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The Retirement Crisis (An Economic Catastrophe?)

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The good news is people are living longer thanks to advances in medicine. The bad news is the retirement crisis is very real and happening right now. If you are a baby boomer, you are 1 of about 10,000 people reaching age 65 every day. This began in 2011 and will continue until the year 2030 (U.S. Census Bureau). This comes to 1 of 5 Americans living in retirement. But not necessarily living well in retirement.

Most of these 75.4 million seniors will officially retire, collect social security checks, and go on Medicare. Some will have pensions and personal savings. Other boomers will keep working out of need. That’s not the only retirement crisis we are facing…

Part 1 of 30+ Years of Retirement Crisis

By 2030, every boomer will have the right to rock-a-way on the front porch. However, the age of our total population keeps rolling into old age. According to the Census Bureau, 2014 saw an important but mostly unseen fact occur. The number of millennials grew beyond the number of baby boomers. The counted is about 83.1 million millennials to 75.4 million baby boomers.

Yeah! We have more youngsters paying into Social Security to support the baby boomers – not really. Keep in mind there is also the smaller group of Gen Xers planning on the American Retirement Dream. By 2056, the 65 years and over population will become larger than the population under 18 years. Who is going to pay for these three waves of retirees?

The Nabers Group Solo 401k team is paying close attention to this very important trend. In this 3 Part Series, we help you better understand what this means to your personal retirement.

This Could Be the Worst Financial Crisis Yet

The Baby Boomers, Millenials and Gen X’ers are not generations who lived through the Great Depression. These are not people with a president promising “A Chicken in Every Pot.” These are people who worked for and fully expect at least a “middle class” lifestyle in retirement. But they saw a glimpse of what can happen from the 2008 Subprime Crisis (Great Recession). Honest, hardworking people lost everything. Including their homes.

Most have almost no financial stability. Would it really surprise you to wake up tomorrow with news that Wall Street stocks and bonds were down 25% across the board? You could hope it bounces back the next day or the next week. Or will it drop another 15%… and another 15%…? Hmm, the Great Depression lasted 10 years (1929-1939). The much shorter than the Great Recession, which lasted at least 5 years (2007 – 2012).

Our pension system is NOT in good shape either. First of all, only 23% of boomers ages 56-61 expect income from a private pension. On top of that, almost all pension funds depend on on Wall Street. Something like 90% of Wall Street money comes from pension funds, insurance companies, and hedge funds.

So, if Wall Street makes you financially nervous, what can you expect? Well, you’ll always have Social Security….

The Social Security Debt Bomb!

Social Security is supposed to be an income foundation with no risk to financial markets. Yet, the Social Security Board of Trustees says program costs will rise by 2035 so that taxes only bring in enough to pay 75% of scheduled benefits.

“If [Social Security] trust fund assets are exhausted without reform, benefits will necessarily be lowered…” – Chief Actuary of the Social Security Administration

People understand Social Security is not a giant savings account that you begin drawing from at retirement. It’s pay-as-we-go. Taxes collected from people working today are paying people in retirement today. The program now provides to over 50 million people. It’s funded by today’s payroll taxes on over 150 million workers and their employers.

Will Social Security even exist when you retire? Can you count on it to cover even your basic needs? At best, people retiring soon needn’t worry too much. But not far down the road, folks will likely face Scrooge-like benefits.

The Social Security Administration’s 2019 Annual Report says 2018 income of $1.003 Trillion barely exceeded costs of $1.0 trillion. Today’s payout is expected to be above 2020 income.

Costs forecasts remain higher for the 75-year projection period. Funds will probably be completely gone by 2035.

But for baby boomers, the news gets worse…

Expenses Outweighing Savings

Most boomers have more expenses but less money to pay them compared to generations that came before. On average, boomers are more than $110,000 in debt. Can you believe there are 2.8 million people over 60 still carrying student debt?

The numbers are just not good. The impending retirement crisis is real. A 2018 survey by Northwestern Mutual found nearly 8 of 10 (78%) Americans are “extremely” or “somewhat” concerned about a comfortable retirement. About 66% believe they are likely to outlive funds.

Those are real fears based on data showing dramatic savings shortfalls and little belief in social safety nets.

  • One in five Americans (21%) has NO retirement savings at all.
  • One in three boomers (33%) has only $0-$25,000 in retirement savings.
  • Three quarters of those surveyed believe it is “not at all likely” (24%) or only “somewhat likely” (51%) that Social Security will be there for them.
  • Nearly half (46%) have taken no steps for the likelihood that they could outlive their savings.

It’s time to find answers that you control!

Avoid Retirement Crisis by Controlling Your Own Retirement Funds

Everyone knows about Individual Retirement Plans (IRAs). But few are familiar with self-directed retirement plans. It’s little wonder that people don’t know about self-directed plans. It’s simply that Wall Street brokers don’t make money when you control your own retirement funds.

With a self-directed checkbook retirement plan, there are no regulations that state you must invest in stocks and bonds. Nor does it have to be controlled by anyone other than you.

You can take control.

Self-Directed Retirement Accounts

There are two basic self-directed retirement accounts. A self-directed IRA or a self-directed 401k. Either of these can invest in almost anything you want to trust for your retirement. You certainly don’t have to trust your retirement to Wall Street, or a pension, or Social Security. It would be nice if those were still there when you need them. If you are in full control of your own retirement account, you may avoid your own retirement crisis.

There are a few rules that you have to follow. When you do, you are free to invest in almost anything. A few examples include:

  • Rental properties
  • Tax liens
  • Gold
  • Private mortgages
  • Private loans
  • Privately held company
  • …and more

Do you think self-investing your retirement funds is less risky than what Wall Street, pensions, and Social Security offer you? If you stay with those risks, you may need to consider working longer, lowering your standard of living, or doing both. You’ll learn more about America’s retirement future in:

Part II – Baby Boomers: Going Back to Work or Time for Yourself?

Part III – How Millennials and Gen Xers Can Take Control of Their retirement Finances.

No one cares about your money more than you do – nor should they!

Have questions about a self-directed IRA or Solo 401k? Solo 401K experts at Nabers Group will help you get your retirement funds into your control, where they belong. Contact us here.

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