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The Coming Retirement Crisis Will Affect Everyone

January 3, 2022

The Coming Retirement Crisis Will Affect Everyone

We are on the cusp of a retirement crisis that will affect everyone. Far too many promises have been made and the demographics we face do not bode well for a bright future. The answer that some people tout is we should have more children or open the borders. This is based on the idea we need more workers and ignores many other factors feeding into this issue. There is simply no way “more children” or workers can ever pay enough into the system to fulfill the promises that have been made.The competition for programs from the government to support the needs of different generations is about to explode as young and old Americans reach out for more help. Much of our problems stem from a slew of bad policies either driven by stupidity, corruption, or an unwillingness to accept the reality you can postpone a reckoning for only so long. Investors and the public at large suffer from a “recency bias of hope” that tends to blind them from unpleasant long-term realities. 

The coming together of surging investment risk, an interrupted business cycle, and demographics are coming together to form the perfect storm. To clarify, much of the wealth in America is held in the hands of the baby boomers that have just or are about to retire, and over the years, many have moved into risky investment in search of yield. It has been years since we have had a major recession so sooner or later, it is logical one will arrive. Last, but not least, we are now seeing demographics play a larger role in the economy as boomers downsize (sell assets) and cut spending.

…click on the above link to read the rest of the article…

Retire early… to save the planet?

December 10, 2019

Retire early… to save the planet?

If it’s not this, it must be the opposite.

How often do you witness this sort of thinking? When I pay attention I find it’s everywhere, framing nearly every argument. Author Daniel Quinn calls it two-handedness: imagining there are only two options, usually framed as opposites. Democrat or Republican. City or country. When it comes to addressing our environmental challenges, the dichotomy is between individual consumer choices or collective action.

Dog and cat warm up together by the wood stove

Are you a cat or a dog person? That question is SO two-handed. I prefer the pile-o-pet that forms in front of my wood stove. They slept there peacefully for a long time until the cat did that claw-kneading thing to the dog. Then the peace was broken.

Before you misunderstand me, let me state clearly that I am not against collective action. I’m all for it. The assumption that it must be one or the other is a major flaw in two-handed thinking. Good answers to our problems should contain both, or rather, neither.

Recent opinion (George Monbiot gives an example) champions collective action, and rejects individual consumer choices, not without good reason. “Buying green” is fantastic marketing, but an ecological wash. Although it arguably makes your laundry smell better, choosing Seventh Generation over Tide does not help the earth much. Even choosing a Tesla over a Corolla may not make a big difference.

But I think Monbiot and the rest of us are also wrong about individual consumption. There is a consumer choice that can change your personal impact for the better. That choice is not to consume.

Not consume? But a person has to eat! Okay, that’s true. I’m not suggesting you go on an air diet. Stick with me for a minute.

…click on the above link to read the rest of the article…

Doug Casey on the Year the World Falls Apart

March 23, 2019

Doug Casey on the Year the World Falls Apart

Justin’s note: It’s “Totally Incorrect” week here at Casey Research…

We’ve shared Doug Casey’s uncensored insights – on topics ranging from the climate change hoax to the next 9/11-type event.

But today’s essay may be the most controversial one yet…

Doug says a disaster of historic proportions is on the menu for 2019.

And it’s critical to understand what’s happening.

Read on for four specific predictions about what lies ahead. Some of these predictions may seem outlandish… but you owe it to yourself to hear what he has to say…

By Doug Casey, founder, Casey Research

Prediction 1: The End of Retirement

The average American can forget about retirement. We’ve all heard these stories about how the average American couldn’t lay his hands on $1,000 to save his life. His expenses aren’t going away, however, even if his income does.

It seems like things have reached a critical mass. And if the economy slows down there are going to be a lot of people losing their homes again. They’ll be unable to pay their credit card bills, their car payments, their student loans, or anything else. They aren’t going to be able to buy anything. They wound up in breadlines in the ’30s. But today 40 million Americans have SNAP cards to take away the hunger pains and embarrassment of being penniless. There could be 100 million in a few years.

I know this sounds outrageous because right now everything is running fairly smoothly. The standard of living of the average middle-class American has degraded slowly over decades but hasn’t yet totally collapsed. But that’s the way it is a day before a volcano explodes, or a day before an earthquake, or minutes before an avalanche starts coming down.

