Breaking Down America's Worst Long-Term Challenges: #2- The Looming Retirement Crisis

Authored by Simon Black via Sovereign Man,

Read #1- Debt here...

Last week, the financial services giant Northwestern Mutual released new data showing that 1 in 3 Americans has less than $5,000 in retirement savings.

It’s an unfortunately familiar story. And Northwestern Mutual’s data is entirely aligned with other research we’ve seen in the past, including our own.

The Federal Reserve’s most recent Survey of Consumer Finances, for example, shows that the median bank balance among US consumers is just $2,900.

And Bank of America’s annual report from last year showed that the average balance per HOUSEHOLD (i.e. -not- per person) was $12,870… which was actually LESS than the average account balance that Bank of America reported in 1997!

On average, the typical US household has less savings today than they did 20 years ago… and almost nothing put away for retirement.

In fact 21% of Americans (based on Northwestern Mutual’s data) have absolutely nothing saved for retirement.

And 33% of Baby Boomers, the generation closest to retirement, have between $0 and $25,000 saved for retirement.

That’s hardly enough savings to last more than a few years… and a major reason why most retirees currently rely on Social Security to meet their monthly living expenses.

According to a Gallup poll from last May, 58% of US retirees said that they rely on Social Security as their major source of income. They simply don’t have enough of their own personal savings stashed away.

But as we’ve discussed many times before, Social Security is rapidly running out of money.

The most recent report from Social Security’s Board of Trustees (which includes the US Secretaries of the Treasury, Labor, and Health & Human Services) tells us that the program’s cost has exceeded its tax revenue since 2010.

Last year this shortfall was $59 billion, 11% worse than in 2016.

And in order to make up the difference and cover this deficit, Social Security has to dip into its trust fund, effectively burning through the program’s savings.

The problem with this approach is that, eventually, these annual deficits will burn through ALL of the program’s savings.

The government knows this; the Board of Trustees even state this in their annual report, projecting that the Social Security trust funds will become fully depleted in 2034.

Sixteen years may seem like a long way off. But we’re talking about retirement here. You’re supposed to think long-term about retirement. And the math simply doesn’t add up.

The Trustee Report states explicitly that, once the trust funds run out of cash, the program will have to, at a minimum, reduce the monthly benefit that’s paid to its recipients.

So if you’re planning on being retired at any point past 2034, the government is LITERALLY TELLING YOU that they won’t be able to pay the retirement benefit that’s been promised to you.

Longer term (pay attention to this if you’re under 40), the numbers get even worse.

The way Social Security works is that retiree benefits are essentially paid for by people who are currently in the work force.

If you have a job, a portion of your paycheck each month goes to Social Security and ends up in the pockets of people who are currently retired.

In order for Social Security to function, there has to be a certain number of workers paying into the program for each retiree.

Social Security tracks this worker-to-retiree ratio VERY closely. The higher the ratio, the better.

In 1995, for example, there were 4.9 workers paying into the program for every retiree receiving benefits.

By 2020, Social Security projects the ratio will be down to 3.7 workers per retiree.

And by 2040, just 2.75.

That’s simply not enough workers.

Do the math– at 2.75 workers per retiree, you’d have to pay nearly 40% of your salary just in Social Security tax (i.e. NOT including Medicare, federal, or state income tax) to keep the program running.

It’s also noteworthy that, just this morning, the US government released data showing that the birthrate in the United States is at a 30-year low.

If you project this alarming trend forward by a few decades, you can see how the worker-to-retiree ratio could easily fall below Social Security’s already dismal forecast.

It’s not just Social Security either. State and local pension funds, and even a lot of union and corporate pension funds, are also terminally insolvent.

A report issued a few months ago by the American Legislative Exchange Council estimates that the total amount of unfunded liabilities for state and local government pensions now exceeds $6 TRILLION.

Bottom line, Social Security is broken. State and local pensions are broken. And the federal government is far too broke to be able to bail any of them out.

Even the Social Security trustees admit this– they’re practically giving us a date to circle on our calendars for when the program will run out of money.

