Lance Roberts has a lot to say on the unaffordability of retirement - the subject of our discussion yesterday. I cited data reported each quarter by Fidelity showing the average size of the firm's retirement balances totaling just $89,000. I added that Fidelity Investments retirement clients are likely far more affluent than average Americans. Comes along Lance Roberts with some more data underscoring that point:
The recent survey from National Institute on Retirement Security... showed the typical working-age household has only $2500 in retirement account assets. Importantly, 'baby boomers' who are nearing retirement had an average of just $14,500 saved for their 'golden years.'"
Ouch. Roberts also cites data showing that "4-out-of-5 working-age households have retirement savings of less than one times their annual income." (That would seem to place Fidelity investors mainly in the top fifth of savers.)
With savings this low, one can readily grasp the importance of Social Security and Medicare - the worry about their solvency and the reluctance of politicians to take actions that might lower benefits.
Roberts devotes a lot of his discussion to criticism of monetary policy and to questions about the durability of the current bull market. I will sidestep those issues here, while seizing on what I think was a key insight of his: namely, that the prosperity we have seen since the last secular bull market has been a function of the credit people have used "to make up the difference between their standard of living and weakening levels of wage growth."
I think that observation is correct. We live in a materialistic culture, and underlying and fueling that culture is a powerful commercial infrastructure promoting consumer credit and advertising. By the time you come home and see a $5,000 check pre-made out in your name courtesy of your credit card company, you already have seen a dozen ads egging you on to use that check for present wants, with worries about repayment kicked down the road. Beyond personal consumption is the added problem of high-ticket items like higher education and healthcare that are anything but affordable for the average wage earner (despite legislation meant to address the latter concern). These problems require urgent attention, but a sclerotic political system, a lack of public consensus and generally weak leadership will not allow for that anytime soon.
Not wanting to end this on a negative note, I will offer one constructive suggestion for retirees and pre-retirees alike. File away the credit card, and see how long you can last on a debit card. With time and conditioning, folks who learn to spend only based on current income will end up in good shape during retirement - even if they have not saved as much as they should have.
What do you think of this modest proposal?
Below please find a few advisor-related links:
- Wolf Richter on the evolution of the EU's financial crisis: one bank at a time, then all at once.
- John M. Mason derives management lessons from the Wells Fargo (NYSE:WFC) scandal.
- Bret Jensen shares lessons learned in 30 years as an investor.
- Kristina Hooper of Allianz Global Investors looks at investor use of liquid and illiquid alternatives.
- Tony Ash: Are all robo-advisors the same?
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.