I’ve written a lot about how Boomers aren’t retiring on schedule. Some of the reasons are positive, like the desire to remain active and engaged for longer. But a big factor – and one that’s growing in importance – is sheer dollars and cents.
Boomers and seniors are underfunded, and the crash of 2008 has turned a problem into a crisis…at least, in the USA.
A recent Gallup poll says retirement is the top financial worry in the USA, with 58% of all adults “very/moderately worried” about it. The number is 77% among 30-49 year olds, who see what’s happening to their parents and grandparents and who know what’s coming (or not coming).
Michael Pento, a senior economist at EuroPacific Capital, is blunt: “Retirement is on life support, if not indeed dead as we know it today,” he says in a disturbing interview. You can – and should – watch the video here.
He notes that in the past retirees banked on the buildup of wealth in the stock market and the increased value of their homes. But over the past 12 years, the major stock market averages have been flat in nominal terms, and have actually dropped significantly when adjusted for inflation. Housing, of course, has been a wipeout. Prices have declined 30% to levels not seen since 2002 – and are still falling. And pension and entitlement programs, going forward, are seriously underfunded.
“Where is the income going to come from to sustain a viable retirement?” Pento asks. “Americans are have negligible savings, the real estate market is still in secular decline, stock prices are in a decade’s long morass, real incomes are falling, public pension plans are insolvent and our entitlement programs are bankrupt.”
Is there a solution? Pento favors lower taxes and a balanced budget to reduce inflation. If the purchasing power of the dollar were higher, he argues, retirees could more easily live off their fixed incomes. Interestingly (or alarmingly, dending on how you look at things), he thinks the deliberate policy of the government is to do the opposite – to encourage inflation because that will lift nominal stock and real estate values.