Yet a disturbing number of Americans has little to nothing set aside for retirement… and they’re expecting to be able to rely on Social Security.

Something is obviously wrong with this picture, and it would be utterly ludicrous to expect this won’t have a substantial impact.

Either future workers and businesses are going to be hammered with all sorts of new taxes to bail out Social Security–

— or retirees who have no savings and rely exclusively on the program to survive are going to have their benefits drastically slashed.

Either way, retirement is a nuclear problem set to explode in the Land of the Free.

One way or another, tens of millions of people are going to have their lives turned upside down.

And it is beyond the powers of the government to do anything to stop it.

And to continue learning how to ensure you thrive no matter what happens next in the world, I encourage you to download our free Perfect Plan B Guide.

Comments

Aubiekong Thu, 05/17/2018 - 20:06 Permalink

They will pay with printed dollars that will be worth less and less every hour you hold on to them.  A months check might only buy a couple of days worth of food but you will get your check...

stacking12321 toady Thu, 05/17/2018 - 20:34 Permalink

“I believe that we should maintain the principles of Social Security, but I think the existing structure is not working. Until we construct a system that creates the savings that are required to build the REAL assets, so that the retirees have REAL goods and services. We don’t have a system that is working. We have one that basically moves cash around and we can guarantee cash benefits as far out and whatever size you like, but we cannot guarantee their purchasing power. Do we have the material goods and services that people will need to consume, not whether or not we pass some hurdle with respect to how legal financing occurs. Financing is a secondary issue and it is a means to create the REAL wealth, not an end into itself.” -Alan Greenspan 2005

In reply to by toady

Chris2 stacking12321 Thu, 05/17/2018 - 21:54 Permalink

This is such bullshit. There are old Chinese people who are collecting SSI without ever having worked in the USA. I saw a gov study from the 90s saying they were the worst offenders for fraud and it asked why are they collecting if never had worked in America.

Then they tell Americans it won't be there for you CUZ WE GAVE IT TO FOREIGNERS WE LET IN.

In reply to by stacking12321

jlmac Chris2 Fri, 05/18/2018 - 05:30 Permalink

SSI is a separate program than Social Security.    You must be extremely poor to collect it and have no other income.   If you're married your spouse's income counts toward the benefit.    So you could literally be disabled and end up with no SSI benefit if your spouse works.    AND if you are disabled and don't qualify for social security AND you are married you don't get one penny from the government.   The only solution for these disabled people is to get divorced and spend all your assets, otherwise, you get nothing.   

Now it may be that these immigrants you are talking about that receive SSI are single and disabled, they would qualify but the amount of the benefit is something like $760 a month maximum.   

In reply to by Chris2

Big Whoop jlmac Fri, 05/18/2018 - 19:39 Permalink

No. This scam has been going on for a long time. It's not disability. The klatch I knew doing it were Russians. They'd bring their elderly parents over - they totally won't be a burden because the kids have enough for them to live on for a year! Then the parents would end up on social security and also getting various benefits for the poor.

In reply to by jlmac

chestergimli toady Thu, 05/17/2018 - 20:45 Permalink

If the older folks don’t leave the work force, then how will the younger ones get jobs to support themselves.  Face it, the (((tribe))) has stolen all the money just the way they did from the Pentagon before 911 and they are getting ready to move-they think.  They may be in for a rude awakening.

In reply to by toady

same2u directaction Thu, 05/17/2018 - 20:43 Permalink

For many it does, my parents and friends are in excellent health, they spent all their money cause they retired in their early 60s,  got hit hard during the housing crisis, fixed income pays almost nothing...now ten years later they live in a subsidized senior apartment complex, they count their pennies daily. Medical bills pile up fast...they thought they would be traveling the world after they retired...they were sold a lie...

In reply to by directaction

HRH of Aquitaine 2.0 johnQpublic Thu, 05/17/2018 - 20:47 Permalink

I am guessing they will roll out those 3D printed suicide pods. You know, the ones we read about a few months ago? Step in, breathe the gas, die. Pod is also your coffin. Reload with a new pod and new gas, rinse, repeat. I can see them now. Where will they be located? Next to the graveyard or at the hospital? No idea, yet. Heck, they might have a town dedicated to your final moments called the Death Pod Express!

