FedUpUSA

Archive for the ‘Retirement Accounts’ Category

For decades we were warned that when the Baby Boomers started to retire that this country would be facing a retirement crisis of unprecedented magnitude.  Well, that day has arrived ladies and gentlemen.  Back on January 1st, the Baby Boomers began to retire and more than 10,000 of them will be retiring every single day for years to come.  Most of them have not saved up nearly enough money for retirement.  At the same time, private sector pension plans are failing all over the place, hundreds of state and local government pension plans from coast to coast are woefully underfunded, and the Social Security system is on the road to complete and total disaster.  A massive wave of humanity is hitting retirement age at a moment in history when the U.S. economy is coming apart at the seams.  We do not have the resources to keep the promises that we made to the Baby Boomers, and most of them have not made adequate preparations for retirement.  What we have is a gigantic mess on our hands, and millions of Baby Boomers are going to find retirement to be very bitter and very painful.

A lot of younger Americans just assume that Social Security is enough to take care of the needs of elderly Americans.  But that is just not the case.

Have you ever tried to live solely on a Social Security check?

It is not easy.  The truth is that those checks are just not that large.

The following comes directly from the Social Security Administration….

The average monthly Social Security benefit for a retired worker was about $1,177 at the beginning of 2011.

Could you live on less than 300 dollars a week?

And keep in mind that the $1,177 monthly figure is just an average.  Many receive a lot less than that.

In addition, Social Security benefits have been seriously squeezed by inflation in recent years.  The cost of food and other basics has risen briskly and Social Security benefits have not.

Today, many elderly Americans have to make a choice between buying food, heating their homes or buying medicine that they need.  They simply do not have enough money to do all of them.

It would have been nice if all of the Baby Boomers had been busy saving money for retirement all these years, but that just did not happen.  In fact, the Baby Boomers as a group are trillions of dollars short of what they need for retirement.

So why doesn’t the U.S. government step in to help them out?

Well, the reality of the situation is that the U.S. government is flat broke.  The federal government is now over 15 trillion dollars in debt.  During the Obama administration so far, the U.S. government has accumulated more new debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

Lawmakers are already looking at ways to make the Social Security program less costly.  No, the federal government is not going to be riding to the rescue.

In fact, it will be a minor miracle if the Social Security program is able to survive until the end of this decade, and it will be a major miracle if the Social Security program is able to survive until 2030.

As for myself, I do not believe that I will ever see a single penny from Social Security, and many other working age Americans feel the same way.

Retirement is supposed to be a fun time, but sadly most Americans that are approaching retirement age are not going to have any “golden years” to look forward to.

Rather, millions of elderly Americans are going to find the years ahead absolutely agonizing as they struggle just to survive.

The following are 25 bitter and painful facts about the coming Baby Boomer retirement crisis that will blow your mind….

#1 According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.

#2 According to a recent poll conducted by Americans for Secure Retirement, 88 percent of all Americans are worried about “maintaining a comfortable standard of living in retirement”.  Last year, that figure was at 73 percent.

#3 A study conducted by Boston College’s Center for Retirement Research has found that American workers are $6.6 trillion short of what they need to retire comfortably.

#4 Today, one out of every six elderly Americans lives below the federal poverty line.

#5 On January 1st, 2011 the very first Baby Boomers started to retire.  For almost the next 20 years, more than 10,000 Baby Boomers will be retiring every single day.

#6 At the moment, only about 13 percent of all Americans are 65 years of age or older.  By 2030, that number will soar to 18 percent.

#7 Right now, there are somewhere around 40 million senior citizens.  By 2050 that number is projected to increase to 89 million.

#8 Back in 1991, half of all American workers planned to retire before they reached the age of 65.  Today, that number has declined to 23 percent.

#9 According to one recent survey, 74 percent of American workers expect to continue working once they are “retired”.

#10 According to a recent AARP survey of Baby Boomers, 40 percent of them plan to work “until they drop”.