 …click on the above link to read the rest of the article…

Will Your Retirement Efforts Achieve Escape Velocity?

November 4, 2018

Will Your Retirement Efforts Achieve Escape Velocity?

Sadly, most of us will outlive our savings

The concept of ‘retirement’, of enjoying decades of work-free leisure in your golden years, is a relatively new construct. It’s only been around for a few generations.

In fact, the current version of the relaxed, golfing/RV-touring/country club retirement lifestyle only came into being in the post-WW2 boom era — as Social Security, corporate & government pensions, cheap and plentiful energy, and extended lifespans made it possible for the masses.

But increasingly, it looks like the dream of retiring is fast falling out of reach for many of today’s Baby Boomers. Most will outlive their savings (if they have any at all).

And the retirement prospects look even worse for Generations X, the Millennials, and Gen Z.

A Bad Squeeze

While the US enjoyed a wave of unprecedented prosperity throughout the 20th century, the data clearly shows that halcyon era is ending.

Real wages (i.e., nominal $ earned divided by the inflation rate) for the average American worker have hardly budged since the mid-1960s:

Yet the cost of living has changed dramatically over the same time period. Note how the rate of increase in the Consumer Price Index (CPI) started accelerating in the late ’60s and never looked back:

Squeezed between stagnant wages and a rising living costs, perhaps it should be little surprise that so many Americans are having difficulty finding anything left over to save for retirement.

We’ve written about this extensively in our past reports, such as Let’s Stop Fooling Ourselves: Americans Can’t Afford The Future and The Great Retirement Con. But as a way of driving the point home, here are some quick sobering stats from the National Institute On Retirement Security:

  • The median retirement account balance among all working US adults is $0. This is true even for the cohort closest to retirement age, those 55-64 years old.

…click on the above link to read the rest of the article…

Book Excerpt: How You Got Screwed

April 25, 2018

Book Excerpt: How You Got Screwed

Chapter 4: How you’re getting screwed by…Retirement Promises

The Point: Most people have an expectation that they’ll be taken care of later in life thanks to government programs like Social Security and Medicare, private or public pensions, or through their own efforts to build up their net worth. In reality, it was never possible for governments and corporations to fulfill the promises they made to you, and those assets you saved may not be worth what you think they will be, when it’s time to cash them in.

There is a predictable pattern to life: We start out as dependent children; grow to be independent adults; and, inevitably, become dependent again as we move into old age. We know this is coming; not a single person in history has avoided it. So it’s important for us to plan for that while we’re in our prime.

Unfortunately, the vast majority of Americans are completely unprepared for the 100 percent certainty of old age. There are many reasons for this:

  • Because we live in a debt- and credit-driven society, we have come to think only of our immediate needs and wants. There’s no need to save for the things we want to buy: We just borrow the money and promise to pay for it later. This mindset not only means that we’re hard-wired against saving, it also means we’re probably going to grow old with a pile of debt—all those things we said we’d pay back in the future. We have some assets—notably our home equity—but all that debt keeps our net worth low.
  • We’re about to deal with a huge demographic bubble—the aging of the huge Baby Boomer population—which will result in a selling frenzy of the assets they accumulated in better times. Asset prices will crash due to little demand and huge supply of those assets.

 

…click on the above link to read the rest of the article…

The Importance Of Knowing

November 28, 2017

The Importance Of Knowing

Without insight, action is useless

At Peak Prosperity, we strive to help people advance in three key areas: Knowing, Doing and Being.

Doing and Being are the resilience-building steps we recommend. Helping folks develop their own personal action plans in these areas is the main focus of the seminars we run.

But Knowing? That’s the essential first part to master. Without sufficient understanding and insight to guide you, any action you take is merely groping in the dark.

That’s why Chris and I spend the majority of our time info-scouting: following the data and analyzing where macro trends are likely to head next given the latest developments.

We dedicate so much time and energy to this because it’s not the domino that’s falling today that matters. What’s much more important is: Which dominoes will fall tomorrow as a result?

And make no mistake, the pace of falling dominoes is accelerating. From the geo-politically destabilizing regime change in Saudi Arabia, to the ending of the central bank liquidity bubble, to the largest species extinction wave in millennia, to the bursting retirement dreams of the Baby Boomer generation, to the fast-worsening net energy predicament — change is afoot. The relative calm of the false ‘recovery’ that the world’s central planners engineered in response to the Great Financial Crisis has reached its terminus.

