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The Real Reason For America’s Looming Retirement Crisis

by Michael Snyder, End Of The American Dream:

Did you know that approximately 40 percent of all American workers have absolutely nothing saved for retirement? And did you know that pension funds in the United States are currently underfunded by about six trillion dollars? Social Security is supposed to be the underlying safety net for our entire retirement system, but it is essentially just a massive Ponzi scheme that everyone agrees is heading for a major disaster. Now that the Baby Boomers have started to retire, it is becoming clear that our society simply does not have the resources necessary to keep all of the promises that we have made to them. We are facing a retirement crisis of epic proportions, and by the end of this article you will understand the real reason why we have gotten into this mess.

Like so many other industrialized nations, America’s population is rapidly aging. In fact, in some rural areas of the country entire towns are in the process of slowly disappearing as their populations literally die off. The following is an excerpt from an outstanding article that was published by The Atlantic…

It can be a pretty depressing proposition to start counting the deaths in this tiny town set among the hills and buttes of central Oregon.

Sherian Asher, 74, began keeping track a few years ago, despite herself, until she realized the tally: four deaths a month, in a town of 450. Then she stopped counting.

Fossil, Asher said, is “just going to die out.”

Businesses are disappearing, too. There used to be four gas stations, three grocery stores, three car dealers, and a lumber mill. Now, there’s just one restaurant in town open at night. The nearest hospital is more than an hour away, the nearest city, Bend, is two-and-a-half.

The Baby Boomers in particular pose a unique challenge for our society, because they represent a massive demographic bubble that has fundamentally altered our culture as they have passed through each stage of life. Now they are retiring in extremely large numbers, and many of them are completely unprepared for retirement.

Of course most of those coming after them are not preparing for retirement either. In fact, the executive director of the National Institute on Retirement Security says that 40 percent of all American workers have nothing saved up for retirement at all

We have a lot of individuals who have nothing saved for retirement, about 40 percent of the workforce,” said Diane Oakley, executive director of the National Institute on Retirement Security. When her organization used census data to assess whether households were saving enough to retire with eight times their projected income, a very conservative estimate of retirement preparedness, “we found that 60 percent of households weren’t on track.

Those numbers are absolutely staggering.

What in the world are we going to do once all of those people hit retirement age?

401(k) plans were supposed to revolutionize the way that Americans prepare for retirement, but that simply has not happened. In fact, USA Today is reporting that those that are participating in such plans only “have an average of $14,500 in their retirement accounts”…

The current retirement system in America hinges on the 401(k) plan, which replaced pensions as the go-to source of retirement income. But over the past 35 years that effort has been failing because participants are not contributing enough, asking for withdrawals and not repaying 401(k) loans. More participants are instead treating their 401(k) as a checking account and making very little effort to learn how to manage their investments. The chart below outlines how less than half of Americans now participate in retirement plans and those that do have an average of $14,500 in their retirement accounts, when they will need between 20 and 30 times that amount.

How long will $14,500 last you?

Perhaps if you are very thrifty it might last you six months.

Of course it is quite difficult to find money to put into your retirement account when you are living paycheck to paycheck, and some recent surveys have found that this is the case for about two-thirds of the population.

In the old days, many large companies offered pensions, but once 401(k) plans were introduced that number dropped significantly.

These days it is mostly federal, state and local government workers that are covered by pension plans, but unfortunately many of those pensions are severely underfunded.

This is something that I covered in substantial depth on the Economic Collapse Blog recently. In my piece, I pointed out a Bloomberg article that stated that overall there would be a pension funding gap of somewhere around 6 trillion dollars if honest numbers were being used. And that 6 trillion dollar shortfall would only apply if stock prices stay at current levels. If stock valuations simply returned to normal levels, pension funds would lose trillions upon trillions of dollars and we would very rapidly have a national crisis on our hands.

Read More @ EndOfTheAmericanDream.com

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2 comments to The Real Reason For America’s Looming Retirement Crisis

  • Craig Escaped Detroit

    While it is true (and most of us know it), that the Social Security System Ponzi cannot survive, and pretty much every pension “fund” will crash… I just don’t care to hear about the broken record of doom & gloom (Michael Snyder) at the mic.

    He’s the “Nostradamus of the Never-Ending Story of Negativeness” everything.

  • Ed_B

    “Did you know that approximately 40 percent of all American workers have absolutely nothing saved for retirement?”

    Yes, I did know that, although I thought that the percentage would be higher than 40. Anyway, this is why it sucks to be them. Those of us who saw the handwriting on the wall when we were young and saved / invested like beavers do not now have this problem. Those who played and bought toys instead of saving and investing WILL get their just reward for that decision.

    There are also many who do not make enough money to save or invest much and I am worried about them. I see many of these people as I go out to the stores and around town and am always saddened when they have a dog, buy non-essentials like cigarettes, magazines, and beer, and otherwise fritter away their money such that they will never have anything of real value. Life is ALL about making good choices and benefiting from them. Few ever benefit from making poor choices.

    “And did you know that pension funds in the United States are currently underfunded by about six trillion dollars?”

    Yep, knew that because bone-headed politicians haven’t got the guts or the brains to take on the really serious problems in this country. All too often, such problems are passed to those who follow in those same positions, who also do nothing about them “on their watch”. Well, time HAS run out and there is no more of it to be frittered away in this manner. The pension plan SHTF IS upon us and it is going to get a LOT worse before it gets any better. This is why I favor good 401(k) plans that allow us as individuals to create our own pension that is invested by us, for us. A national 401(k) plan, like Chile has, would have been FAR superior to the dingleberry Social Security concept. It would be better because 401(k) plans are based on the concept of OWNERSHIP and not some socialized retirement BS.

    “Social Security is supposed to be the underlying safety net for our entire retirement system, but it is essentially just a massive Ponzi scheme that everyone agrees is heading for a major disaster.”

    Of course it is. It is run by the US Gov. How could it not become a complete cluster-****? The problem with these huge program is that they are set up, adjusted a bit, and then left for decades to just putter along on their own. Anyone who is at all familiar with business concepts knows that such money-pit programs require constant review and adjustment. Neither SS nor Medicare have received this, so are poorly run and will fail because of it.

    “Now that the Baby Boomers have started to retire, it is becoming clear that our society simply does not have the resources necessary to keep all of the promises that we have made to them.”

    What it even more clear, is that we, as a nation, have known that the BB gen was coming and we have known that for more than 40 years, yet virtually nothing was DONE about it. Even a monkey knows that when a big wave of water comes, it is good to climb the highest tree he can find quickly. But our politicians are nowhere near as smart as a monkey confronted by a big wave. They saw it coming, watched it, did absolutely nothing, and then yelped in surprise as it swept them (and us) away. Such is how SS and Medicare have been run by these idiots.

    “We are facing a retirement crisis of epic proportions, and by the end of this article you will understand the real reason why we have gotten into this mess.”

    Some of us already know, which is why we have been preparing for retirement for the major part of our working lives. Doing that requires sacrifices in the things not bought and enjoyed so that money would be available for saving and investing. It also requires the sacrifice of time spent learning about investments and managing them so as to not pay broker expenses that can be high even if their results are mediocre. When a small investor makes a mistake, they have to EAT those results and I can tell you that they are not at all tasty. But such experiences are amazing teachers that help us to avoid such poor results in the future.

    The bottom line: the one thing that lies between you and a good or lousy retirement is YOU. Make the effort it takes to have a good retirement because it is totally worth it. Do not depend upon someone else or some lowest common denominator government program because no one cares about your money, your success, and your life more than you do.

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