#11 A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.

#12 A study by a law professor at the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.  Back in 2001, they only accounted for 12 percent of all bankruptcies.

#13 Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

#14 What is causing most of these bankruptcies among the elderly?  The number one cause is medical bills.  According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States.  Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.

#15 Public retirement funds all over the United States are woefully underfunded.  For example, it has been reported that the $33.7 billion Illinois Teachers Retirement System is 61% underfunded and is on the verge of complete collapse.

#16 Most U.S. states have huge pension obligations which threaten to bankrupt them.  For example, pension consultant Girard Miller told California’s Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities.  When you break that down, it comes to $22,000 for every single working adult in the state of California.

#17 Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern’s Kellogg School of Management have calculated the combined pension liability for all 50 U.S. states.  What they found was that the 50 states are collectively facing $5.17 trillion in pension obligations, but they only have $1.94 trillion set aside in state pension funds.  That is a difference of 3.2 trillion dollars.  So where in the world is all of that extra money going to come from?

#18 According to the Congressional Budget Office, the Social Security system paid out more in benefits than it received in payroll taxes in 2010.  That was not supposed to happen until at least 2016.  Sadly, in the years ahead these “Social Security deficits” are scheduled to become absolutely nightmarish as hordes of Baby Boomers retire.

#19 In 1950, each retiree’s Social Security benefit was paid for by 16 U.S. workers.  According to new data from the U.S. Bureau of Labor Statistics, there are now only 1.75 full-time private sector workers for each person that is receiving Social Security benefits in the United States.

#20 The U.S. government now says that the Medicare trust fund will run out five years faster than they were projecting just last year.

#21 The total cost of just three federal government programs – the Department of Defense, Social Security and Medicare – exceeded the total amount of taxes brought in during fiscal 2010 by 10 billion dollars.  In the years ahead expenses related to Social Security and Medicare are projected to skyrocket dramatically.

#22 The Pension Benefit Guaranty Corporation is the agency of the federal government that pays monthly retirement benefits to hundreds of thousands of retirees that were covered under defined benefit pension plans that failed.  The retirement crisis has barely even begun and the PBGC is already dead broke.  The PBGC says that it ran a deficit of $26 billion during the fiscal year that just ended and that it will probably need a huge bailout from the federal government.

#23 According to a survey by careerbuilder.com, 36 percent of all Americans say that they don’t contribute anything at all to retirement savings.

#24 More than 30 percent of all investors in the United States that are currently in their sixties have more than 80 percent of their 401k plans invested in equities.  So what is going to happen to them if the stock market crashes?

#25 A survey taken earlier this year found that 20 percent of all U.S. workers admitted that they had postponed their planned retirement age at least once during the last 12 months.  Back in 2008, that number was only at 14 percent.

Our politicians should have addressed the retirement crisis decades ago before we got to the point of being in debt up to our eyeballs.

It is being projected that the U.S. national debt will hit 344% of GDP by the year 2050, and the Congressional Budget Office says that U.S. government debt held by the public will reach a staggering 716% of GDP by the year 2080.

Obviously those figures will never be reached because our financial system would totally collapse long before then.

So what do we do?

We have tens of millions of elderly Americans that are completely and totally dependent on Social Security and Medicare, but those programs also threaten to bankrupt us as a nation.

Anyone that believes that there is a “quick fix” to these issues is being naive.

The “supercommittee” was supposed to address this problem, but they failed so spectacularly that they have become a national joke.

Sadly, most of our politicians just keep kicking the can down the road.  They hope that somehow things will just magically “work out”.

Well, the truth is that things are not going to “work out”.  The poverty level among the elderly is going to continue to increase.  Pension plans all over this nation are going to continue to fail in staggering numbers.  Social Security and Medicare are going to bleed more red ink with each passing year.

Something should have been done about this problem a long, long time ago.

But it wasn’t.

