How long do you expect to be dead?
Having never been asked this before, I convened with my inner philosopher and estimated the times between death and reincarnation, heaven (assuming a straight path), hell, and the end of the universe--year, month, month, forever. I was on the wrong track. ~ Ilene
By Paul Price
The question in my title is often used by life insurance salespeople when somebody asks the price of a ‘too small’ policy amount. A too small policy – for instance $50,000 or $100,000 – is not enough. To determine if a life insurance policy is adequate, divide the death benefit ($) by the actual annual cost of maintaining the beneficiary’s current lifestyle ($ per year). The result is the number of years the payout would cover the beneficiary's expenses.
If the beneficiary lives beyond those years, the “too small” policy will run out. The insured will be summoned back from the dead.
It’s the same story with retirement savings. Most people have not calculated how much money they need to retire. However, many people fear that they won’t have the resources. A recent survey by AARP found that nearly 70 percent of non-retired baby boomers in Florida thought they would have to delay retirement. 51 percent worried that they would never be able to retire. (Baby Boomers Worry They Won’t Be Able To Retire)
A new study by LearnVest and Chase Blueprint showed the net worths claimed by respondents in various pre-retirement age groups (below).
[Note: 12% - 23% of people in the different age groups gave no indications of the wealth. Thus the percentages listed in each specific category do not add up to 100%.]
It’s understandable that 25 to 32 year olds do not have significant savings. It’s alarming that 45 to 54 year olds have a median nest egg of only $101,000. That means 50% have less. How many years of your own lifestyle could you pay for with $101,000 or even the average, $219,000?
Thanks to Bernanke and the Fed’s ZIRP (Zero Interest Rate Policy), we can’t even make a reasonable risk-free return on the median or average savings amounts. At 1%, the interest on $219,000 would come to a whopping $6.08 per day, pre-tax. In the future, that probably won’t even buy a Happy Meal.
There are various reasons why savings rates are so low. Political promises tell us:
- Social Security will be there to support you.
- Obamacare, Medicaid or Medicare will provide you with health care.
- Food Stamps will ensure you’ll always have food.
- Subsidized housing will be offered if necessary.
If we did defer immediate gratification by providing for ourselves:
- We may be denied some or all of our SS benefits because we don’t really need them. Others are more deserving (aka: means testing),
- We will need to pay for health care. No subsidies for rich folks.
- SNAP is straining the system. No free food for us.
- We will pay our own property taxes and utility bills.
Forego spending now and we’ll subject ourselves to double or triple taxation later. Spend every dime and we’ll be taken care of by the ever-dwindling pool of suckers that are still working.
Our warped world is now rewarding bad behavior (failure to save and invest) while punishing good behavior. We are teaching entire generations that they are chumps if they do the right thing.
If we raised our children or dogs this way, we’d have bratty kids and out of control pets. If we continue to run America this way, we’ll get the same result.