Saving for the long term

by adamzerner 3 min read24th Feb 201538 comments


I'm 22 years old, just got a job, and have the option of putting money in a 401k. More generally, I just started making money and need to think about how I'm going to invest and save it.

As far as long-term/retirement savings goes, the way I see it is that my goal is to ensure that I have a sufficient standard of living when I'm "old" (70-80). I see a few ways that this can happen:

  1. There is enough wealth creation and distribution by then such that I pretty much won't have to do anything. One way this could happen is if there was a singularity. I'm no expert on this topic, but the experts seem to be pretty confident that it'll happen by the time I retire.

    Median optimistic year (10% likelihood): 2022
    Median realistic year (50% likelihood): 2040
    Median pessimistic year (90% likelihood): 2075

    And even if they're wrong and there's no singularity, it still seems to be very likely that there will be immense wealth creation in the next 60 or so years, and I'm sure that there'll be a fair amount of distribution as well, such that the poorest people will probably have reasonably comfortable lives. I'm a believer in Kurweil's Law of Accelerating Returns, but even if you project linear growth, there'd still be immense growth.

    Given all of this, I find thinking that "wealth creation + distribution over the next 60 years -> sufficient standard of living for everyone" is a rather likely scenario. But my logic here is very "outside view-y" - I don't "really understand" the component steps and their associated likelihoods, so my confidence is limited.
  2. I start a startup, make a lot of money, and it lasts until retirement. I think that starting a startup and using the money to do good is the way for me to maximize the positive impact I have on the world, as well as my own happiness, and so I plan on working relentlessly until that happens. Ie. I'm going to continue to try, no matter how many times I fail. I may need to take some time to work in order to save up money and/or develop skills though.

    Anyway, I think that there is a pretty good chance that I succeed, in, say the next 20 years. I never thought hard enough about it to put a number on it, but I'll try it here.

    Say that I get 10 tries to start a startup in the next 20 years (I know that some take longer than 2 years to fail, but 2 years is the average, and it often takes shorter than 2 years to fail). At a 50% chance of success, that's a >99.9% chance that at least one of them succeeds (1-.5^10). I know 50% might seem high, but I think that my rationality skills, domain knowledge (eventually) and experience (eventually) give me an edge. Even at a 10% chance of success, I have about a 65% (1-.9^10) chance at succeeding in one of those 10 tries, and I think that 10% chance of success is very conservative.

    Things I may be underestimating: the chances that I judge something else (earning to give? AI research? less altruistic? a girl/family?) to be a better use of my time. Changes in the economy that make success a lot less likely. 

    Anyway, there seems to be a high likelihood that I continue to start startups until I succeed, and there seems to be a high likelihood that I will succeed by the time I retire, in which case I should have enough money to ensure that I have a sufficient standard of living for the rest of my life.
  3. I spend my life trying and failing at startups, not saving any money, but I develop enough marketable skills along the way and I continue to work well past normal retirement age (assuming I keep myself in good physical and mental condition, and assuming that 1. hasn't happened). I'm not one who wants to stop working.
  4. I work a normal-ish job, have a normal retirement plan, and save enough to retire at a normal age.

The point I want to make in this article is that 1, 2, 3 seem way more likely than 4. Which makes me think that long-term saving might not actually be such a good idea. 

The real question is "what are my alternatives to retirement saving and why are they better than retirement saving?". The main alternative is to live off of my savings while starting startups. Essentially to treat my money as runway, and use it to maximize the amount of time I spend working towards my (instrumental) goal of starting a successful startup. Ie. money that I would otherwise put towards retirement could be used to increase the amount of time I spend working on startups.

For the record:
  1. I'm frugal and conservative (hard to believe... I know).
  2. I know that these are unpopular thoughts. It's what my intuition says (a part of my intuition anyway), but I'm not too confident. I need to achieve a higher level of confidence before doing anything drastic, so I'm working to obtain more information and think it through some more.
  3. I don't plan on starting a startup any time too soon. I probably need to spend at least a few years developing my skills first. So right now I'm just learning and saving money.
  4. The craziest thing I would do is a) put my money in an index fund instead of some sort of retirement account, forgoing the tax benefits of a retirement account. And b) keeping a rather short runway. I'd probably work towards the goal of starting a startup as long as I have, say 6 months living expenses saved up.
  5. I know this is a bit of a weird thing to post on LW, but these aren't the kinds of arguments that normal people will take seriously ("I'm not going to save for retirement because there'll be a singularity. Instead I'm going to work towards reducing existential risk." That might be the kind of thing that actually get's you thrown into a mental hospital. I'm only partially joking). And I really need other people's perspectives. I judge that the benefits that other perspectives will bring me will outweigh the weirdness of posting this and any costs that come with people tracing this article to me.