This crisis was ignored, dealing with it was put off time after time and all the doomsayers were laughed at.

Now the crisis is here, and we are all going to pay the price.

The Economic Collapse

All over America tonight, millions of elderly Americans are wondering if their money is going to run out before it is time for them to die.  Those that are now past retirement age are not going to be rioting in the streets, but that doesn’t mean that large numbers of them are not deeply suffering.  There are millions of elderly Americans that are leading lives of “quiet desperation” as they try to get by on meager fixed incomes.  Many are surviving on Ramen noodles, oatmeal, peanut butter or whatever other cheap food they can find in the stores.  There are some that are so short on cash that they will not turn on the heat in their homes until things get really desperate.  As health care costs soar, millions of elderly Americans find themselves deep in debt and facing huge medical bills that they cannot possibly pay.  A lot of older Americans would go back to work if they could, but jobs are scarce and very few companies seem to even want to consider hiring them.  Right now caring for all of the Americans that have already retired is turning out to be an overwhelming challenge, and things are about to get a whole lot worse.  On January 1st, 2011 the very first Baby Boomers turned 65.  A massive tsunami of retirees is coming, and America is not ready for it.

Sadly, most retirees have not adequately prepared for retirement.  For many, the recent economic downturn absolutely devastated their retirement plans.  Many were counting on the equity in their homes, but the recent housing crash crushed those dreams.  Others had their 401ks shredded by the stock market.

Meanwhile, corporate pension plans all across America are vastly underfunded.  Many state and local government pension programs are absolute disasters.  The federal government has already begun to pay out significantly more in Social Security benefits than they are taking in, and the years ahead are projected to be downright apocalyptic for the Social Security program.

So needless to say, things do not look good for the Baby Boomers that are now approaching retirement age.

The following are 21 signs that the new reality for many Baby Boomers will be to work as wage slaves until they drop dead….

#1 According to a shocking AARP survey of Baby Boomers that are still in the workforce, 40 percent of them plan to work “until they drop”.

#2 A recent survey of American workers that included all age groups found that 54 percent of them planned to keep working when they retire and 39 percent of them plan to either work past age 70 or never retire at all.

#3 A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.

#4 A recent study by a law professor from the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.  Back in 2001, they only accounted for 12 percent of all bankruptcies.

#5 Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

#6 Most of the bankruptcies among the elderly are caused by our deeply corrupt health care system.  According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States.  Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.

#7 The U.S. government now says that the Medicare trust fund will run dry five years faster than they were projecting just last year.

#8 Starting on January 1st, 2011 the Baby Boomers began to hit retirement age.  From now on, every single day more than 10,000 Baby Boomers will reach the age of 65.  That is going to keep happening every single day for the next 19 years.

#9 Over 30 percent of all U.S. investors currently in their sixties have more than 80 percent of their 401k retirement plans invested in equities.  So what happens if the stock market crashes again?

#10 All over the United States predatory lenders are coldly and cruelly foreclosing on elderly homeowners.  You can read what one lender is doing to a 70-year-old woman and her terminally ill husband right here.

#11 Medical bills are absolutely devastating large number of elderly Americans right now.  Many are going to great lengths to try to pay their bills.  An elderly woman that lives in the Salem, Oregon area that is fighting terminal bone cancer tried to raise some money for her medical bills by holding a few garage sales on the weekends.  However, a neighbor ratted her out, and so now the police are shutting her garage sales down.

#12 Social Security’s disability program has already been pushed to the brink of insolvency and wave after wave of new applications continue to pour in.

#13 Approximately 3 out of every 4 Americans start claiming Social Security benefits the moment they are eligible at age 62.  Most are doing this out of necessity.  However, by claiming Social Security early they get locked in at a much lower amount than if they would have waited.

#14 According to the Congressional Budget Office, the Social Security system paid out more in benefits than it received in payroll taxes in 2010.  That was not supposed to happen until at least 2016.  Sadly, in the years ahead these “Social Security deficits” are scheduled to become absolutely nightmarish as hordes of Baby Boomers retire.

