The Greatest Retirement Crisis in History is Looming

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/

It is simple......return tax rates to 1982, slowly over the next decade, and lift the limit on social security contributions, and make sure we return estate tax rates to the 1982 limits, again slowly, even take 30 years to correct this mess.........Poverty is the new normal, and vets, and seniors will be no exception......when this country was hoodwinked into allowing fair taxation to fall to the wayside, we were heading like a freight train to the bridge swept away in the flood of greed.........it starts now.....vote for people who enhance the median income......raise the sea level.........but like the titanic......first class got off the boat.......steerage drown........America has to be taken back.

Sal - you are so right - I have been saying the same thing for years. I am a former financial planner, investment advisor, current CEO of a business that provides retirement plans to small businesses and individuals, and now the Executive Producer of a documentary on this topic.

If you would, check out the site for the documentary Broken Eggs Film: The Looming Retirement Crisis in America - www.brokeneggsfilm.com.

We would love for you to comment there and contribute to the conversation.

Thanks!

www.brokeneggsfilm.com

“…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…”

“…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, and Strauss, William. (1997). The Fourth Turning. Random House, Inc.

Howe and Strauss were not right-wing lunatic authors. They were historians who were simply looking into the future as they predicted the next great crisis for our nation, which they said would occur in the first 20 years of the new century. They wrote their book in 1997, and had no insights about 9/11 or the 2008 economic crash. However, their predictions are ringing true.

Broken Eggs wrote:Sal - you are so right - I have been saying the same thing for years. I am a former financial planner, investment advisor, current CEO of a business that provides retirement plans to small businesses and individuals, and now the Executive Producer of a documentary on this topic.

If you would, check out the site for the documentary Broken Eggs Film: The Looming Retirement Crisis in America - www.brokeneggsfilm.com.

We would love for you to comment there and contribute to the conversation.

Thanks!

www.brokeneggsfilm.com

Interesting site. You do a good job of making the point of being more self reliant when it comes to retirement planning. My concern is that you seem to be strong advocates for 401k plans which are not good retirement savings tools. Especially when it comes to retirement distributions. Am I misinterpreting your emphasis on 401k plans?

bizguy wrote:

Broken Eggs wrote:Sal - you are so right - I have been saying the same thing for years. I am a former financial planner, investment advisor, current CEO of a business that provides retirement plans to small businesses and individuals, and now the Executive Producer of a documentary on this topic.

If you would, check out the site for the documentary Broken Eggs Film: The Looming Retirement Crisis in America - www.brokeneggsfilm.com.

We would love for you to comment there and contribute to the conversation.

Thanks!

www.brokeneggsfilm.com

Interesting site. You do a good job of making the point of being more self reliant when it comes to retirement planning. My concern is that you seem to be strong advocates for 401k plans which are not good retirement savings tools. Especially when it comes to retirement distributions. Am I misinterpreting your emphasis on 401k plans?

Hi bizguy - thanks for the note - we emphasize personal savings, and right now under our current retirement system, the 401(k) is as good as it gets with immediate tax savings to help incentivize and subsidize savings. They have a lot of room for improvement for many reasons - and they are evolving, but we welcome the dialogue on what is a better way!

Broken Eggs wrote:

bizguy wrote:

Broken Eggs wrote:Sal - you are so right - I have been saying the same thing for years. I am a former financial planner, investment advisor, current CEO of a business that provides retirement plans to small businesses and individuals, and now the Executive Producer of a documentary on this topic.

If you would, check out the site for the documentary Broken Eggs Film: The Looming Retirement Crisis in America - www.brokeneggsfilm.com.

We would love for you to comment there and contribute to the conversation.

Thanks!

www.brokeneggsfilm.com

Interesting site. You do a good job of making the point of being more self reliant when it comes to retirement planning. My concern is that you seem to be strong advocates for 401k plans which are not good retirement savings tools. Especially when it comes to retirement distributions. Am I misinterpreting your emphasis on 401k plans?

Hi bizguy - thanks for the note - we emphasize personal savings, and right now under our current retirement system, the 401(k) is as good as it gets with immediate tax savings to help incentivize and subsidize savings. They have a lot of room for improvement for many reasons - and they are evolving, but we welcome the dialogue on what is a better way!

One of the problems (and there are many) with a 401k/403b type plan is the fallacy that you are better off funding your retirement with pre-tax dollars and delaying the tax bill until distribution. Would a farmer rather pay tax on the seed or the harvest? Of course, the correct answer is he would rather pay tax on the seed. The retirement planning industry has preached for years that your taxes will be lower when you retire. I know because that's what I was taught many years ago. What people don't take into account is that the average person has lost most of their tax deductions by the time they retire. Plus (IMO) tax rates are probably not getting any lower in the future.

