The Greatest Retirement Crisis in History is Looming

Retirement Crisis. And it's gonna be a world of poor baby boomers. According to a set of recent surveys, more and more people approaching retirement are ill-prepared for it. Many are not even conscious of the true costs that lay ahead of them. As a result, the tradition of leaving a financial legacy for the kids is rapidly becoming a quaint custom of history.

I don't quite understand, Sal. Since the debt is no problem and concern about deficits is just some bullshit dreamed up by the deficit hawks, why can't the government just borrow more money to pay for this too? No big deal.

maysieriley wrote:Retirement Crisis. And it's gonna be a world of poor baby boomers. According to a set of recent surveys, more and more people approaching retirement are ill-prepared for it. Many are not even conscious of the true costs that lay ahead of them. As a result, the tradition of leaving a financial legacy for the kids is rapidly becoming a quaint custom of history.

Crisis may not even be a strong enough word. Many studies show that the average 401k balance for those over 55 is around $140,000. That doesn't provide much of an after tax income stream. Can you say "Welcome to Walmart?"

Good thread, Sal.
For those aged aged 62+ who only have $25,000 (or $100,000) in retirement savings, that is scary. Action on Social Security needs to be taken now by Congress and the President, but it will not happen. I think we'll eventually see a means test sometime in the future.

bizguy wrote:

maysieriley wrote:Retirement Crisis. And it's gonna be a world of poor baby boomers. According to a set of recent surveys, more and more people approaching retirement are ill-prepared for it. Many are not even conscious of the true costs that lay ahead of them. As a result, the tradition of leaving a financial legacy for the kids is rapidly becoming a quaint custom of history.

Crisis may not even be a strong enough word. Many studies show that the average 401k balance for those over 55 is around $140,000. That doesn't provide much of an after tax income stream. Can you say "Welcome to Walmart?"

$140,000 is generous according to the Forbes article that Sal posted:

With the average 401(k) balance for 65 year olds estimated at $25,000 by independent experts – $100,000 if you believe the retirement planning industry - the decades many elders will spend in forced or elected “retirement” will be grim. (Update: In response to readers’ questions about the lower number, Teresa Ghilarducci, a professor of economics at the New School for Social Research, estimates that 75% of Americans nearing retirement in 2010 had less than $30,000 in their retirement accounts.)

SS is only half the crisis.

Trustees: Medicare Will Go Broke in 2016, If You Exclude Obamacare's Double-Counting

http://www.forbes.com/sites/aroy/2012/04/23/trustees-medicare-will-go-broke-in-2016-if-you-exclude-obamacares-double-counting/

Bob wrote:SS is only half the crisis.

Trustees: Medicare Will Go Broke in 2016, If You Exclude Obamacare's Double-Counting

http://www.forbes.com/sites/aroy/2012/04/23/trustees-medicare-will-go-broke-in-2016-if-you-exclude-obamacares-double-counting/

Yes, many elderly are going to have little money and they'll need expensive health care.

And our young generation, the people in their 20s and early 30s now--we're hearing the term "lost decade" in reference to them because for many of them, their careers are not going as they planned. They're just trying to make ends meet. They cannot afford to take care of the rest of us as we age. And there aren't enough of them to pay into the system to take care of us as we age.

$140,000 is generous according to the Forbes article that Sal posted:

No one knows for sure. The bottom line is that many (most?) baby boomers are not ready to have a comfortable retirement. Even those that have managed to accumulate substantial sums in their 401k/IRA plans are in for a big surprise when it comes time to start taking distributions. The relatively small amount they saved by contributing pre-tax $s will be eclipsed by the taxes they pay on the distributions. Additionally, many have their 401k/IRA invested 100% in equities. I regularly work with pre-retirees that are within a couple years of retirement that could lose 30-50% of their account value due to a market correction.

Market is doing well now. Kind of scary though. Older people are trying to play catch up. But when to jump in, when to get out? We didn't worry so much about that when we were younger.

Nekochan wrote:Market is doing well now. Kind of scary though. Older people are trying to play catch up. But when to jump in, when to get out? We didn't worry so much about that when we were younger.

It always does good right before it drops like a rock. The point I was trying to make is that people have been led to believe that taking market risk is the only way to save for retirement. This is not true...especially when you are close to retirement age.

bizguy wrote:

Nekochan wrote:Market is doing well now. Kind of scary though. Older people are trying to play catch up. But when to jump in, when to get out? We didn't worry so much about that when we were younger.