#15 In 1950, each retiree’s Social Security benefit was paid for by 16 U.S. workers.  In 2010, each retiree’s Social Security benefit was paid for by approximately 3.3 U.S. workers.  By 2025, it is projected that there will be approximately two U.S. workers for each retiree.  How in the world can the system possibly continue to function properly with numbers like that?

#16 According to a shocking U.S. government report, soaring interest costs on the U.S. national debt plus rapidly escalating spending on entitlement programs such as Social Security and Medicare will absorb approximately 92 cents of every single dollar of federal revenue by the year 2019.  That is before a single dollar is spent on anything else.

#17 Most states have huge pension liabilities that are woefully underfunded.  For example, pension consultant Girard Miller recently told California’s Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities.  When you break that down, it comes to $22,000 for every single working adult in the state of California.

#18 Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern’s Kellogg School of Management recently calculated the combined pension liability for all 50 U.S. states.  What they found was that the 50 states are collectively facing $5.17 trillion in pension obligations, but they only have $1.94 trillion set aside in state pension funds.  That is a difference of 3.2 trillion dollars.  So where in the world is all of that extra money going to come from?  Most of the states are already completely broke and on the verge of bankruptcy.

#19 According to one recent survey, 36 percent of Americans say that they don’t contribute anything at all to retirement savings.

#20 According to another recent survey, 24 percent of all U.S. workers say that they have postponed their planned retirement age at least once during the past year.

#21 Even though prices for necessities such as food and gas have been exploding, those receiving Social Security benefits have not received a cost of living increase for two years in a row.  Many elderly Americans that are living on fixed incomes are being squeezed like they have never been squeezed before.

There are millions of Americans out there that have done everything “right” all of their lives, but that now find the system letting them down in their golden years.

So how badly are some people hurting?  Well, a reader identified as “Anna44″ recently shared with us what some of her family members have been going through in this economy….

My B-I-L was a dealership owner/manager who worked long hours over 38 years and had to close his doors when Saturn was dissolved. When his dealership went under, 72 others lost their job. That’s 72 families who took a hit. He lost his home, everything. A few of his former employees lost their homes as well eventually. They were not lazy or WORTHLESS. It took him a year and a half to finally find something, but now he lives in a hotel unable to qualify for a house or apartment. This is an educated man who competed nationwide for top dog and got it more then once. His biggest fault? He’s almost 60, young enough to need the work, but too old to be hired.

As for my husband- 26 years AF officer, handling millions & billions on International & National levels has just entered his 7th month of unemployment. Two tours abroad- lazy he is NOT. He doesn’t qualify for unemployment, nor is he counted because he gets a retirement check. He wants and needs to work- yet there is little out there. If he doesn’t find something soon, we too will lose the home we sunk every cent into after 20 years of saving for it!

These are Americans that should be getting ready to enjoy their golden years, but that are now fighting just to survive.

Today you will find a disturbingly large number of elderly Americans flipping burgers or welcoming people to Wal-Mart.  But most of them are not doing it because they are bored with retirement.  Rather, most of them are working as wage slaves because that is what they have to do in order to survive.

Sadly, there are a whole lot of companies out there that do not want to hire people that are past a certain age.  If you are older than 50, there are a lot of jobs that you should just basically forget about applying for.

Instead of valuing the experience and wisdom of our elders, our society openly makes fun of them and treats them as undesirables.

If you are afraid of getting old, you are not being irrational.  Getting old is indeed something to fear in this society.  We tend to treat elderly Americans like garbage.

Abuse of the elderly is rampant.  For example, a report from a couple of years ago found that 94 percent of all nursing homes in the United States had committed violations of federal health and safety standards.

As the U.S. economy continues to crumble, the way we treat the elderly is probably going to get even worse.

Right now there is tons of bad news about the economy, and another major economic downturn would put even more pressure on federal, state and local government budgets.