Many people understand this which is why Roth IRA's are so popular. Of course, the 2 main problems with Roths are the contribution limit and the phase out for higher incomes. I don't think that will change significantly because Uncle Sam has a voracious appetite. The alternative is to use a tool that is funded with after tax dollars, distributes tax free dollars and has no contribution or income limits. Large corporations and banks have been using them for years to create $billions of safe money. The tool is a properly structured life insurance contract. I realize Dave Ramsey and Suze Ormon just choked on their lunch but you can't argue with math.

Thanks for trying to teach people to take ownership of their financial future and not rely on the government.

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

Now that would be interesting... If we do away with social security then the taxpayer won't have to pay that tax and they can just keep their money so they can invest it into a retirement plan they feel best for them.

Now I wonder what will happen to all of those people who are on SSDI for their disabilities?

Will they have to rely on charitable donations for their welfare as they did in the past?

*****CHUCKLE*****

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

oh noes... another manufactured crisis that we didn't see coming. I wonder what brilliant govt solution will fix it?

<sigh>

Several years ago ML conducted a survey concerning the amount of time spent planning for various expenses within a year.

#1 was vacation planning
#2 was tax filings
#3 was household budgets
#4 was retirement planning

People have no one to blame but themselves. 401ks if used properly are wonderful way to retire early. It's about retirement planning....

NaNook wrote:Several years ago ML conducted a survey concerning the amount of time spent planning for various expenses within a year.

#1 was vacation planning
#2 was tax filings
#3 was household budgets
#4 was retirement planning

People have no one to blame but themselves. 401ks if used properly are wonderful way to retire early. It's about retirement planning....

I agree that people put a low priority on retirement planning. Curious about why you think 401k plans are so wonderful? What age would you consider to be an early retirement?

bizguy wrote:

NaNook wrote:Several years ago ML conducted a survey concerning the amount of time spent planning for various expenses within a year.

#1 was vacation planning
#2 was tax filings
#3 was household budgets
#4 was retirement planning

People have no one to blame but themselves. 401ks if used properly are wonderful way to retire early. It's about retirement planning....

I agree that people put a low priority on retirement planning. Curious about why you think 401k plans are so wonderful? What age would you consider to be an early retirement?

Using my limited investment option 401k back in the 80s, I maxed out my matched contributions. I built a base and borrowed from my 401k to enhance my retail brokerage account while paying myself interest on my loan. I repeated the process every 3 years. Back in the 80s a 401 offered 3-4 investment choices. My brokerage account allowed me more investment choices.

I continued this practice for years. 401ks offered few choices, I'd borrow my money pay myself 6.25% interest and invest my money in a retail brokerage account. Forced savings.....

I retired at age 54 with 0=ZERO debt. I'm 62 now and will wait to collect social security. I never planned for social security.

Can I get a refund?

NaNook wrote:

bizguy wrote:

NaNook wrote:Several years ago ML conducted a survey concerning the amount of time spent planning for various expenses within a year.

#1 was vacation planning
#2 was tax filings
#3 was household budgets
#4 was retirement planning

People have no one to blame but themselves. 401ks if used properly are wonderful way to retire early. It's about retirement planning....

I agree that people put a low priority on retirement planning. Curious about why you think 401k plans are so wonderful? What age would you consider to be an early retirement?

Using my limited investment option 401k back in the 80s, I maxed out my matched contributions. I built a base and borrowed from my 401k to enhance my retail brokerage account while paying myself interest on my loan. I repeated the process every 3 years. Back in the 80s a 401 offered 3-4 investment choices. My brokerage account allowed me more investment choices.

I continued this practice for years. 401ks offered few choices, I'd borrow my money pay myself 6.25% interest and invest my money in a retail brokerage account. Forced savings.....

I retired at age 54 with 0=ZERO debt. I'm 62 now and will wait to collect social security. I never planned for social security.

Can I get a refund?

I'm glad it worked out for you. I assume you started distributions from your brokerage account in order to retire early. I would have gone a different route that was much more tax advantaged but if you're happy and comfortable that's what matters.

bizguy,

You need to warn people not to wait until they are 701/2 to draw down their assets. Start early....go slow.

I don't see people who paid into the system getting shafted for their SS. I can see people who never paid a dime into SSI losing it though and letting the states take care of these people. California pays SSI to people who are drug addicts as a disability. We pay SSI to children simply because they have a disability although many of them can work and look where we're at? Some of my students parents won't let them get a job for fear of losing their SSI.

