Wednesday, October 24, 2012

Reminder: there is no retirement

Even while our friends over in France continue to whistle past the graveyard and pretend that their official retirement age should in fact be lowered, rather than raised massively, Americans seem to be waking up to the obvious and inevitable. That is to say, for most Americans, retirement is now a pipe dream.
As they struggle to save for retirement, a growing number of middle-class Americans plan to postpone their golden years until they are in their 80's. 
Nearly one-third, or 30%, now plan to work until they are 80 or older -- up from 25% a year ago, according to a Wells Fargo survey of 1,000 adults with income less than $100,000. 
"It is so tough for Americans to save for retirement that the answer seems to be to work longer," said Joe Ready, director of Wells Fargo Institutional Retirement and Trust. 
Overall, 70% of respondents plan to work during retirement, many of whom plan to do so because they simply won't be able to afford to retire full time. 
But working well into your 70's, 80's or even 90's, isn't always realistic, said Ready. Nearly three-quarters of those who plan to work into their 80's say their employer won't want them working when they're that old, for example. Other roadblocks, like health issues, could arise as well.
Never mind the fact that many Americans won't even live until their 80s, this is an ugly statistic and trend. It's also terrible news for the next generation of college grads, who will emerge from school with mountains of debt and realize that there are no jobs for them because their parents (and grandparents?) are still holding them.

The simple fact is, we've convinced ourselves for decades now that low-interest rate policy and deficit spending gives us an economic free lunch, and that we'll therefore never have to endure another recession again. In reality, all low-interest rate policy has done is to pull forward years (if not decades) of economic growth into the current period, as workers spend now and cost themselves the ability to spend later (in retirement). Sooner or later we have to pay the price for those policies, and we're now seeing the side costs of all of that "prosperity" coming home to roost.

A devastatingly low number of 50-55 year olds in our country can currently afford to retire at anything approaching a reasonable age, and this problem will only get worse as our distressing gaps in pension and Social Security funding become more apparent (let's not even discuss their investment return assumptions right now). This is bad news for the older generation and the younger generation alike, and it all comes back to unrealistic monetary and interest rate policies. Thanks, Ben.

[CNN Money]
(h/t Tim Iacono)

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