OT: No Surprise. . .A Retirement Crisis is Coming to a Country Near You. . .

[flyer]

Even though this topic has often been discussed here and elsewhere, the new numbers are still shocking, and will hopefully be a “wake-up call” for those who have not yet prepared for the inevitable.

http://money.msn.com/now/post.aspx?post=156687a2-545d-4bc8-8e60-5aff9d8345a0

[earlyretirement]

Yep. The numbers/data is SCAREY! I read the same thing in the Wall Street Journal yesterday.

http://online.wsj.com/article/SB10001424127887323639604578368823406398606.html?KEYWORDS=retirement

The sad thing is I don’t think people are getting this “wake up call”. Everyone keeping hitting the “snooze” button and wants to sleep in. It’s not going to be pretty.

[The-Shoveler]

Even retiree’s feeling nice and safe and secure in their DB pension plans could be in for a very rude awakening as well.
With a inflation adjustment cap between 2-5% depending on department/plan inflation of 7-10% could reduce a DB plan to a pittance in a decade,
Best to keep some type of biz going and never fully retire (well until they wheel you blabbering incoherently into the state nursing home).

On a lighter note.
For a city with annual revenue of 3.6 billion, a 26 billion pension short fall seems insurmountable,
No fear, inflation will save the city…

• In 2012-13, Los Angeles’s pension costs are expected to rise to $1.3 billion, or 18% of the city’s budgeted expenditures. In 2002-03, just 10 years ago, pension costs were only $157 million, or 3% of total expenditures.
• Over the last decade, pension costs have grown at an annual average growth rate of 25% and have outpaced spending growth for every major area of the city’s budget.
• In 2012-13, the city of Los Angeles is expected to spend up to 32 cents toward pension benefits for every dollar it spends on total payroll for its employees. Employees will pay 9 cents for every dollar of payroll.
• From 2003 to 2012, the total official funding ratio of the city’s pension plans declined from 99.7% to 77.2%. Correspondingly, the city’s officially-reported unfunded liability increased from $87 million to $9.4 billion, more than a 100-fold increase.
• The growth in the unfunded liability and declines in the funding ratio are largely attributable to investment returns falling below the rate pension plans assumed they would earn (on average 7.75% per annum, net of expenses, on a portfolio consisting largely of bonds and equities). Over the last 10 years, LACERS, LAFPP, and LADWP pension trust funds have earned compound annual rates of return of 6.46%, 6.68%, and 5.11%, respectively. Over the last five years, these return rates were 0.68%, 1.06%, and 1.47%, respectively.
• Using Moody’s investment return assumption (5.5%), the unfunded liabilities would nearly triple to $25.9 billion.

[spdrun]

Perhaps we should be giving bloods and crips gold medals instead of jail time — might save on those cop and firefighter pensions if they never make it to retirement age 🙂

[UCGal]

[quote=earlyretirement]
The sad thing is I don’t think people are getting this “wake up call”. Everyone keeping hitting the “snooze” button and wants to sleep in. It’s not going to be pretty.[/quote]

I agree – I talk to coworkers who are in their 40’s/50’s who feel good because they invest “just enough” to get the company match. It will be hard to retire if you only save 6% of your income.

All have the same answer – “I don’t plan to retire… I’ll just keep working”.

Apparently they are also oblivious to the trend of laying off older workers in favor of hiring fresh grads, contractors, and H1B types…. assuming the job/department isn’t offshored.

They all drive newer cars, eat lunch out every day, and haven’t pinched a penny in their life. If their plans work out – they’ll be working in their late 60’s or early 70’s. I save like crazy, pinch pennies, brown bag, drive older paid for cars… And hope to retire in less than 5 years. Sooner if the market continues on a tear like it has this year. (Not counting on that.)

I hope it works out for them.

[paramount]

[quote=UCGal]

They all drive newer cars, eat lunch out every day, and haven’t pinched a penny in their life. [/quote]

So it sounds like they’re enjoying life and don’t have a lust/love for money under the cover story of I’m saving for retirement.

There’s nothing normal or natural (or even healthy) about retirement – this is a wall street propaganda article.

Wall Street banksters and the feds are robbing us blind.

You’ve been programed and brainwashed and don’t even know it.

[spdrun]

Me, I don’t have a lust or love for money. I have a lust/love for not being a 9-5’er, having the ability to travel at will, and being able to tell anyone whom I work with to “go f**k yourself with a sharp tool, and same goes for your crummy family” without severe financial repercussions. Note that I actually love most of the people whom I work with, but I only love them because I’m not DEPENDENT on them. Lack of freedom would breed mortal rage in me.