The truth is that there is simply no way that we can keep all of the financial promises that we have made to elderly Americans even if the most optimistic projections for our economy play out.

If the worst happens, we are going to see a lot more elderly Americans eating out of trash cans and freezing to death in their own homes.

The United States is facing a retirement crisis of unprecedented magnitude.  A comfortable, happy retirement is rapidly going to become a luxury that only the wealthy will enjoy.

For most of the rest of us, our golden years are going to mean a whole lot of pain and suffering.

That may not be pleasant to hear, but that is the truth.

The Economic Collapse

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

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.

Read the rest at My Budget 360

The Great Recession is revealing some fundamental challenges in our economy.  One of those challenges revolves around the exceedingly expensive college degree and its ability to translate into employment.  As a percent many more American’s have a bachelor’s degree today than say in 1992 yet unemployment for college educated Americans is at modern record highs.  Another profound challenge facing American families is retirement savings (or lack thereof which is more likely the case).  Retirement is largely becoming a luxury that only a handful of families can count on.  As we look back at the last decade not all global stock markets were created equal and this is evident when we compare the US stock market to those abroad.  Finally we will examine what areas are seeing major price increases all the while overall inflation appears to be muted to average Americans.

College educated rise but less employment

Source:  BLS

In 1992 27 percent of those employed and 25 years of age or older had a bachelor’s degree or higher.  Today that figure is up to 36 percent.  However back in 1992 during another recessionary time those with bachelor’s degrees or higher had an unemployment rate of 3.5 percent while today it is up inching closer to 5.5 percent.

“In other words as a nation our employed workforce is more educated but it is also having a harder time gaining or maintaining employment.  At the same time college costs have far outpaced the overall inflation rate.”

This may seem counterintuitive because in terms of career aspiration a college degree is less likely today to secure you a job compared to 1992 but it is much more expensive in real terms.  So what are you really paying for?  Of course college is not merely a means to a job but a place where students develop into well rounded citizens.  Yet many for-profit institutions sell themselves as job factories and are all the willing to take federal financial aid without any statistics to back up their career placement rates.

What has occurred is a bubble in higher education.  Obviously becoming an educated citizen is important.  However we are facing a stratified market.  You have private institutions charging $50,000 a year or more catering to many of the financially well off in the country.  This group continues to get a solid education.  Next you have a public education system with very good schools but competition for admission is getting exponentially harder and students are dealing with bigger classes and more expensive tuition.  Finally you have the for-profit sector that merely operates to generate revenues by sucking in federal financial aid and not being accountable to their students and many operating only one step above diploma mills.

Retirement accounts largely a concern for top households

A BLS report done a few years ago showed that the median amount in retirement accounts for Americans was $2,000.  This makes sense given that half of Americans make $25,000 a year or less.  Many are looking at Social Security as their retirement account.  If you look at where the money is aggregated you will start to realize that retirement accounts are largely becoming a luxury for a small fragment of American society:

Keep in mind that only 15 percent of US households make more than $100,000 or more a year.  However 64 percent of all retirement assets are in the hands of the top 15 percent.  The median household income in the US is $50,000.  So we can even average out this amount here:

$1.04 trillion / 55 million US households =     $18,909

Now this may seem higher than the BLS figures but keep in mind this is because of the $20,000 to $49,999 cohort that holds the bulk of this amount.  In reality 1 out of 3 Americans have zero in savings.  Even here the data is skewed.  But think about the $18,909.  How long would that last you in retirement?  Say you draw down $1,000 per month and you are out of money within 18 months.

For many saving for retirement has become a harder and more trying exercise.  If we look at the domestic stock market we can see why.

