantee is high, the settlement interest rate will be lower than the aggressive one, generally speaking.
So, it's up to you to choose between these two.
Of course, you can also split it in half, and you want it all.
Another point to note is that most of the pension insurance on sale is annuity-type, which will allow you to choose the age at which you receive it, and whether it is by month or age.
As mentioned earlier, you need to decide whether you want a sum of money or a stable cash flow.
✅ Pension FOF, that is, to buy a basket of fund portfolios.
At present, the equity position of a target-date FOF with a year in its name is generally higher than that of a "target-risk" FOF, so it is also more volatile. In turn, it also determines that it gets different results in bear markets and bull markets.
Everyone should have this expectation.
In addition, I would like to say a few words of my personal thoughts: my own personal pension account bought Mr. Xu Liming's products, but this does not constitute investment advice at all, I only want to say my feelings as a holder:
First, the cost of selection is actually very high. You need to find out all the past performance of this person, because his past performance means your holding experience. Of course, the longer the track record is covered, the better. Although the Y share was only launched at the end of 2022, the first batch of pension FOF2018 was launched, and there are still many achievements to be checked.
Second, we need to understand a fund manager's investment ideas. Through fund reports, interviews, roadshow videos, minutes, and of course, podcasts I personally think is better. Only by understanding the framework of the fund manager can we understand his train of thought. Mr. Xu's framework is to judge the style from the top down, and to make this clear, you can only partially understand his operation by looking at the quarterly report.
But on the other hand, it takes a lot of time and energy to understand a person and track a person. So I suggest that you should control the amount of funds in your personal pension account and not buy too much - if you still want to follow up on the research.
In addition, Mr. Xu has a point of view that I quite agree with, personal pension account, like me, I have to buy for more than 30 years, and the real result I want is the net value in the account when I retire, not the result of just buying 3 periods. The scale is the most important thing in the early stage, and the scale is large in the later stage, and the level of investment will greatly affect the final result.
Personal pension calculator
Finally, introducing a gadget.
The Youzhi Youxing team launched a "pension calculator" that includes the three pillars of pension, which is why I didn't spend time taking you to the pension calculation formula in this episode.
It's really complex, and it contains a lot of expected assumptions about the future.
Second, if you really want to calculate, you also need to check the past social security rights and interests by yourself.
If you go directly to this tool and fill in the numbers carefully, you can roughly calculate how much cash flow you can get at the moment of retirement.
I think with this calculator, I can also draw a perfect and landable end to this episode.
I really tap the water, and I highly recommend everyone to go to the "Know and Do App" to experience this gadget.
Old-age care is an ongoing process for my parents, the post-60s.
For the post-70s, it is a matter of imminence.
For the post-80s and post-90s, pension is a thing that can be delayed.
It is like a gray rhinoceros in the distance, the sound of running footsteps can be faintly heard, but we also know that the gray rhinoceros is far away. But the front of him is full of thorns, surrounded by tigers and wolves, and he can't take care of so much.
For us, the matter of pension is important but not urgent. But because of this, as long as you have the heart, you can spend a small amount of energy and a small amount of money now to load some materials on that time train and give them to your future self.
Because we still have time!
But I would also like to remind you that there is a huge assumption about the knowledge and action of pension calculators:
It assumes that you have paid social security every month before you retire!
This is like a metaphor - our preparation and efforts for retirement, just like the social security paid every month, cannot be interrupted.
It sounds a bit East Asian-style cruelty and helplessness.
But! Think of the Bamang group, think of the Annie Shaber I introduced to you in the issue of getting richer, think about our fathers...
Retirement is not the end, retirement is a new beginning.
Pension, like life, is a process, and it is a proposition that we have to face alone. *The article only represents the author's point of view and does not represent the position of IT Orange.
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