Came across an interesting 2¢ video on Youtube basically discussing what you need to do to have a shot at retirement.. needless to say it got me thinking.. and here’s my own 2cents conclusion..
Great video but oohhh 2¢ , way too optimistic with those projections. The short answer is that thanks to wealth inequality , probably 20-25% of retirees will live comfortably (from a financial perspective) , the rest of Americans are screwed, and will rely on Social security to eak out a basic retirement.
Look at the facts the vast majority of Americans have meager 401k balances, Social Security benefits will need to be reduced, its inevitable as they themselves project by 2034, and the few that still have public pensions can expect , can count on lots of under funded pensions and expect a haircut in those benefits as those revenues dry up to. And those without any savings well that’s where the real tragedy begins.
- My issues with the video.. 1st. issue is these market projections are way to optimistic. The classic 10% annualized returns from the market (Which they scaled back 7.5%) is not guaranteed. The #1 disclaimer about investing is past returns are NO GUARANTEE of future results. Sure economists like to say things will even out in the long run, but if the bulk of you’re long run happens to be during a major and prolonged stock market downturn, your out of luck. Don’t think it can happen, go look at Japan’s Nikkie it peeked in 1990 at about 38K, now 2019 (about 30 years later, a working lifetime), its at 20K, What if that happens to the US markets. With a changing world demographics its not out of the question, by most standard measure the current market is quite over-valued.
- 2nd. Betty is going to work regularly for the next 30 years, contributing 15% , c’mon, that’s so unlikely (especially in today’s job market) that someone will stay with their employer for so long and receive a consistent paycheck, without any breaks.. will Betty have kids? will she get married , then divorced? will she need to take time off to help an aging family member? Will her employer merge making he job made obsolete?.. the list goes on…and don’t even get me started on automation..
- 3rd Most folks especially those starting out, simply can’t sock away 15% of their pay, its too much of a burden, when you consider the high cost of living in any city that offers reasonable wages, its a high threshold even if they’re frugal and disciplined enough . Sure over time they can sock away some money, but not likely enough to make a difference.
- 4th There’s a ton of under funded liabilities, besides Social Security, you have Medicare/Medicaid and the thousands of municipal and public pensions.
- Finally, a point they briefly addressed but needs more consideration, the value of money, aka inflation over time, means all those meager savings if they don’t grow AT LEAST to keep up with inflation, will be worth so much less…
How the 1% plan on spending retirement..
I don’t have the answers, how to fix this, but until there’s some serious political will to make the hard choices, a lot of Americans through no fault of their own will likely live their retirement years scrimping and tightening their belts just to live a basic life in their golden years.
In any event do SUBSCRIBE to Two Cents! https://goo.gl/jQ857H they have a really useful and informative no-nonsense finance and economics channel..
Defined benefit plans are a scam, and very likely going to be the cause of yet another economic crash down the line. If you think our 22 trillion national debt is bad, the 160 trillion in “unfunded obligations” (aka defined benefit plans, like social security and government pensions) is utterly nightmarish.?
The one thing that $1.18M dollar retirement nest egg doesn’t take into account the skyrocketing price of health care, especially drug prices. You mention how federal policy has put the burden on workers rather than on policy. While I agree that we need to take some responsibility for our own choices, isn’t there a failure here in policy, too? I think you should have put out a call to address the failure of the public systems that are basically saying to workers in the USA: “Retirement is a lie. You will work until you die.”?
I find it quite hilarious that people talk about saving for retirement when we are on the cusp of a radical socio-political transformation due to climate change and runaway capitalism. Society will likely devolve to a neofeudal system where billionaires control everything and provide safety/shelter for people in exchange for service in their private militia.?