It always does good right before it drops like a rock. The point I was trying to make is that people have been led to believe that taking market risk is the only way to save for retirement. This is not true...especially when you are close to retirement age.

That is what's scary. I'm afraid a lot of older people are in the market now, happy to play catch up. But when will it drop?
When you're young, you're in for the long haul, ups and downs. But you cannot afford the risks when you are nearing retirement.

A person could have a million dollars in their qualified plan, and not even come close to a government retiree who is getting a traditional pension in the 70k per year range.......I agree that the higher returns must be abandoned as retirement nears, but the whole 401k fantasy was built on 10-12% returns which were common in the early 80s when IRA were being sold. My wife's folks retired early with a significant cash nest egg where they were getting 10% plus on run of the mill bank CDs......the babyboomers who saw their parents retiring in the late 70s and 80s envisioned compounding of their qualified plans with minimum 6-10% conservative no risk returns on their qualified plans.....try less than 3%. So a person with the Million should have been looking at about 70k a year, yet they are lucky to get half of that as they invade principal....while the government employee who could have not saved a lick....will be getting double what the qualified plans.......the systemic problem is that those traditional pensions are not getting the return to fund that 70k.......major fail on both fronts.

Quite a few folks sunk their retirement income into houses that were supposed to never lose value and sell for double when they retired to Florida on the cheap....want to make God laugh ?...tell him your plans.

Nekochan wrote:

bizguy wrote:

Nekochan wrote:Market is doing well now. Kind of scary though. Older people are trying to play catch up. But when to jump in, when to get out? We didn't worry so much about that when we were younger.

It always does good right before it drops like a rock. The point I was trying to make is that people have been led to believe that taking market risk is the only way to save for retirement. This is not true...especially when you are close to retirement age.

That is what's scary. I'm afraid a lot of older people are in the market now, happy to play catch up. But when will it drop?
When you're young, you're in for the long haul, ups and downs. But you cannot afford the risks when you are nearing retirement.

Who knows when it will drop? No one knows when but many believe it will. John Bogle, founder of Vanguard funds, predicts 2 50% drops in the next 10 years. The good news...there are proven alternatives to putting your retirement dollars at risk.

PBS produced a good program featuring John Bogle about the retirement crisis. The link is below. It runs about 53 minutes.

The Retirement Gamble

want to make God laugh ?...tell him your plans.


We would all die of boredom without the challenges.....however, I have seen depression at an all time high. A person I know who was 66 and had a great career with some amazing wealth accumulation twenty years ago, just committed suicide this week stepping in front of a train. Many of the issues with returning veterans is the babyboomers clinging on to their jobs into their 70s when opportunity has been lost as referenced earlier for almost a decade now..........on top of the world one day........but here is a news flash.....if you get right between the ears, and look around this great country the poorest man lives like Kings did 500 years ago.......it really begins and ends between the ears.

Nekochan wrote: Action on Social Security needs to be taken now by Congress and the President, but it will not happen.

I hope no one is counting on this worthless dysfunctional government to ever do anything again which will have any benefit for this country. That's just a hopeless pipedream.

Bob wrote:

Nekochan wrote: Action on Social Security needs to be taken now by Congress and the President, but it will not happen.

I hope no one is counting on this worthless dysfunctional government to ever do anything again which will have any benefit for this country. That's just a hopeless pipedream.

I agree and it makes me For all of us but especially for my kids.

We can plan but the truth is, none of us know. Just like Teo and Seaoat said...top of the world one day, down in the dumps the next. Lord help those who think that standing in front of a train is the only answer. Just so sad.

2seaoat wrote:A person could have a million dollars in their qualified plan, and not even come close to a government retiree who is getting a traditional pension in the 70k per year range.......I agree that the higher returns must be abandoned as retirement nears, but the whole 401k fantasy was built on 10-12% returns which were common in the early 80s when IRA were being sold. My wife's folks retired early with a significant cash nest egg where they were getting 10% plus on run of the mill bank CDs......the babyboomers who saw their parents retiring in the late 70s and 80s envisioned compounding of their qualified plans with minimum 6-10% conservative no risk returns on their qualified plans.....try less than 3%. So a person with the Million should have been looking at about 70k a year, yet they are lucky to get half of that as they invade principal....while the government employee who could have not saved a lick....will be getting double what the qualified plans.......the systemic problem is that those traditional pensions are not getting the return to fund that 70k.......major fail on both fronts.