In reply to by johnQpublic

NoDebt 38BWD22 Thu, 05/17/2018 - 20:30 Permalink

The great lie that the SS "trust fund" will run out of money in 2034... most often repeated pack of bullshit I've heard since global warming.  It's fucking out of money NOW.  There is no money in the trust fund.  There are congressional IOUs.  Every shortfall comes out of the CURRENT YEAR federal budget.  

SS since inception was set up to be "pay as you go".  Reagan set up the "trust fund" and started filling it.  Clinton emptied it to "balance the budget" and put SS back to being a pay-as-you-go ponzi scheme, as it was originally.

THERE. IS. NO. FUCKING. MONEY. IN. THE. SS. TRUST. FUND.

This is not a crisis that will start in 15 years.  It's already happening TODAY.  And it's going to get worse every fucking year from here out.  Is that clear enough?

 

In reply to by 38BWD22

38BWD22 NoDebt Thu, 05/17/2018 - 20:55 Permalink

 

Yep, that is my understanding as well, that Social Security "is funded".  It is NOT for the future, and as you write, it is NOT funded (under normal accounting rules) even now.

It's all fake.

Neither my wife nor I are even eligible for SS (nor, alas, for MediCare), so that aspect of the pension crisis affects us, because we will get no pensions...

In reply to by NoDebt

Drop-Hammer NoDebt Thu, 05/17/2018 - 22:40 Permalink

True.  They started raiding the trust fund in 1967-68 to cover up the inflation caused by the Vietnam conflict.  They bankrupted the fund years ago.  Today, SS is paid with the tax dollars our jew-infested gov't collects in payroll tax every year and from monies we borrow from foreign banks/governments.  Fucking jew cunts did quite the number on us.  

In reply to by NoDebt

uhland62 38BWD22 Thu, 05/17/2018 - 22:49 Permalink

If you overinvest in wars and war machinery there's not enough left for people. Now that's rocket science!!! War machinery does not yield, they only cost, and also need to be replaced/upgraded pretty soon, turning taxpayer billions into scrap.

" The THAAD system is being designed, built, and integrated by Lockheed Martin Space Systems acting as prime contractor. Key subcontractors include Raytheon, Boeing, Aerojet Rocketdyne, Honeywell, BAE Systems, Oshkosh Defense, and MiltonCAT." 

They're making the money but that's not good enough for the general population of old people. 

In reply to by 38BWD22

44magnum Thu, 05/17/2018 - 20:10 Permalink

"And it is beyond the powers of the government to do anything to stop it.'

Steal it from the private banks, they have been stealing it from us since 1913. Pay back will be a bitch.

HRH of Aquitaine 2.0 Thu, 05/17/2018 - 20:14 Permalink

"And 33% of Baby Boomers, the generation closest to retirement, have between $0 and $25,000 saved for retirement.

That’s hardly enough savings to last more than a few years… and a major reason why most retirees currently rely on Social Security to meet their monthly living expenses.

According to a Gallup poll from last May, 58% of US retirees said that they rely on Social Security as their major source of income. They simply don’t have enough of their own personal savings stashed away."

 

Scary.  What were they thinking?  That cat food tastes good?

CRM114 Thu, 05/17/2018 - 20:20 Permalink

There is no miscalculation on the part of the near retirees.

Look at the population age distribution.

The vast majority 45 or over are not going to accept the reduction of the real value of social security.

And they hold a majority of likely voters.

 

However, the very wealthy are never prepared to write blank checks, and have found new ways not to write any.

The middle class tax cow is being milked to death.

The immigrants are, shall we say, not in the habit of paying taxes. 

 

Irresistible Force, Immovable object.

The fractures are already happening on city and State boundaries; the taxpayers are voting with their feet.

 

The USA, in its current form, has less than 10 years. Not that many western nations are much different.