Guest Post: Retirement Account Fantasy And Middle Class Erosion – 1 Out Of 3 Americans Has Zero Dollars In A Retirement Account

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From MyBudget360

Retirement account fantasy and middle class erosion – 1 out of 3 Americans has zero dollars in a retirement account.

From 1950 to 1989 top 1 percent earned roughly 7 to 8 percent of nationwide income. Today it is inching closer to 20 percent resembling pre-Great Depression levels.

Many Americans live precariously close to the edge of financial
insolvency flirting with economic disaster daily.  If you casually
browse mainstream articles and watch any amount of television you would
think that the US still had a vibrant and strong middle class
When we pull back the covers on the current financial situation we
realize that many Americans are merely getting by and many would like
to live in some 1984 Orwellian fantasy world where suddenly things are
back to financial equilibrium.  43 million Americans
are depending on government food assistance to get by.  But many more
millions are merely living paycheck to paycheck hidden in the cellar of
the headlines.  1 out of 3 Americans has zero in any retirement account
(not one slowly eroding dollar).  Half of Americans have $2,000 or less
which puts them one month away from needing government assistance. 
With the volatile job market and turbulent Wall Street
middle class Americans are feeling the once prided stability being
slowly washed away.  Let us examine how retirement is now becoming more
of a fantasy for many Americans.

standard of living

Many Americans especially young adults realize that saving large amounts of money is a key to a sustainable retirement:

saving-money

Over 84 percent of 18 to 29 year olds surveyed feel they need at
least $1 million saved up in order to stop working some day.  60
percent of those 30 and older feel that they will also need $1 million
saved up.  Yet the actual figures are somewhat disturbing in contrast
to the perceptions of many:

us-retirement-accounts

Source:  Census

The median retirement account for US households is $2,000
This is why the vast majority of retirees depend on Social Security as
their primary source of funds in old age even though Social Security
was never designed to be a long term pension system.  You’ll notice
that the average retirement account is closer to $50,000 a year but
this is heavily skewed by the top 1 percent that keep most of their funds in stock wealth.

The reason retirement is slipping through the fingers of many like
sand is the disjointed income equality in the country that has grown in
the last decade.  If we look at income growth it has been heavily
tilted at the top:

800px-United_States_Income_Distribution_1967-2003.svg

Source: Census, Chart: Wikipedia

There has been virtually no real income growth for most Americans. 
The real significant wage growth over the last 50 years has occurred at
the very top 10 percent of income earners in the country with this
inequality accelerating in the last bubble decade.  What is more
important is that 75 percent of Americans largely depend on a job as a
primary source of income which seems rather obvious:

income-sources

Source:  Federal Reserve

If you examine the chart closely, it is only the top 10 percent that really benefit from a buoyant and thriving stock market.  As we have mentioned earlier 1 out of 3 Americans has zero, nada, or zilch in their retirement account.  The movement of the stock market
is like watching the score of a football game where the outcome means
nothing to the individual.  Yet the problem is that Wall Street has
taken the one item that was stable like a rock for Americans, housing and turned it into another commodity to be gambled and speculated against.

The share of income flowing to a smaller and smaller group of Americans is draining the life blood out of the middle class:

Share_top_1

“From 1950 to 1989, nearly 40 years of data the top 1 percent earned roughly 7 to 8 percent
of all the nationwide income.  Today it is inching closer to 20
percent, a figure resembling the massive income inequality seen during
the Great Depression.”

Even within the top 1 percent the difference in incomes is striking:

top 1 percent of income

This kind of income inequality is coming at the cost of the middle class
Banks and the financial press would like you to believe that this isn’t
the case but just look at how far your dollar is now going.  If you are
fortunate to have a retirement account it is likely you don’t have the
gambling devices of options, hedges, and other items that are largely
new casino devices for Wall Street
Most Americans are comfortable with income discrepancies but not at
these levels and not when much of the gains are based on bets that hurt
the overall economy.

The problem as many are now seeing is the financial sector is largely rent seeking by pilfering the future of many middle class Americans
The banking system extracts wealth by devaluing the US dollar, by
charging interest or fees on retail banking, and ultimately suckering
many Americans to dump money into a stock market that is operated like
a casino.  Washington Mutual, a once popular bank used to offer free
checking for life.  JP Morgan Chase took over Washington Mutual in a
government shotgun wedding.  Now, Chase is looking to extract $10 to
$12 per month merely for having a checking account.  Of course they’ll
waive this if you have $5,000 saved in a handful of their accounts. 
Look above again.  1 out of 3 Americans have no savings so how will
this be accomplished?

As we mentioned Social Security is largely becoming the retirement
account default of many Americans.  Yet the growing number of
beneficiaries is now putting strain on the system:
social-security-beneficiaries

The above chart will only continue to show expansion.  Where will
all this money come from?  We have a smaller workforce with the young
that are already having a tough time saving any money in this economy. 
Many of the good paying jobs of today require a college education and
college has largely entered its own student loan bubble
Many of the future middle class are merely trying to service their own
massive debt even before they begin their careers.  To save that $1
million will become a daunting task moving forward.  Also, if the Federal Reserve has its way $1 million 30 or 40 years from now may not be much.

With 17 percent of Americans unemployed or underemployed many are
simply looking for that next paycheck let alone planning for a
retirement where they can sip margaritas in some picturesque beach
location.  Wall Street
has pilfered the pockets of the middle class through bailouts for their
reckless gambling and incredible excess.  Many Americans now understand
this yet the current political class is merely interested in protecting
the established plutocracy by pillaging the American village.  Most
Americans are becoming exhausted by both political parties and their
pandering to Wall Street that provides a revolving door of money, jobs,
and connections.

The younger generation is seeing their ability to grow their net worth diminishing:

25-to-34-year-old-drop-in-median-savings

This figure has only dropped even further in the last few years. 
Retirement was once thought of as a place where one would reach a
comfortable existence after many years of hard work.  Not an
extravagant lifestyle but one in where a home was paid off and enough
money came in for food and daily necessities.  But now with Wall Street
turning housing into a giant commodity
and stripping bear the employment base of the country; many are
wondering if retirement is even an option especially when the stock
market is at the same level as it was one decade ago.

Ultimately what needs to happen is to get money out of politics and
to split up commercial and investment banking.  The answer is obvious
but the plutocracy is relentless
in keeping this game going as long as possible.  As this continues,
retirement will continue to look more and more as a fantasy to millions
of Americans.