Apparently, this was a topic for discussion among for attendees at a symposium on the sustainability of retirement in the US. I kid thee not….
At a recent University of Pennsylvania symposium on the future of the retirement system, Hodgson raised just that possibility — the risk of a malevolent alien invasion. (Imagine the Capitol-zapping invaders of Tim Burton’s “Mars Attacks!,” not Steven Spielberg’s bike-ridingE.T.)
His point was a serious one. Other theorists — most prominently Nassim Nicholas Taleb — have written books pondering so-called “black swans,” unexpected events that are difficult-to-impossible to plan for. As any investor who lived through 2008 can attest, the threats in our financial system are real and our prognosticators have a lousy record of spotting them.
Hodgson and his colleagues at Tower Watson were trying to gauge some of the non-financial risks out there. A partial list of what they came up with:
- major acts of terrorism
- natural disasters
- World War III
- a food, water or energy crisis
- cosmic threats (such as a major meteorite)
- a health pandemic (A plague in 541-542 A.D. may have killed half the world’s population, Hodgson notes.)
An alien invasion is also on that list, along with technological singularity (which is when the robots take over). By Hodgson’s reckoning, it makes sense to keep an eye on extremely unlikely possibilities with truly scary consequences. Less severe, though far more likely, are threats like changes in global temperatures, nuclear contamination or a collapse in global trade.
I think of more pressing concern is why are retirement plans which are largely mandated by government fiat in the Western world allowed to be such poor performers and pose the threat of intergenerational poverty.
I can think of two ways to secure retirement incomes.
1. Have government run index only funds that charge no fees. By definition these funds would outperform 99% of all fund managers globally.
2. Mandate that if you want to run an active fund then the maximum you can charge is 0.25% and the rest is based upon your outperformance of a given benchmark.
Over the past decade funds locally have ripped billions out of investors for the staggering return of 3.9% pa which is half what the All ords total return index generated for the same period.
PS : If we get hit by a big arse asteroid or ET turns up and he is a prick the last thing on my mind will be my retirement.