fbpx
U

Retirement In Crisis – Update

September 17, 2007

I received an email from a subscriber (thanks Helen) suggesting that I watch the PBS Frontline special titled Can You Afford to Retire. I was so impressed with the program that I have decided to focus today’s podcast entirely on the special. Provided below is a link to watch the show for FREE:

Frontline special; CAN YOU AFFORD TO RETIRE?

The focus of the program is on the changing retirement landscape.

1974 Retirement Funding:
11% Employee
89% Employer

2006 Retirement Funding:
51% Employee
49% Employer
Defined Pensions: The Endangered Species
** In the not so distant past employers provided for their employees retirement through pension plans.
** Changes in the Global marketplace have led all but a few companies away from Defined Benefit Pensions; instead favoring Defined Contribution Plans (i.e. 401ks, 403bs)
** Pensions have become too expensive for companies to offer in the competitive global marketplace
** Pensions also create legacy liabilities that can drain the financial health of companies (longer life expectancies of workers & loss of flexibility in financial streamlining)
** Pensions also had a tendency to be underfunded by corporations because of the unrealistic growth assumptions used based upon the run away stock market of the 90s

How Deep is the Crisis?
** The Pension Benefit Guarantee Company (PBGC – government org. that provides a low level of pension insurance) estimates the following:
** There are 18,000 pensions that are currently underfunded (promised benefits do not equal assets of the plan)
** The estimated financial shortfall is over $450 Billion (that is Billion with a B!)

The Horrible Truth = Bankruptcy has become an accepted tool for corporate America
**
Unfortunately many corporations that struggle to compete in the marketplace have decided that the easiest path to recovery is to relieve themselves of their obligations/promises of a comfortable retirement for their employees

Pension Alternative – 401ks and Employee Ownership
**
401ks and similar plans have become the preferred retirement tool for the majority of corporate America.
** 401ks offer tremendous opportunities to employees because they have complete ownership of their assets (this allows employees to grow their assets and potentially pass on wealth to their children and grandchildren)
** 401ks also offer the ability to lower your taxes by saving for retirement since the assets are not taxed until you actually take distributions (tax-deferred growth)

The Problem:

Most Workers are Lazy and Uninterested in their Retirement
** Low Participation; 25-30% do not join their plans
** Only 10% invest the maximum
Many Use their Retirement Savings as a Rainy Day Fund
** 50% of workers liquidate and take the cash from their retirement plan when they change jobs

Most Workers Underestimate how much they need to save for retirement
**
Average balance of retirement savings account is $29,000 according to the Federal Reserve
** At a minimum you need 8-10 times your gross wages in a retirement account to cover the basics
** 15-20% is what you need to devote from each pay check towards your retirement

Most Workers are Horrible Investors
**
2003 DALBAR Study – Average equity investor earned 2.57% (1984-2002) vs. 12.22% for the S&P 500 during the same period
** Yield Disparity = In most retirement plans the top 20% (based upon income) outperform the bottom 20% by 5-7 times their annual returns (in other words the rich get richer based upon understanding how investments work)

CLOSING: TAKE YOUR RETIREMENT VERY SERIOUSLY OTHERWISE YOUR RETIREMENT WILL CONSIST OF YOU WORKING UNTIL THE DAY YOU DIE!!!

Subscribe Now to the Wealth Report Print Newsletter

SIGN UP NOW FOR THE MONEY-GUY WEALTH REPORT PRINT NEWSLETTER. Only $29/year provides you with a quarterly guide to make the best financial decisions and keeps you up to date with the changing investment world. All proceeds directly help offset the cost of the podcast.The 3rd Quarter’s Wealth Report covers the following topics:
** The Dollar Is Weak and It has Affected US Investors
** Avoiding Mistakes on IRA Rollovers
** Update on College Savings Plans
** Eight Ways to Save on Life Insurance
** Why You Should Avoid direct Debits

FILED UNDER: Podcasts
TAGGED WITH:

Most Recent Episodes

Financial Hacks and Habits of the Top 1% (By Age)

ho wouldn’t want to have a high enough income and net worth to be considered part of the top 1%? In this episode, we’ll tell you exactly how much you need to be considered part of the top 1% - and the habits and hacks those in the top 1% used to get there.   In this...

How to Win With Money in 2023!

Financial resolutions are always near the top of the list of Americans’ most popular New Year’s resolutions. Whether you want to save and invest more, pay off debt, or have other financial goals, we will give you the tools you need to win with money in 2023.   In this...

TikToks That INFURIATE Financial Advisors

The most powerful time to get serious about building wealth is when you’re young. So, what is the younger generation learning? Financial Advice (good and bad) is being produced in massive rates across online platforms and TikTok is the new frontier. Is there good...

5 Levels of Wealth AND How to Achieve Them! (2023 Edition)

We believe there are five distinct levels of wealth, but they aren’t solely dependent on income or net worth. We’ll walk you through each of the five levels - including how to know where you are at, how to advance to the next level, and signs you are doing it right.  ...

Average Net Worth By Age in 2023!

It’s time for one of our most anticipated shows of the year: our annual Net Worth By Age show! In this year’s edition, we’ll shared updated numbers and data for 2023 and discuss the most important things for you to focus on in each decade.   In this episode, you'll...

Win Financially During a Recession! (Everything You Need to Know)

The bear market we've experienced in 2022 has been longer than many in recent memory - and some are concerned that the economy may soon enter into a recession. Here's everything you need to know to stay on-track and win financially during a recession!   In this...

The Fed Just BROKE the Car Market! (What You Need to Know)

Car prices have been on a rollercoaster ride the last few years, and it looks like they might finally be coming down. In this episode, we’ll discuss what you need to know about the current car market, pitfalls of buying a car, and how to do it the right way.   In this...

Top 4 Money Mistakes People Make During the Holidays!

There’s a reason why financial resolutions are always near the top of the list in January - many Americans spend the holiday season making financial mistakes. In this episode, we’ll discuss the top money mistakes people make during the holidays and how to avoid them....

Financial Advisors Share What They WISH They Knew About Money Earlier!

Have you ever felt like if you just knew this one thing about money earlier your finances would be in a better spot? In this episode, we’ll share the five biggest things we wish we knew about money earlier!   In this episode, you'll learn: What we wish we knew earlier...