Skip to site content
The Show

Retirement In Crisis – Update

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!!!

Enjoy the Show?

Categories

Where You Can Watch and Listen:

Subscribe on these platforms or wherever you listen to podcasts for new episodes every Friday, live streams every Tuesday at 10am CT, and new highlight clips throughout the week.

Related Content

Free Resources

Financial Order of Operations®: Maximize Your Army of Dollar Bills!

Here are the 9 steps you’ve been waiting for Building wealth is simple when you know what to do and…

View Resource

Wealth Multiplier By Age

How much to save every month to become a millionaire.

View Resource

Car Buying Checklist

Here’s how to buy a dependable car that won’t break the bank.

View Resource

Articles

Can This Annuity DESTROY Your Retirement?

, ,

Read More

The IRS Just Changed the Rules About 401(k)s (What You Need to Know)

, ,

Read More

Wealth Multiplier Revealed: The Magic of Compound Interest!

, ,

Read More

Financial FAQs

Courses & Tools

How about more sense and more money?

Check for blindspots and shift into the financial fast-lane. Join a community of like minded Financial Mutants as we accelerate our wealth building process and have fun while doing it.

https://moneyguy.com/wp-content/uploads/2023/10/accent-icon-book.png

Millionaire Mission (Brian’s Book)

Buy Now
https://moneyguy.com/wp-content/uploads/2023/10/accent-icon-math.png

Know Your Number Course

Buy Now
https://moneyguy.com/wp-content/uploads/2023/10/accent-icon-pencil.png

The Money Guy Net Worth Tool

Buy Now

Recent Episodes

It's like finding some change in the couch cushions.

Watch or listen every week to learn and apply financial strategies to grow your wealth and live your best life.

maxresdefault 2

Is It Okay to Retire with a Mortgage?

Watch Now
maxresdefault 1 1

How to Choose Between Competing Financial Priorities (Determining the Winner)

Watch Now

Budgeting vs. Cash Flow Management: What’s the Difference?

Watch Now