Global stock market growth

Even after the amazing 90 percent stock market recovery from the 2009 lows the S&P 500 is still off by 11 percent from where it was in January of 2000.  In other words someone investing in boring and plain bank CDs actually performed better than the overall stock market for the decade.  The Wall Street mystique has been lost on many.  60 Minutes featured a story of a famed gambler that made millions betting on sports yet was taken for a ride with Wall Street.  In his own words, he did not trust Wall Street.  This coming from a professional gambler and hustler.  Wall Street has largely become one giant casino.

What is fascinating is markets that have benefitted from outsourcing such as India and China have boomed exponentially.  In exchange for cheap goods many Americans are now struggling to keep a hold on to what they once thought of as the middle class.  Why would a global multinational corporation want to pay someone in the US $10 an hour when they can pay someone overseas $10 per day for the same work?  That is the profound question many now have to wrestle with and no politician is willing to tackle.

Inflation is where?

The BLS CPI has shown virtually no movement over the last few years.  Much of this is due to the bursting of the housing market.  The BLS heavily weights housing as it should.  Most Americans spend the most on their housing costs each month.  Yet the housing crash has hidden some major inflation in certain items.  For example, oil is back up and you need only look at gas prices.  For those who shop the cost of food items has gone up last year.  Yet retailers have gotten creative with packaging so prices stay the same yet the amount you are receiving has gone down.

Take a look at the price of coffee, wheat, soybeans, orange juice, and other items over the last year.  The S&P 500 went up by 13.6 percent but this pales in comparison to other sectors.

What can we conclude from the above?  It is safe to say that there is a bubble in higher education.  The costs are outstripping the benefits in many cases depending on what schools you go to.  This is similar to the housing bubble.  Some homes should have never tripled in value yet many homes are nice and built with quality in good areas.  Others are not but when banks get involved you are likely to find speculation and gambling inflating costs.  Students need to be extremely careful in choosing their institution and not falling into too much debt.  Another conclusion you can draw is that the housing bust has hidden the inflation of many daily items.  The CPI is muted because of the implosion of the housing market and this covers up rising costs in other sectors.  For example college tuition, healthcare, gas, and food have all gone up significantly over the decade yet this hardly shows up while wages have gone stagnant or declined.  Ultimately American families have to be cognizant of these changes since they will impact their daily lives.

My Budget360

Many Americans live precariously close to the edge of financial insolvency flirting with economic disaster daily.  If you casually browse mainstream articles and watch any amount of television you would think that the US still had a vibrant and strong middle class.  When we pull back the covers on the current financial situation we realize that many Americans are merely getting by and many would like to live in some 1984 Orwellian fantasy world where suddenly things are back to financial equilibrium.  43 million Americans are depending on government food assistance to get by.  But many more millions are merely living paycheck to paycheck hidden in the cellar of the headlines.  1 out of 3 Americans has zero in any retirement account (not one slowly eroding dollar).  Half of Americans have $2,000 or less which puts them one month away from needing government assistance.  With the volatile job market and turbulent Wall Street middle class Americans are feeling the once prided stability being slowly washed away.  Let us examine how retirement is now becoming more of a fantasy for many Americans.

Many Americans especially young adults realize that saving large amounts of money is a key to a sustainable retirement:

Over 84 percent of 18 to 29 year olds surveyed feel they need at least $1 million saved up in order to stop working some day.  60 percent of those 30 and older feel that they will also need $1 million saved up.  Yet the actual figures are somewhat disturbing in contrast to the perceptions of many:

Source:  Census

The median retirement account for US households is $2,000.  This is why the vast majority of retirees depend on Social Security as their primary source of funds in old age even though Social Security was never designed to be a long term pension system.  You’ll notice that the average retirement account is closer to $50,000 a year but this is heavily skewed by the top 1 percent that keep most of their funds in stock wealth.