NaNook wrote:bizguy,

You need to warn people not to wait until they are 701/2 to draw down their assets. Start early....go slow.

********************************************************

Could you elaborate a bit please . . . . . . . . I have that very looming issue and would appreciate your concerns. Thanks!

knothead wrote:

NaNook wrote:bizguy,

You need to warn people not to wait until they are 701/2 to draw down their assets. Start early....go slow.

********************************************************

Could you elaborate a bit please . . . . . . . . I have that very looming issue and would appreciate your concerns. Thanks!

I'm not sure what point NaNook was making. If you have questions regarding distribution from a qualified plan I'll be happy to answer them for you.

ZVUGKTUBM wrote:I watched that trailer, and class-wafare is on the horizon. .

Class warfare has been the norm since Jan 20, 2009.

bizguy wrote:

knothead wrote:

NaNook wrote:bizguy,

You need to warn people not to wait until they are 701/2 to draw down their assets. Start early....go slow.

********************************************************

Could you elaborate a bit please . . . . . . . . I have that very looming issue and would appreciate your concerns. Thanks!

I'm not sure what point NaNook was making. If you have questions regarding distribution from a qualified plan I'll be happy to answer them for you.

********************************************************

First, thanks for offering to assist my inquiries . . . . . NaNook seems to imply that people "should NOT wait and begin drawing down the account early" . . . . is it tax consequences or something else? I understand without having more specifics it puts you in a situation of giving a general answer without having more specifics . . . . . . if you could give me a hint as to the hazards ahead I would appreciate it . . . . . . .

knothead wrote:

bizguy wrote:

knothead wrote:

NaNook wrote:bizguy,

You need to warn people not to wait until they are 701/2 to draw down their assets. Start early....go slow.

********************************************************

Could you elaborate a bit please . . . . . . . . I have that very looming issue and would appreciate your concerns. Thanks!

I'm not sure what point NaNook was making. If you have questions regarding distribution from a qualified plan I'll be happy to answer them for you.

********************************************************

First, thanks for offering to assist my inquiries . . . . . NaNook seems to imply that people "should NOT wait and begin drawing down the account early" . . . . is it tax consequences or something else? I understand without having more specifics it puts you in a situation of giving a general answer without having more specifics . . . . . . if you could give me a hint as to the hazards ahead I would appreciate it . . . . . . .

The only time that age 70 1/2 comes into play with a qualified retirement fund is to trigger the Required Minimum Distribution (RMD). The IRS requires that you take a minimum distribution each year once you turn 70 1/2 from your qualified retirement plan or pay a substantial penalty.

NaNook wrote:bizguy,

You need to warn people not to wait until they are 701/2 to draw down their assets. Start early....go slow.

Exactly. It takes someone who takes SS at age 70 nearly 14 years to catch up with the person who takes it even at the reduced rate offered at age 62. I'm taking mine at 63 because that will be my 35th year as a state employee and I'll exit with the DROP money then. I'll hand out smiley stickers at Wally World to kids at the front door if I need to work more at that time. Hopefully not.

The only time that age 70 1/2 comes into play with a qualified retirement fund is to trigger the Required Minimum Distribution (RMD). The IRS requires that you take a minimum distribution each year once you turn 70 1/2 from your qualified retirement plan or pay a substantial penalty.

**********************************************************

Nanook implied to take distribution early and to go slow . . . . . . . no commentary followed for his logic which made me curious. I will be 69 in October. NanNook's implication that people should consider withdrawing early (before 70 1/2) but do it slowly . . . . . . . is this in your view tax consequences or something else?

knothead wrote:
The only time that age 70 1/2 comes into play with a qualified retirement fund is to trigger the Required Minimum Distribution (RMD). The IRS requires that you take a minimum distribution each year once you turn 70 1/2 from your qualified retirement plan or pay a substantial penalty.

**********************************************************

Nanook implied to take distribution early and to go slow . . . . . . . no commentary followed for his logic which made me curious. I will be 69 in October and have a net asset value of perhaps 1.5 to 1.6 M with a substantial annuity linked to the DOW and Libor with an anniversary date tomorrow in fact. NanNook's implication that people should consider withdrawing early (before 70 1/2) but do it slowly . . . . . . . is this in your view tax consequences or something else?

I suspect he was referring to the RMD penalty that kicks in at age 70 1/2. Any of your funds that are in a qualified retirement account such as an IRA or 401k/403b are subject to the RMD. If your annuity is not part of an IRA then it is not subject to the RMD.