Every time I read an article by a brokerage house or financial expert preaching the traditional mantra of investing in stocks, mutual funds, etc., as the path to building a safe retirement fund, I want to barf.
What baffles me is that the financial industry continues to spout guidelines which fail to recognize today’s reality. For example, “Everyone must achieve $1 million in financial investments to live off of a four percent annual withdrawal.” This benchmark is unrealistic for most of us. Today, few Americans will ever have $1 million in net wealth (let alone the inflated value of that figure down the road). And for those who have not a hope of achieving this lofty goal, the industry proclaims it’s their fault for “spending lavishly and not saving enough.”
Most people in our country live on a financial edge. Whether blue- or white-collar, they juggle one or more jobs, kids, bills, credit card payments and often student loan debt. Over 40 million people use food stamps. Some have given up on job searches. Others work multiple minimum wage jobs. A major illness, bill or job loss would put many on the street. Home ownership is out of reach for younger generations. And for most, traditional retirement like that enjoyed by earlier generations is just a pipedream.
Baby Boomers who were crushed by the 2008 Great Recession (I’m raising my hand) quickly found ourselves behind the retirement curve with little time to catch up. Subsequent lost jobs and devastated real estate values were the coup de gras. We scrambled and learned how to survive. Scaled down retirement plans were modified to included home businesses, continued or part-time work, or relocation to south of the border where the dollar stretches further.
And it is not just Baby Boomers who face a new reality. The average Millennial (born 1979-2000) or Gen Xer (born 1965-1978) is pessimistic about their retirement prospects. Burdened with stagnant income and student loans, the only advice they receive from the financial industry is insulting, “If you’re falling short of the goal to have $1 million in funds by retirement age, the best thing you can do is set a goal for yourself and make some lifestyle changes so you can save more.”
“Well, what about 401K investment plans or pensions?” you may ask. One has to only look at the last time Wall Street blew up the world economy to see how vulnerable 401K funds are. And most people cannot afford to max out their monthly 401K contributions. Many do not participate at all.
Wall Street won a major victory when 401K’s replaced traditional pensions. They make money churning mutual funds, while everyone else unknowingly assumes the risk. Most pensions that survive today are for public employees and dangerously bloated while being underfunded.
There is little or no fat in the average American’s income. Unless they get a fat inheritance, Millennials and Gen Xers are looking at meager personal savings, Social Security and perhaps some home equity as their only retirement assets…and they aren’t confident Social Security is going to be around.
Everything else going on in the country aggravates the situation. There are no national programs for training those displaced by automation or clean energy policies. Obsolescence and a worldwide economy are eliminating domestic blue-collar jobs. A college degree is no longer the path to financial security. Many cannot afford healthcare. Homelessness is common in most cities. Wealth is now concentrated among a small percentage of the population. Government is ineffectual. The dire consequences of global warming are not even being addressed. So it is no wonder that most people feel concerned about their long-term prospects. The American dream is fading.
The bottom line is that traditional retirement advice and services are useful only for those with excess income. The rest are struggling and falling behind. They wonder what will become of them as they age. And no one is addressing this.
This is America’s dirty little secret. We no longer have an economy or retirement programs that work for the majority of our citizens. Achieving full retirement at some point is now impossible for the average person. Few politicians acknowledge this sad development, let alone dare to begin fixing it. What we have today works for Wall Street, large corporations and the wealthy, but not for the rest of us. And that, my friends, is a ticking time bomb.