Now, more than ever in recent years, understanding where events are headed next is critical to preserving your wealth and well-being.

Being keenly aware of this, Chris and I have been working for months on solving the question: How can we better arm people with the insights and answers they need to take informed action in their lives?

…click on the above link to read the rest of the article…

Stagnation Nation: Middle Class Wealth Is Locked Up in Housing and Retirement Funds

October 25, 2017

Stagnation Nation: Middle Class Wealth Is Locked Up in Housing and Retirement Funds

The majority of middle class wealth is locked up in unproductive assets or assets that only become available upon retirement or death.

One of my points in Why Governments Will Not Ban Bitcoin was to highlight how few families had the financial wherewithal to invest in bitcoin or an alternative hedge such as precious metals.

The limitation on middle class wealth isn’t just the total net worth of each family; it’s also how their wealth is allocated: the vast majority of most middle class family wealth is locked up in the family home or retirement funds.

This chart provides key insights into the differences between middle class and upper-class wealth. The majority of the wealth held by the bottom 90% of households is in the family home, i.e. the principal residence. Other major assets held include life insurance policies, pension accounts and deposits (savings).

What characterizes the family home, insurance policies and pension/retirement accounts? The wealth is largely locked up in these asset classes.

Yes, the family can borrow against these assets, but then interest accrues and the wealth is siphoned off by the loans. Early withdrawals from retirement funds trigger punishing penalties.

In effect, this wealth is in a lockbox and unavailable for deployment in other assets.

IRAs and 401K retirement accounts can be invested, but company plans come with limitations on where and how the funds can be invested, and the gains (if any) can’t be accessed until retirement.

Compare these lockboxes and limitations with the top 1%, which owns the bulk of business equity assets. Business equity means ownership of businesses; ownership of shares in corporations (stocks) is classified as ownership of financial securities.

…click on the above link to read the rest of the article…

Red Flag Warning: These California Wildfires Are ‘Among The Most Destructive Fire Events In US History’ And They Are About To Get Even Worse

October 11, 2017

Red Flag Warning: These California Wildfires Are ‘Among The Most Destructive Fire Events In US History’ And They Are About To Get Even Worse

The wildfires that are roaring through northern California are already “among the most destructive fire events in U.S. history”, and by the time it is all said and done this could be the worst wildfire season in the history of the state.  So far, fires have scorched more than 250 square miles, and more than 3,500 homes and businesses have already been destroyed.  The official death toll has risen to 21, but that is expected to rise dramatically because over 600 missing persons reports have been filed with authorities.  The worst damage has been done in Napa and Sonoma counties, and you can see some deeply troubling photos of the devastation here and here.

Unfortunately, this crisis is far from over.  In fact, the National Weather Service has just issued a pair of “red flag warnings”…

The weather forecast is not looking good for those living in wine country, and for those firefighters trying to get a handle on the 22 wildfires raging through Northern California, which broke out Sunday and are barely contained more than three days later.

The National Weather Service issued a red flag warning for the North and East bays starting at 5 p.m. Wednesday and midnight on Thursday respectively.

That means winds can gust from 20 mph to 50 mph in the higher elevation areas, fanning the flames down mountains and into the cities.

So as bad as things are at this moment, the truth is that they are going to get even worse over the next 24 hours.

And that is quite sobering to hear, because this is already one of “the most destructive fire events in U.S. history”…

…click on the above link to read the rest of the article…

Global Retirement Reality

October 1, 2017

Global Retirement Reality

Global Shortfall
UK Time Bomb
Swiss Cheese Retirement
Pay-As-You-Go Woes
Lisbon, Denver, Lugano, and Hong Kong

Today we’ll continue to size up the bull market in governmental promises. As we do so, keep an old trader’s slogan in mind: “That which cannot go on forever, won’t.” Or we could say it differently: An unsustainable trend must eventually stop.

Lately I have focused on the trend in US public pension funds, many of which are woefully underfunded and will never be able to pay workers the promised benefits, at least without dumping a huge and unwelcome bill on taxpayers. And since taxpayers are generally voters, it’s not at all clear they will pay that bill.

Readers outside the US might have felt smug and safe reading those stories. There go those Americans again, spending wildly beyond their means. You are correct that, generally speaking, we are not exactly the thriftiest people on Earth. However, if you live outside the US, your country may be more like ours than you think. Today we’ll look at some data that will show you what I mean. This week the spotlight will be on Europe.

