The Retirement Fantasy: Stagnant Income, Debt Illusion and the Real Future Outlook


The Retirement fantasy – middle class Americans are quickly realizing that a secure retirement future may only be a myth.  Stagnant income, debt illusion, and the future outlook for working Americans.

Americans are having a tougher time finding extra disposable income to save and create wealth.  It is hard to plan for the future when you are worrying about having enough money to purchase a couple of frozen meals.  When looking at overall statistics we rarely get a glimpse at how tough things have become for the working and middle class.  We usually get data discussing retirement account worth but most of these reports fail to acknowledge that 1 out of 3 Americans have zero dollars to their name.  That is obviously an important caveat.  You also have a banking system that imposes predatory practices on those least able to afford it.  Case after case has been reported of those living paycheck to paycheck while having to pay multiple overdraft fees that can range from $25 to $40 per charge.  Banks realize they can simply place a stop but why let all this easy money free?  For those who can save and end up purchasing a home, most of the wealth is derived from home equity which in a nationwide housing bubble is like having all your money in one stock.  Income is not a good measure of wealth.  The per capita income in the United States is $25,000 and after paying the mortgage or rent, healthcare costs, and buying food little is left over.  What all these items point to is that retirement as many envisioned may largely be a fantasy that is only available to a select few.


Personal savings rate deceptive

personal savings revolving debt

Part of the big change since the recession hit in 2007 has been access to debt to American households.  Working and middle class Americans have been under the illusion, not all but many, that somehow debt equaled wealth.  This credit binge could only last for as long as the banking system did not transform into a Ponzi like system, which it did.  The housing market at one point simply relied on the greater fool theory of investing and became so ludicrous, that it was destined to pop and pop hard.  Yet the above chart shows this new change which on the surface may seem positive but really is reflecting a decreased standard of living.

A few years ago some articles started making their rounds talking about how great it was that Americans were saving.  However what wasn’t mentioned was the subsequent collapse of access to debt which many Americans were simply substituting for actual earned money.  The above chart shows this change.  Revolving credit has contracted by a stunning 18 percent since peaking in 2008 reversing a multi-decade long trend.  Hundreds of billions of dollars in debt purchasing power has been sucked out of the economy.  So it should be no surprise that many Americans have enabled the rise of the dollar store in many regions.  Bigger stores like Target in many regions have added consumables since many have shifted from needs to wants.

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