Die Early: One Solution To The Retirement Crisis

by: John Lohr


We created the retirement crisis. Can we fix it? Not likely, although financial literacy starting in grade school may help.

We are not prepared for a 30-year retirement, unless we started at birth, or just before.

Work longer or die early are two solutions. The other options are not very good either.

Will Rogers "Don't gamble; take all your savings and buy some good stock and hold it until it goes up; then sell it. If it don't go up, don't buy it."

Woody Allen "A stockbroker is somebody who invests your money until it's gone."

Willie Sutton "I rob banks 'cause that's where the money is."

In 2017, April is Financial Literacy Month. Imagine that, our Federal Government dedicated an entire month for a nation experiencing the highest debt ratio and lowest savings rate combination since 1933. I intend to celebrate by cutting up my girlfriend's credit cards. This country is in the midst of a retirement crisis that only Doctor Who and the TARDIS can solve.

American workers who think they can retire are in trouble.

The personal savings rate is now at 5.7%, well below the 60-year average, Personal Savings in the United States averaged 8.32% from 1959 until 2016, reaching an all-time high of 17% in May of 1975 and a record low of 1.90% in July of 2005. 2005 was the lowest saving rate since the Great Depression. (About the Great Depression - ask your parents who may remember what their grandparents had to say about it.) We haven't improved much since 2005.

It is estimated that 10 million Americans do not use insured banks. (See "Great Depression") 75 million Americans are "credit challenged" (i.e. head over heels in debt) and 37% of American workers are not saving for retirement (see "The Demise of Social Security" coming in 2038.)

62% of Americans have less than $1,000 in savings, and 21% have none. The average American has $152,000 in investible assets, but don't be misled by that average. Averages are skewed by those at the higher end. The median household has $8,100 in savings but is $13,000 in debt, not counting mortgages. That is to say if there are 200 million households in the U.S., 100 million have less than $8,100 in investible assets. And, they have more debt than assets.

But, the endemic problem goes much deeper than these superficial statistics. It is in the area of "good news" that financial catastrophes are germinating. The good news is that Americans have a high likelihood of living longer. The "bad news" is that they will not have any money to sustain themselves.

The London Center for Longevity Studies announced that the first person to live to 1,000 has already been born. The expected lifespan of an average 30-year old TODAY is 120. In 2016, the average retirement age is 63 years. The average age of the second to die of a couple is 92! 65% of today's 65-year-olds will reach 85 years of age or more. This year, the first group of boomers turned 70. Are they on the beach, yet? No.

Americans have simply not yet been taught to think in terms of a 20- or 30-year retirement. At 3% inflation, in 30 years, we'll need $2.45 for every $1.00 we need in 2016. The risk of dying too young has been replaced by the risk of living too long.

The soon to retire or even planning to retire have no idea of the magnitude of their financial shortfall. They can't imagine being 92 or how they get there. It's expensive to golf every day for 30 years. As a response to the lifestyle challenge, some 50 colleges so far have established (or are establishing) communities that span homes to hospice. Basically they are "Retire to Die" communities. Today they cost $200,000 to $600,000 to enter, plus $1,500 to $4,000 per month. In 2038, they may cost $1.5 million and $10,000 per month.

Today's worker may need to forget about leaving a legacy to their kids or favorite charity. They may need to go back to work and stay there until they die.

Excerpt is taken from the series, Die Early from "RetirementCulture" at somebodyelsesmoney.com ©Lohr, 2016

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.

Additional disclosure: Excerpt is taken from the series, Die Early from “RetirementCulture” at somebodyelsesmoney.com ©Lohr, 2016. It first appeared in the John Lohr Blog, "The Ethical Treatment of Somebody Else's Money" on November 11