SA Dividends, Income & Retirement Editor Robyn Conti here, subbing in for Gil, who's observing Passover this week. I'll do my best to fill his very talented and knowledgeable shoes and continue to keep you up to date daily on the latest FA analysis and news here on Seeking Alpha.
It's no secret that America's retirement system is in crisis. We are well aware that Social Security and Medicare need shoring up, and that workers today aren't saving enough to create the financially secure and comfortable retirements most of us dream about.
SA contributor Kevin Wilson presents a rather gloomy picture of how truly dire the circumstances of our nation's retirees and near-retirees are in Of Mice And Men: The Retirement Crisis In America. He aptly points out that traditional retirement planning assumptions have broken down over the past few years, and that savers can no longer rely on tried-and-true investment methods like asset allocation because expected returns across all asset classes are bunk due to central banks' insistence on ZIRP and NIRP policies across the globe.
So what does that mean for the best laid plans of retirees and near-retirees? Wilson writes:
The crux of the problem then is the low expected returns on all types of investments, as discussed briefly above and mentioned by many other analysts. As a consequence, the average person must either withdraw much less from their investments in retirement than they actually will need (i.e., accept a lower standard of living), or as mentioned above, retire significantly later than planned or save a multiple of what was assumed above. National data suggest that the average investor has been chasing yield in a vain attempt to make up the difference through investment magic. Unfortunately, yield chasing doesn't end well historically, and there are already signs that it is failing now...
Wilson then goes on to cite programs that desperately need reform at the government level, i.e., Social Security and Medicare -- which he calls the "bedrock" of retirement planning -- and discusses strategies for addressing the problem of low investment returns. It's an interesting read, and Wilson makes several valid points that, in this author's humble opinion, hold a lot of water, and are definitely worthy of consideration by our lawmakers and others with the power to affect the changes we all want to see in the retirement world.
In defiance of reliance on Social Security and Medicare, self-proclaimed "geezer" George Schneider summons the wisdom of the Oracle of Omaha Warren Buffett in his piece, How Greedy Retirees Steal Candy From Fearful Babies, touting the old adage investors know so well: "be greedy when others are fearful." Schneider touts interest rate-sensitive stocks, especially REITs, advising that now is the time for the income-oriented and dividend-hungry to jump in while prices are down and investors are fearful, to reap those profits when markets "normalize."
Here are a few more posts from the day that contain items of interest for financial advisors:
- Invesco PowerShares explains that with low volatility investing, increased tracking error correlates with higher returns.
- Jonathan Prather shares his grandma's sage investment strategy.
- Kevin Mahn observes Earth Day with a discussion of the evolution of ESG (environmental, social and corporate governance) investment practices across the globe.
- James Picerno speculates on the Q1 GDP report.
- Could slumping retail sales indicate a looming recession? queries Ian Bezek.
What are your thoughts? Are recession fears overblown? Comment below.