First, let me suggest that you read my last letter, “Build Your Economic Storm Shelter Now,” if you missed it. It has some important background for today’s discussiion, as well as a special invitation to attend my Strategic Investment Conference next March 6–9 in San Diego. With so much change occurring so quickly now, next year’s conference is an event you shouldn’t miss.

Global Shortfall

I wrote a letter last June titled “Can You Afford to Reach 100?” Your answer may well be “Yes;” but, if so, you are one of the few. The World Economic Forum study I cited in that letter looked at six developed countries (the US, UK, Netherlands, Japan, Australia, and Canada) and two emerging markets (China and India) and found that by 2050 these countries will face a total savings shortfall of $400 trillion.

…click on the above link to read the rest of the article…

The Ticking Time Bomb That Will Wipe Out Virtually Every Pension Fund In America

March 31, 2017

The Ticking Time Bomb That Will Wipe Out Virtually Every Pension Fund In America

Are millions of Americans about to see the big, juicy pensions that they were counting on to fund their golden years go up in flames in the biggest financial disaster in U.S. history? When Bloomberg published an editorial entitled “Pension Crisis Too Big for Markets to Ignore“, it simply confirmed what a lot of people already knew to be true.  Pension funds all over America are woefully underfunded, and they have been pouring mind boggling amounts of money into very risky investments such as Internet stocks and commercial mortgages.  Just like with subprime mortgages in 2008, this is a crisis that everyone can see coming well in advance, and yet nothing is being done about it.

On a day to day basis, Americans generally don’t think very much about pensions.  Most of those that have been promised pensions simply have faith that they will be there when they need them.

Unfortunately, the truth is that pension plans all over the country are severely underfunded, and this has already resulted in local fiascos such as the one that we just witnessed in Dallas.

But what happened in Dallas is just the very small tip of a very large iceberg.  According to Bloomberg, unfunded pension obligations on a national basis “have risen to $1.9 trillion from $292 billion since 2007″…

As was the case with the subprime crisis, the writing appears to be on the wall. And yet calamity has yet to strike. How so? Call it the triumvirate of conspirators – the actuaries, accountants and their accomplices in office. Throw in the law of big numbers, very big numbers, and you get to a disaster in a seemingly permanent state of making. Unfunded pension obligations have risen to $1.9 trillion from $292 billion since 2007.

And of course that $1.9 trillion number is not actually the real number.

 

…click on the above link to read the rest of the article…

Simultaneous Elderly Overpopulation, Youth Depopulation & The Impact on Economic Growth

April 25, 2016

Simultaneous Elderly Overpopulation, Youth Depopulation & The Impact on Economic Growth

Strangely, the world is suffering from two seemingly opposite trends…overpopulation and depopulation in concert.  The overpopulation is due to the increased longevity of elderly lifespans vs. depopulation of young populations due to collapsing birthrates.  The depopulation is among most under 25yr old populations (except Africa) and among many under 45yr old populations.
So, the old are living decades longer than a generation ago but their adult children are having far fewer children.  The economics of this is a complete game changer and is unlike any time previously in the history of mankind.  None of the models ever accounted for a shrinking young population absent income, savings, or job opportunity vs. massive growth in the old with a vast majority reliant on government programs in their generally underfunded retirements (apart from a minority of retirees who are wildly “overfunded”).  There are literally hundreds of reasons for the longer lifespans and lower birthrates…but that’s for another day.  This is simply a look at what is and what is likely to be absent a goal-seeked happy ending.

In a short yet economically valid manner, every person is a unit of consumption.  The greater the number of people and the greater the purchasing power, the greater the growth in consumption.  So, if one wanted to gauge economic growth, (growth in consumption driving economic growth), multiply the annual change in population by purchasing power (wages, savings) per capita.  Regarding wage growth, I hold wages flat as from a consumption standpoint, wage growth is basically offset by inflation.  Of course, there is another lever beyond this which central banks are feverishly torqueing; substituting the lower interest rates of ZIRP and NIRP to boost consumption from a flagging base of population growth.

