Retirement Concerns

I wrote this article knowing full well that I’m going to sound like a broken record but I believe the subject matter is to important to ignore. Last week I wrote an article about the impending insolvency of Social Security and pointed out why it is so important to save for your own retirement. Basically, why you should never depend on the government for your retirement security. Then this week I saw two Bloomberg articles that caught my eye.

The first was about a global retirement security survey. The survey looks at numerous factors from 43 different developed nations. The US dropped 3 slots this year to number 17 on the list. The report listed income inequality and a short life expectancy as reasons why the US fell in the rankings. Those are issues, I’m not saying they aren’t, but the bigger issue in my opinion is our nations dependence on Social Security.

You see news articles all the time pointing out how little Americans have saved for retirement. Many times these surveys show 30% or more haven’t saved anything at all. You have a program that is broken and heading off the rails. So far no one has been willing to wade into the waters to fix it, save it somehow. Throw into the mix the declining ratio of people paying into the system versus taking out, something the article noted, and now you have a recipe for disaster.

As I’ve said before, your retirement security is just that, your retirement security. It shouldn’t be based on which nation has the most cushy welfare programs. It should instead be an individual metric on how well you’ve prepared yourself. The article mentioned one other thing that I believe is super important to remember, life expectancy. As we live longer it not only puts a strain on public welfare systems but it can also put a strain on our personal savings as well. If you saved with the idea that you would live till 80 but you make it to 100, the odds of running out of money has increased significantly.

The second article talked about the same thing that I discussed last week but started out with a figure that I thought was fascinating. In the past 13 years the percent of Social Security beneficiaries has risen by 32%. That is a massive increase and a huge bump like this could put a strain on even the best ran and funded welfare programs. The problem is Social Security isn’t a well ran program. The thesis of the article was what used to be the American dream is now being replaced by retirement dread.

Just like the first article, this article started beating the drum of income equality. Look, I understand that since 1980 incomes of the top 1% has skyrocketed while the incomes of the bottom 50% has stayed basically unchanged when adjusted for inflation. Is this an issue, yes it is, but I think we are missing the mark when that is all we focus on.

In the past 35 years a tremendous amount of wealth has been created by the markets. No matter your age or income you have access to this wealth building engine. The wealthy, who a lot of times have stock options perks or are simply paid in stock, have seen the magic of compounding grow their nest eggs at a rapid pace because they’ve been more involved in the markets. Even if you don’t have millions to invest, lets say you only have hundreds to invest, the magic of compounding is still the same. The return percentage will be the same even if the end amount isn’t. I believe the lack of market involvement is what is hurting the bottom half of the nation more than anything.

The last thing I want to mention from the article was the topic of rising healthcare costs. Simply put, prices are skyrocketing out of control. For retirees, over the next decade the cost of healthcare is projected to rise 5.5% each year. That will most likely outpace benefit increases by a wide margin. I’ve talked about the issue of rising healthcare costs before and it isn’t just a retiree issue. It is an issue that is crippling our economy. It is an issue that we have to address together. We have to come up with solutions or we will all suffer dearly for our inaction.

Most of the retirement issues that we face can be fixed by our own due diligence. It isn’t something we can simply pass the buck on and hope for the best. Other issues like healthcare, we unfortunately will need help from our politicians. Help that so far has not come or has involved misguided attempts to fix things that simply made things much worse. Fixing the healthcare system is going to be a story that won’t go away. It is going to be the greatest test of national resolve we’ve had to face in a long time.

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