7/23/2012 3:47 PM ET|
5 reasons boomers will go bust
Millions of baby boomers will retire in the next 2 decades. Many haven't prepared enough -- and they face a shocking reality.
AIG CEO Robert Benmosche said in June that in light of the euro crisis, retirement ages in Europe would have to move to 70 or 80 years old to make pensions and health care affordable for younger people. Though that's not likely to happen in Europe any time soon (we're talking about countries like France, which erupted in violent protests over a proposal to raise the age from 60 to 62), Benmosche is not alone in his doomsday predictions.
In the United States, retirement has also reached a critical point. Seventy-seven million baby boomers are slated to retire over the next 20 years, with approximately 10,000 reaching retirement age every day, while 401k accounts have been drained by the recession, pension systems are strained and Social Security coffers are being drained of money.
Here are five worrisome facets of the looming U.S. retirement crisis:
The unplanned retirement
Americans have never excelled at retirement planning, but the economic downturn has made them even less prepared. More than 60% of workers in a recent survey said they've lost confidence in their retirement plans since 2007, according to the Transamerica Center for Retirement Studies. The survey also found that more than half (54%) of workers in their 60s said they haven't saved enough to sustain themselves for the rest of their life.
A recent report from the Employee Benefit Research Institute (EBRI) found similar results. Just 14% of those surveyed were very confident they will have enough money to live comfortably in retirement. Even more shocking? Sixty percent of workers reported that the total value of their households' savings and investments (not including the value of their homes and any official retirement benefit plans) was less than $25,000.
Though the majority of Americans now depend on employee-provided 401k accounts for their retirement, according to the Transamerica report, 23% of workers don't participate in an employer-provided retirement plan. Another report, from the financial industry think tank LIMRA, found that nearly half (49%) of Americans aren't saving for retirement at all.
For those who do contribute to a 401k plan, the Transamerica report found that the average contribution level has dropped to 7% of an employee's annual salary (the commonly recommended amount is 10% to 12%), and the average balance in a 401k account is just over $60,000, according to the EBRI. For those who are 10 years away from their planned retirement age, more than a third have saved less than $25,000 (that's $875,000 short of the EBRI's suggested $900,000 that a typical person would need to live out his or her retirement years).
The 80-year-old worker
Though 65 is considered the official retirement age in the United States (the year someone born in 1947 or earlier is eligible to receive Social Security benefits), the reality is much different. Eighty-six percent of workers in their 60s predict they will work past age 65, according to the Transamerica report. And one quarter of middle-class Americans plan to delay retirement until they are at least 80 years old (currently life expectancy in the U.S. is 78), according to a Wells Fargo poll in November. Essentially, many Americans are planning to work until they die.
Too sick to retire
According to a recent report from Fidelity Investments, a 65-year-old couple this year would need an estimated $240,000 to cover medical costs through retirement (and that's including traditional Medicare coverage), a 50% increase since Fidelity first did the study in 2002, and up from $230,000 last year.
At the same time, most people have no idea how much they need to save for medical costs in old age. In a Nationwide Financial survey, boomers guessed they would need about $5,600 a year to cover out-of-pocket costs (or about $112,000 in total), less than half of the Fidelity Investments estimate. Many of those interviewed in the survey reported being "terrified" of what health care costs may do to their retirement plans.
A program in peril
The latest annual trustees' report for Social Security projected that the program's trust fund will be exhausted by 2033, three years earlier than last year's estimate. When the fund runs dry, the government will be able to pay only 75% of the promised benefits to retirees. Meanwhile, the Medicare trust fund will be exhausted by 2024, according to the report. The main reason for the accelerated timeline is the sluggish economy and high unemployment, causing total earnings in 2011 to be 1.6% less than expected. "Lawmakers should address the financial challenges facing Social Security and Medicare as soon as possible," the report said.
More from The Fiscal Times:
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Wall Street, aided by our Corrupt Congress, makes sure America's non-wealthy are considered pawns to be manipulated and monetarily milked of their money.
1. No Tenure / No Pension.
2. A Congressman/woman or senator collects a salary while in office and receives no pay when they're out of office.
3. Congress (past, present & future) participates in Social Security. All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.
4. Congress can purchase their own retirement plan, just as all Americans do.
5. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.
6. Congress loses their current health care system and participates in the same health care system as the American people. (ObamaCare).
7. Congress must equally abide by all laws they impose on the American people.
8. All contracts with past and present Congressmen/women or senators are void effective 1/1/12. The American people did not make this contract with Congressmen/women.
9. Congressmen/women and senators serve for no more than two terms then they are out of office and can never run again or work as congressional or senatorial staff or lobbyists. Violators get 30 years in federal prison with no parole.