Good points. Most of us don't have access to defined benefit plans and have been told that the best way to save for our retirement is to use a defined contribution plan funded with pre-tax dollars. The trick is trying to calculate how much you can withdraw annually without running out of funds before you die.

The trick is trying to calculate how much you can withdraw annually without running out of funds before you die.

I think this country used to be at our inception about 90% agrarian. Retirement was the number of kids who were going to work the farm. As we evolved to a manufacturing society, we saw the evolution from exploitation to unions demanding traditional pensions, until the early eighties where this nation lost our industry, unions lost their battle for traditional actuarial sound fixed pensions, and the finacialization of America in the last 35 years led to a massive theft of our wealth.....Now if a person had a farm.....well I can tell you all my farmer friends and their children are multi millionaires where the traditional 3-5% of farm income, has jumped to the 4-7% return, and raw productive farm land is better than gold. Yet, in our post industrial financial based economy, we have few advocates for the average citizen who has been laid bare by sophisticated wealth transfer........this problem goes beyond a simple retirement crisis......it goes to the core of a rigged system which requires regulation.......that cow has left the barn for baby boomers.

In the press over the last sixty years to ensure that the scientists were educated in ethics and morality they neglected to arrange the same for the rest of society, especially those with power and money.

*****SMILE*****

https://www.youtube.com/watch?v=3khH9ih2XJg

https://www.youtube.com/watch?v=E0Nf4l7LTdo

Sal wrote:This is where we're headed.

Corporate pensions are a thing of the past, public pensions are dying, and 401Ks are a massive fail.

Seems like an excellent time to cut SSI because we can't bear to have the plutocrats pay a penny more.

We are on the precipice of the greatest retirement crisis in the history of the world. In the decades to come, we will witness millions of elderly Americans, the Baby Boomers and others, slipping into poverty. Too frail to work, too poor to retire will become the “new normal” for many elderly Americans.

That dire prediction, which I wrote two years ago, is already coming true. Our national demographics, coupled with indisputable glaringly insufficient retirement savings and human physiology, suggest that a catastrophic outcome for at least a significant percentage of our elderly population is inevitable. With the average 401(k) balance for 65 year olds estimated at $25,000 by independent experts—$100,000 if you believe the retirement planning industry—the decades many elders will spend in forced or elected “retirement” will be grim.

.........

At some point, lack of savings, lack of employment possibilities and failing health will catch up with the overwhelming majority of the nation’s elders. Let me emphasize that we’re talking about the overwhelming majority, not a small percentage who arguably made bad decisions throughout their working lives.

Eventually the pain will be so widespread that the crisis will be impossible to ignore. For many, the challenge is to hang in there until help arrives.

http://www.forbes.com/sites/edwardsiedle/2013/03/20/the-greatest-retirement-crisis-in-american-history/

A future of more crime and more suicides.

These quotes are from a book that was written in 1997 (The Fourth Turning):

“…Not far into the Fourth Turning, today's long-term projections for Social Security, Medicare, and other elder benefits programs will lie in history's dust bin. The economy will not keep growing as smoothly as the actuaries now assume—and critical events will force the government to reshuffle all its spending priorities. At that point, no one will be entitled to anything; those in need will merely be authorized something. Public figures should alert today's working Americans to their vulnerability…”

Howe, Neil; Strauss, William (2009-01-16). The Fourth Turning (Kindle Locations 6750-6754). Random House, Inc.. Kindle Edition.

“…For Boomers, Social Security will be the object of fatalism and sarcasm. Some will get it, and some won't. The typical Boomer will live on bits and pieces of SEP-IRAs, Keoghs, 401Ks, federal benefits, and assorted corporate pension scraps that will vary enormously from person to person. For many, this will add up to a lot; for many others, nearly nothing. When the market hits bottom, millions of Boomers will find themselves at the brink of old age with far smaller nest eggs than they ever expected. They will immediately have to make do with steeply diminished material consumption…”

Howe, Neil; Strauss, William (2009-01-16). The Fourth Turning (Kindle Locations 6082-6086). Random House, Inc.. Kindle Edition.

They will immediately have to make do with steeply diminished material consumption…”

You mean find true happiness.......