The reason retirement is slipping through the fingers of many like sand is the disjointed income equality in the country that has grown in the last decade.  If we look at income growth it has been heavily tilted at the top:

Source: Census, Chart: Wikipedia

There has been virtually no real income growth for most Americans.  The real significant wage growth over the last 50 years has occurred at the very top 10 percent of income earners in the country with this inequality accelerating in the last bubble decade.  What is more important is that 75 percent of Americans largely depend on a job as a primary source of income which seems rather obvious:

Source:  Federal Reserve

If you examine the chart closely, it is only the top 10 percent that really benefit from a buoyant and thriving stock market.  As we have mentioned earlier 1 out of 3 Americans has zero, nada, or zilch in their retirement account.  The movement of the stock market is like watching the score of a football game where the outcome means nothing to the individual.  Yet the problem is that Wall Street has taken the one item that was stable like a rock for Americans, housing and turned it into another commodity to be gambled and speculated against.

The share of income flowing to a smaller and smaller group of Americans is draining the life blood out of the middle class:

“From 1950 to 1989, nearly 40 years of data the top 1 percent earned roughly 7 to 8 percent of all the nationwide income.  Today it is inching closer to 20 percent, a figure resembling the massive income inequality seen during the Great Depression.”

Even within the top 1 percent the difference in incomes is striking:

This kind of income inequality is coming at the cost of the middle class.  Banks and the financial press would like you to believe that this isn’t the case but just look at how far your dollar is now going.  If you are fortunate to have a retirement account it is likely you don’t have the gambling devices of options, hedges, and other items that are largely new casino devices for Wall Street.  Most Americans are comfortable with income discrepancies but not at these levels and not when much of the gains are based on bets that hurt the overall economy.

The problem as many are now seeing is the financial sector is largely rent seeking by pilfering the future of many middle class Americans.  The banking system extracts wealth by devaluing the US dollar, by charging interest or fees on retail banking, and ultimately suckering many Americans to dump money into a stock market that is operated like a casino.  Washington Mutual, a once popular bank used to offer free checking for life.  JP Morgan Chase took over Washington Mutual in a government shotgun wedding.  Now, Chase is looking to extract $10 to $12 per month merely for having a checking account.  Of course they’ll waive this if you have $5,000 saved in a handful of their accounts.  Look above again.  1 out of 3 Americans have no savings so how will this be accomplished?

As we mentioned Social Security is largely becoming the retirement account default of many Americans.  Yet the growing number of beneficiaries is now putting strain on the system:

The above chart will only continue to show expansion.  Where will all this money come from?  We have a smaller workforce with the young that are already having a tough time saving any money in this economy.  Many of the good paying jobs of today require a college education and college has largely entered its own student loan bubble.  Many of the future middle class are merely trying to service their own massive debt even before they begin their careers.  To save that $1 million will become a daunting task moving forward.  Also, if the Federal Reserve has its way $1 million 30 or 40 years from now may not be much.

With 17 percent of Americans unemployed or underemployed many are simply looking for that next paycheck let alone planning for a retirement where they can sip margaritas in some picturesque beach location.  Wall Street has pilfered the pockets of the middle class through bailouts for their reckless gambling and incredible excess.  Many Americans now understand this yet the current political class is merely interested in protecting the established plutocracy by pillaging the American village.  Most Americans are becoming exhausted by both political parties and their pandering to Wall Street that provides a revolving door of money, jobs, and connections.

The younger generation is seeing their ability to grow their net worth diminishing:

This figure has only dropped even further in the last few years.  Retirement was once thought of as a place where one would reach a comfortable existence after many years of hard work.  Not an extravagant lifestyle but one in where a home was paid off and enough money came in for food and daily necessities.  But now with Wall Street turning housing into a giant commodity and stripping bear the employment base of the country; many are wondering if retirement is even an option especially when the stock market is at the same level as it was one decade ago.

Ultimately what needs to happen is to get money out of politics and to split up commercial and investment banking.  The answer is obvious but the plutocracy is relentless in keeping this game going as long as possible.  As this continues, retirement will continue to look more and more as a fantasy to millions of Americans.

My Budget360

Remember my discussion on Pensions?

And how you were going to get screwed?

