Dear friends,
Back in Ancient Rome, veteran soldiers were sometimes given some land upon retirement but only on a case-by-case basis. Sometimes it would be near Rome, sometimes in newly conquered territories. Sometimes it would be in fertile land and hence valuable, sometimes it would be in barren land and hence useless. This treatment was deemed unfair for the soldiers who gave their life for their country and in 13 B.C. emperor Augustus decided to establish a standardized pension plan for veteran legionaries. After 16 years of service, a retired legionaries would expect to be paid a state pension roughly equivalent to the 75% of a laborer’s salary. It was a great idea and was well accepted by the legions, but very quickly things went downhill. Let’s see how.
Within a few years Augustus realized that since the pensions are drawn out of general revenues, they were putting pressure on the state budget. He frequently had to use his own personal wealth to balance the empire’s budget. So in 5 A.D. he set up the “Aerarium Militare”, which was a special fund for veterans’ pensions. The fund was endowed with newly imposed taxes; a 5% tax on inheritances and a 1% tax on all auctions in the empire. Still that wasn’t enough. Then the length of service in the legions was extended from 16 years to 20 years, in the hope that pensions will cover less veterans because some will die before claiming a pension or will claim for less years. Still that wasn’t enough. Then the length of service was extended again from 20 years to 25 years. Still that wasn’t enough, even if life expectancy in the Roman Empire was roughly only 35 years. To make things worse, inflation and constant devaluations of roman currency made pensions (and salaries) less valuable. The result was that army service was no longer a desirable career and the army struggled to recruit new legionaries. Does any of that sound familiar to you?
Let’s see the similarities with modern times. State pensions straining the public budget? Check! A dedicated pension fund and raising of extra taxes to fund it? Check! Never ending extension of service to reduce pension liabilities? Check! Inflation and devaluation of currency making pensions worthless? Doublecheck! Low salaries and pensions that discourage people from work? Check! It’s all happening today and we are all like these poor Roman legionaries. So now that we learnt from history that state pensions cannot be relied upon, it is even more obvious that individuals have to plan their retirement on their own. What’s the solution? Real Estate investments that you choose for yourself. Real Estate tracks inflation closely, it produces cash flows that also track inflation closely, it benefits from tax breaks, it receives cheap funding from the banks as mortgages, and it can finally provide a shelter before or upon retirement. What’s not to like?
If you plan to rely on a state pension alone, you need some help so let’s discuss it. If you understand that state pension will not be enough, reach out to Artemis Assets with your requirements.
Until the next one!