I'm in my 40's ..have worked all my life..living in one of the most expensive states in the USA, I dont know anyone including myself who has enough money to retire....this economy sucks, you cant make any interest in a savings account..I dont trust the little money i have in the stock market....and a layoff a few years ago forced us to withdraw our 401K just to survive till we got working again....what is a person supposed to do when 80 percent of your income goes to rent and utilities, the rest on food and gas.....I am a very frugal person, most people call me cheap, but I'm not in debt, I just dont have much money. I simply dont see how it's possible to save for retirment at all, if social security goes away in a few years theres gonna be alot of people on soup lines again or something because there comes a point in your life when nobody will hire you anyway so you cant work till you die even if your body allowed it !!!!
It's scary living in these times !
This site needs a moderator to delete all the "life is so lonely" ads. Start by spamming them with a denial of service attack. MSN has plenty of resources to visit their website, say, 100 million times a day (or hour). I say, go for it! Send a few hundred thousand replies that look serious, and let them sort them out.
I've made a buck or three writing software. Would anyone be willing to pay a mere dollar for a program that accepted a spam web URL and visited them a few hundred thousand times a day? You'd just enter your favorite trash site and it would visit the page over and over and over. Multiply that by zillions of offended people and we could put a dent into such nuisances.
Even better, if they give an email address, it could send them lots of spam.
By the way, if your government and mine wanted to stop spam, they could do it easily. At the end of nearly every spam is someone who is trying to make a buck. Just follow the money! It's not even hard.
Hey all you downthumbers, you have to understand I have a very physical job. A job that I am sure most of you would not and/or could not do. Eighty? No way.
This clown from AIG has the nerve to sit there and tell us we're screwed? His company helped screw us.
Here's what did those of us who tried to save in:
Credit Default swaps, derivatives and similar paper scams tanked the economy while these bastards made out like bandits. They also peddled this paper crap to Europe and crashed their economy. Goldman Sachs managed Greece's inveatments. The result, your 401K gets drained and their bounuses increase.
Healthcare: Largest cause of bankruptcies, but hey, we have the best system in the world. Yeah, for those who can afford it.
Health insurance: Give us a lot of your money, then go away. When people complain, blame trial lawyers. Note ins cos pay less than 2% of profits to malprac claims. If med malprac disables a loved one for life, you think a couple hundred grand will be enough?
Reinstate Glass-Steagall. If these clowns want to play casino, let them do it with their own money. Prosecute clowns like the AIG's Benmousche. Oh, yeah they bribed politicians to make the illegal legal.
SS: Raise the index to 150K. Result, solvency for decades.
Healthcare: Single payer, or mandate that healthcare insurance providers be not for profit (like Germany).
My advice to anyone working is qiut trying to keep up with the Jones. To be able to retire at a decent age is to be debt free at that age. Don't keep up grading your house. To be able to retire you need to own your house. So what ever you do make sure you own your house. Everything else will fall in line. House payments at an older age is a killer.
This could be avoided if the government would quit sending money to other countries, level them with wars & promise to rebuild. Most of the money is stolen by our government & dictators. Meanwhile our soldiers are killed & eventually there will be nobody to protect us here.
The mirror doesn't reflect the real person, and the amount of money you retire with doesn't reflect how hard you worked. We have income inequality for work. Some people work hard and are paid low wages. It is hard for them to save. I think sports people are paid millions and I don't get it, things are out of balance. How does a high paid golfer make the world a better place? What is really fair for people is to fix the wage problem.
Have a wall street guy clean rooms, or pick strawberry's all day in the hot sun, then talk about retirement. He doesn't relate to their needs.
Here is a novel idea: Dump the credit cards and stop going out to eat and buying garbage at some crappy convenience store. When you realize you have money, save and invest it. Social Security is done, and even if it isn't - you'd live like some pathetic old person trying to get by on 1300 dollars a month on social security. Rather than buy the ridiculous house, live within your means and save the money. "Oh, the poor old person" you say. Well, they should have saved their money rather than live beyond their means. My grandmother saved her money and lived like a champ after she retired. I just witnessed a family of six pull up to a Texas gas station with a broken tail light on their minivan. They bought $35 in crap for their little fat kids. What the parents should have done was fix the darn tail light!
Trickle Down definition, someone pissing down your back and telling you it's raining!
Outsourcing, there goes your living wage job!
Legacy Cost, there goes your retirement and health insurance!
Congress the most worthless organization ever devised for the working and middle class since the lobbyist were turned loose in DC! If only the had to wear overalls as they do in NASCAR with all the promoters insigna on them, then at least we could tell which corporation owned them!
Bright side is since the Supreme Court said the corporations a a person and can now spend all they want to either elect or defeat a candidate to their liking or someone they oppose the lobbyist jobs may be in peril. Now a corporation can buy their candidate direct and cut out the middle man! Oh and congress can't seem to pass legislation that discloses where all the money comes from, the big money donors can remain anonymous.
The baby boomers may be toast but everybody coming after will be screwed also, all brought to you by the best government money can buy!
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