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Golden Years or Retirement Nightmare?

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Do you dream of retirement? Sitting on a beach sipping cocktails? Leisurely afternoon rounds of golf? Spending hours playing with grandchildren?

Well, for a lot of Americans, that retirement dream may turn into a nightmare. Instead of reclining poolside, they may find themselves greeting customers at Walmart.

According to data recently released by Northwestern Mutual, one-third of Americans have less than $5,000 in retirement savings. 

Twenty-one percent – nearly a quarter of Americans – have a retirement savings of zero. Thirty-three percent of Baby Boomers  – the generation now entering into retirement years – have on average between 0 and $25,000 saved up.

Here’s another sobering fact. The average household bank balance was $12,870 last year, according to Bank of America’s annual report. That’s less than the average account balance the bank reported in 1997. In other words, the average household is saving less than it did 20 years ago and has very little put away for retirement.

According to a Gallup poll, a majority of current retirees – 58% – say they rely on Social Security to get by. As an article at the SovereignMan points out, that isn’t exactly a rock-solid retirement plan.

The most recent report from Social Security’s Board of Trustees (which includes the US Secretaries of the Treasury, Labor, and Health & Human Services) tells us that the program’s cost has exceeded its tax revenue since 2010. Last year this shortfall was $59 billion, 11% worse than in 2016. And in order to make up the difference and cover this deficit, Social Security has to dip into its trust fund, effectively burning through the program’s savings. The problem with this approach is that, eventually, these annual deficits will burn through ALL of the program’s savings. The government knows this; the Board of Trustees even state this in their annual report, projecting that the Social Security trust funds will become fully depleted in 2034. Sixteen years may seem like a long way off. But we’re talking about retirement here. You’re supposed to think long-term about retirement. And the math simply doesn’t add up. The Trustee Report states explicitly that, once the trust funds run out of cash, the program will have to, at a minimum, reduce the monthly benefit that’s paid to its recipients. So if you’re planning on being retired at any point past 2034, the government is LITERALLY TELLING YOU that they won’t be able to pay the retirement benefit that’s been promised to you.”

If you’re under 40, the prospects of having a government safety net to fall into look even bleaker.

Social Security relies on current workers to pay retirees’ benefits. Yes. It is essentially a government-run Ponzi scheme. And like all Ponzi schemes, it will eventually collapse.

In 1995, 4.9 workers paid into the program for every retiree getting benefits. By 2020, the Social Security Administration projects the ratio will drop to 3.7 workers per retiree. By 2040, the ratio will fall to 2.75-to-1. As the Sovereign Man put it – that’s not enough workers.

In other words, the system that the majority of American rely on for retirement is completely unsustainable.

Do the math– at 2.75 workers per retiree, you’d have to pay nearly 40% of your salary just in Social Security tax (i.e. NOT including Medicare, federal, or state income tax) to keep the program running.”

And if you happen to be relying on a state pension program, your prospects are even more dismal.

SovereignMan summed it up this way:

Either way, retirement is a nuclear problem set to explode in the Land of the Free.”

So, what’s your plan?

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