Recently, a Gallup poll asked Americans about their greatest financial worries.
The number one worry was not having enough money for retirement. The survey reported 59% of Americans are either very worried or moderately worried about retirement.
But how many of the 41% that aren’t too worried about retirement are likely accurate in their assessments?
Perhaps a few people don’t plan on ever retiring, and therefore it isn’t a worry. And there are certainly some people who are either really wealthy or live frugally enough that affording retirement is not a concern.
But the 59% who are worried are probably right to be worried. And we can guess that a sizable portion of the other 41% should probably be more worried than they say.
I’ve talked to people with only $200,000 or $300,000 in savings and little in the way of a pension who were planning to retire soon. Unless you’re going to live an extremely frugal lifestyle, I don’t see how most people can live 20 or 30 years on a couple of hundred thousand dollars plus Social Security, at least in the U.S.
Unless you are an incredibly great investor, it probably isn’t going to last.
It is amazing that most people never actually sit down and do the math. They don’t figure out a realistic budget and determine what their cash flow will be given a certain investment return.
It’s hard enough to figure out your retirement needs when you can’t predict things such as inflation, investment returns, and unexpected living expenses such as medical bills. It’s impossible to figure out your retirement if you don’t actually sit down and do the math.
Middle-Aged Americans Most Worried
The Gallup poll broke down the results into different age groups, and the most concerned about not having enough retirement money were middle-aged Americans.
70% of those aged 30 to 49 are worried about retirement, while 68% aged 50 to 64 are worried. Of those 65 or older, only 37% are very or moderately worried, and 50% of those aged 18 to 29 also fall into this category.
This is not surprising considering younger people are still so far from retirement. Meanwhile, those 65 and older aren’t going to worry as much because many of them are already retired. Many of them also have pensions that are far less prevalent for those currently in the workforce.
Middle-aged Americans, particularly those in the middle class, are starting to wake up to the fact that the American dream of retirement is slipping away.
Retirement was not a common thing prior to the 20th century. Most people worked until they died, or at least up until the point where they were not physically or mentally able to work any longer.
The 20th century brought about the dream of retiring and enjoying the last years of your life. But in recent times, this dream is starting to seem less attainable.
It’s interesting that in the Gallup poll, a majority of Americans were not too worried about things such as paying regular bills. Most Americans can manage their monthly expenses well enough to get by.
The problem is, there’s nothing left over at the end of each month to put into savings.
The Government Factor
While government received some credit in the past for helping people to retire with Medicare and Social Security — and probably still does receive credit by those who are currently retired — we have to consider all of the ways it is hurting our chances for a comfortable retirement.
First, and most importantly, the government at all levels spends almost half of our money. When the federal government is spending almost $4 trillion per year and the state and local governments are spending another couple of trillion dollars combined, it leaves us with a lot less money.
While some of this money is redistributed back into people’s pockets, such as with Social Security, we must also consider that a great deal of it is wasted or even quite destructive.
Government spending misallocates resources and distorts production and savings. This leaves most of us poorer and less able to save for our retirement.
Second, to fund some of this government spending, inflation has chipped away at our purchasing power. We see consumer goods get more expensive each year while paychecks lag behind. And inflation makes it extremely difficult to plan for retirement when your money may only buy half as much 20 years down the road.
Third, Medicare and Social Security can actually create a sense of dependency and modify people’s behavior into saving less. Aside from having to pay payroll taxes and having less money to save, some people don’t take on the responsibility of providing for their own retirement. They figure the government is there to do that for them.
Apparently nobody ever explained to them that you might want more than just Social Security checks to fund your retirement.
A fourth issue with government — one we cannot fathom the full effects of — is the unfunded liabilities, particularly for Medicare and Social Security. The U.S. government has made promises that it will simply not be able to keep. There are unfunded obligations with some estimates topping $200 trillion.
Quite simply, there is going to be a default. The default will most likely occur in the form of significantly raising the retirement age. There may be means testing (no Social Security for the rich), but only raising the age will be able to solve the problem.
If you are currently around 50 years old or younger, it is a pretty safe bet that you won’t be collecting Social Security when you are in your 60s. You may not even get it in your early 70s, if at all.
We can’t really be certain how it will all play out, but we can be certain that the current system is unsustainable. If you are 50 or younger and you want to retire before the age of 70, then you better do a good job of planning your own retirement and not counting on any government help.
If you are between 50 and 60, it is a lot harder to say… It just depends on how much further the can will be kicked down the road.
While some people think taxes will just be raised on workers to pay for the so-called entitlement programs, we must realize that more taxes are not going to cover it.
And at some point, younger workers are going to revolt against paying higher taxes to fund other people’s retirement, particularly when they are struggling so much and know they can’t fund their own.
Don’t Depend on Government
I think people are right to be worried about not having enough money for retirement. About half of Americans have little or no savings.
It’s depressing when you work hard and still have little to show for it other than being able to pay for your daily living expenses.
If you are in this situation, you need to try something to get out of it — even if it just means saving a few dollars a week. At some point, you need to spend less than you earn and build up some savings. It’s important not just for retirement, but even for emergency situations.
If you have been able to save money, it’s important to keep doing so, while keeping the majority of the money you already have relatively safe. This is why I recommend investing in the permanent portfolio, as well as residential real estate that provides positive cash flow.
And most importantly, do not depend on the government for anything. You have to take responsibility for your own retirement needs. A great place to start is by locking in a steady flow cash with superior dividend plays like these.
Until next time,
Geoffrey Pike for Wealth Daily