…click on the above link to read the rest of the article…

Seniors going bankrupt in soaring numbers

June 29, 2015

Seniors going bankrupt in soaring numbers

More Canadians are outliving their savings and spending their golden years in debt

Judy Southon never imagined it would come to this. She and her husband Vic had good jobs, raised a son and were homeowners. But after a run of bad luck, the 67-year-old wound up deep in debt and had to declare bankruptcy.

“I was scared and shocked,” says Southon, who lives in Toronto.

The golden years have become a tarnished chapter for some. Seniors are carrying more debt into retirement and, as a result, a growing number are going bankrupt.

According to the federal Office of the Superintendent of Bankruptcy, 10 per cent of those who declared bankruptcy in 2014 were aged 65 and older.  That’s a whopping 20.5 per cent increase from 2010.

Spend savings, pile on debt

One of the reasons is actually a plus — we’re living longer. “For many of us, we’re outliving our savings,” explains Nora Spinks with the Vanier Institute of the Family, a non-profit research organization.

Another driving force is that more seniors are retiring in the red.According to Statistics Canada‘s most recent numbers, in 2012, 42.5 per cent of people aged 65 and over still had debt. That’s a stunning increase of 55 per cent since 1999.

Bankruptcy trustee Doug Hoyes blames the lingering debt largely on our addiction to low interest loans.

“If you’ve got decent credit, you can go out and get a mortgage for 2.5 per cent. So why not be buying the bigger house?” he says. “Today we don’t need to save because we all have a line of credit.”

But paying down debt in your senior years can be challenging on a fixed income. Throw in an unplanned setback like a financially needy adult child or a family illness and the bills can become crushing.

 

…click on the above link to read the rest of the article…

Younger workers more likely to see less income in retirement, CIBC says Average person born in ’80s and after may see only 70% of pre-retirement income, economist Benjamin Tal says

June 3, 2015

Younger workers more likely to see less income in retirement, CIBC says

Average person born in ’80s and after may see only 70% of pre-retirement income, economist Benjamin Tal says

Urgent attention needs to be given to what Canadians can expect to get in retirement income — something that’s become a real divide along generational lines, a prominent Canadian economist says.

In a note to clients this week, Benjamin Tal at CIBC waded into the ongoing debate over Canada’s looming pension and retirement crisis.

While falling well short of endorsing any of the myriad proposals out there to fix the problem, including beefing up the Canada Pension Plan, encouraging more individual savings by expanding RRSPs and TFSAs or something else, Tal is unequivocal in his view that declining retirement income is a problem needing a solution — and soon.

After running a simulation of pension income across a wide variety of age ranges, Tal found a clear deliniation between those in retirement now or approaching it, and those who won’t get there for several years or decades.

In today’s economy, few people rely on any one source of retirement income, with most people drawing on a combination of their own investments such as RRSPs, TFSAs and real estate, government programs such as CPP and things like pension plans that they may have accrued from employers over a lifetime of work.

In general, Tal says, “the typical 70-year-old today has enough income to maintain his or her pre-retirement standard of living, taking into account the typical drop in expenses in one’s post-working years.”

Generational gap

But while millions of Canadians 65 and up are on a path to the retirement of their dreams, the data show that millions of others are headed for a steep decline in living standards in the decades ahead, particularly people who are younger and are in middle-income brackets.

 

 

…click on the above link to read the rest of the article…

The First-World Fear That Makes Life Harder

May 24, 2015

The First-World Fear That Makes Life Harder

Here in the so-called First World, we give up a lot because of an exaggerated fear of a particular feeling.

It’s usually pretty subtle, but I see this fear made explicit whenever Mr Money Mustache or other early-retirement advocatesget national news coverage. The comment sections of these major publications are always vile, and I don’t recommend you read them, but if you do you will notice a trend. Even when Pete explains the shockingly simple math that proves early retirement is possible for people of average incomes, commenters insist they would prefer to leave their lifestyle costs unchanged than retire twenty years earlier but “live a life of deprivation”.

This unexamined fear of deprivation has a huge effect on our lives. Consumers go into debt because they’re afraid of going without something they’re used to. We eat too much because we’re afraid of being disappointed by small portions. We continue bad habits for years because the thought of disallowing ourselves to do something we enjoy feels oppressive. “We deserve it!” we tell ourselves. Or at least advertisers tell us to tell ourselves that.

The strange thing is that usually it’s not even real deprivation. These are all choices. The big purchase, the extra calories, and the indulgent habit are always available to you to take or leave.

…click on the above link to read the rest of the article…

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