Feel free to use the search bar and type in “Pension”, then have a read.

You’re hosed America.  Severely.  Far worse than you think.  And there’s nothing you can do about it.

I wish it wasn’t true, but it will be, because you refuse to stand up and put a stop to this crap.

France is the latest to seize pension assets.  They follow Hungary and Ireland.  There will be more.  And eventually, it will come here – and when it does, you will get hosed.

There is only one way to stop it. 

You, the American people, must demand that all of the bad loans that were made by banks be forced back onto them and defaulted.  At the same time the government must stand back and let the adjustment take place.

Yes, this will detonate the banks.  Yes, this will result in huge losses.  Yes, this will result in a short-term dislocation in the economy – a really, really bad one.  Yes, it will result in the collapse of home prices, bankruptcy of tens of millions of people and even more unemployment in the short term.

Again, government must do nothing more than providing emergency shelter and food to those who need it in this regard.

Government must also, at the same time, put an immediate stop to the offshoring monster through wage and environmental-parity tariffs.

If, as is often claimed, the reason for firms to offshore production is because people are willing to work harder or smarter than they are in the US, all fine and well.  But if they’re doing it because they have effective slave labor or can pollute with impunity, thereby having dramatically lower costs through poisoning the earth, that has to stop because those firms are then creating an economic imbalance that not only cannot be maintained but if not stopped will destroy our nation’s economy and funding mechanisms.

We all want certain services from our government.  We claim we want social services of various sorts, including social security, medicare, welfare and more.  But we have to be able to pay for those services, and we can’t when the tax base is destroyed by sending our labor overseas in search of slave-like conditions and the ability to poison the planet instead of keeping it, and the tax base it generates, here in this nation.

We have avoided the truth of this matter through borrowing for two decades.  We’re now coming up against our national credit card’s limit.  To avoid that The Fed, with the explicit consent of both Congress and President Obama, is intentionally trying to devalue the currency – that is, create “inflation.”

But the money is going overseas, and the inflation he’s creating is in China.  This is due to the fact that money is global and goes where it can earn the best return.  It doesn’t care what Bernanke wants or what our government wants – money is agnostic.

We can choose only between an orderly process and a disorderly one.  We can choose to force the banks to eat their own cooking along with citizens and take them into receivership or we will suffer a disorderly collapse.  That which is happening through Europe will come here.  We cannot avoid it.  We are only holding our place in line and acceleration is now taking place in these matters.

Remember that we started here with Bear Stearns and were told it was all ok after that.  Then we had Fannie and Freddie get into trouble, and we were told they were “stabilized” with Paulson’s Bazooka.  He lied – both they and Lehman collapsed at once.

The point is that he lied – he knew damn well what was going on and so did The Fed.  They all knew that Citi, for example, was writing crap paper for more than two years prior to it all blowing up and that 80% of their loans were bad by 2007. 

They tried to hide it and failed.

The same thing is happening in Europe right now.  The rolling “fails” will continue and intensify until the truth is recognized and the debt that cannot be paid is defaulted.  This path cannot be avoided irrespective of what people want or desire.

Our time to act in a responsible fashion as citizens of this nation is running out.  Three years ago I sent a fax to all 535 members of Congress urging them to put aside the cash necessary to feed, house and clothe at a basic level up to 1/4 of Americans – in closed military facilities and similar if necessary – for a year or more.  I’m talking about three hots and a cot, not “welfare payments” to sustain people in their iPhones and cable TV. 

Of course I was ignored and probably considered a nut, but in point of fact nothing has gotten better, and in fact has gotten worse, since I recognized this threat and warned of it and what must be the response.

If you’re currently dependent on pension funds of any sort, make other plans because given our government’s idiocy and refusal to stop sucking on the wang of people like Blankfein, Lewis and Strumpf you will not have a backstop from the government either. 

God helps those who help themselves, and on the path we’re on that’s all you’re going to have left.