Money is just a means of enjoying life — if I end up driving an old, paid-off car in order to have more in the bank for things that are REALLY enjoyable, then so be it. Fortunately, I live in a city where (while it has a large wealth gap), it’s perfectly acceptable to arrive on a date on foot or on the subway.

If I were forced to live the life of the average American peon (2 weeks of vacay, more debt than assets, 8-6, 2.5 hr commute), I’d probably be in jail for breaking someone’s nose in.

[paramount]

Most people live hand to mouth, paycheck to paycheck.

Exactly how are these people (the majority) supposed to save for some abstraction called retirement?

We have been enslaved by the banksters.

And I quote:

The writer has his head in the sand. When boom went to bust, cashing in my 401K was a necessity after loosing my job. I did everything right and the banks won. At least my credit score is still intact at 800, but means little as banks won’t loan the $ anyway. The innocent suffer still as bankers continue to count the $ instead of going to jail for what they pulled!

[paramount]

[quote=spdrun]Me, I don’t have a lust or love for money. I have a lust/love for not being a 9-5’er, having the ability to travel at will, and being able to tell anyone whom I work with to “go f**k yourself with a sharp tool, and same goes for your crummy family” without severe financial repercussions. Note that I actually love most of the people whom I work with, but I only love them because I’m not DEPENDENT on them. Lack of freedom would breed mortal rage in me.

Money is just a means of enjoying life — if I end up driving an old, paid-off car in order to have more in the bank for things that are REALLY enjoyable, then so be it. Fortunately, I live in a city where (while it has a large wealth gap), it’s perfectly acceptable to arrive on a date on foot or on the subway.

If I were forced to live the life of the average American peon (2 weeks of vacay, more debt than assets, 8-6, 2.5 hr commute), I’d probably be in jail for breaking someone’s nose in.[/quote]

spdrun: I couldn’t agree with you more, I know you’re right.

But do you get that largely through the public education system the zombie’s have been programmed?

I think that’s starting to change, but yes gen x and late baby boomers are probably in bad shape.

[spdrun]

I went to public school through high school — I’ve always had a hatred of authority, guess that I was born a mild sociopath.

Some people act their dislike of authority out by collecting guns, marching around in a “militia” or whatnot. Me, I realize that true power comes from a some bucks in the bank more than from the barrel of a gun, so I use that means for self-defence.

[bearishgurl]

Throughout history, very few of the 25-34 yo group were in a postion to save for retirement. They were focused on trying to buy a home to start a family in or for a growing family. As it should be. As home prices and interest rates rise (as they did in periods of the past), it is best to get in while the getting is good.

I’m with UCGal, except that she is including some Gen X-coworkers in her post. I don’t see a terrible catastrophe on the horizon with boomers being able to retire. Like myself, most lived below their means (during some periods of their life FAR below their “means”) in order to amass savings. I utilized all of the savings methods UCGal mentioned and more while a FT “worker bee” and still do today. Add to that method cheaper (sometimes MUCH cheaper) ways to get good food (yes, fresh). Suggestions are all over the internet so I won’t mention any here.

With a small DB pension, SS and savings, plus possibly a PT gig for awhile, I plan to do fine in “retirement.”

The elephant in the room for boomers and later generations is catastrophic illness before the age of 65 and having inadequate medical coverage or none at all. I can’t emphasize enough how important it is for all CA adults who can’t qualify for CMS or MediCal to carry at least an HDHP (most of them have preventative-health benefits with zero deductible) if one does not have coverage through an employer, ESPecially if they own real property (which is subject to lien by Medicaid/MediCal without a court filing). And there is something to be said for healthy living. Continually buying a half-dozen supplements at CVS, taking them regularly and buying a gym membership (and using it several times per week) is a LOT cheaper annually then just having ONE non life-threatening medical issue annually that needs to be treated due to NOT doing the above.

Since retirement is either looming nearby or upon them, every boomer will eventually “retire” within their means. If that means living with one of their kids, in a mobile-home park in the nation’s midsection or leaving the US entirely, that is what they will do. In any case, many US-citizen boomers will likely be able to qualify for “lifeline” phones and utilities and tap into their neighbor’s secured router by bartering, etc, to defray monthly expenses.

Re: boomers, I don’t see where all this concern is coming from. Not everybody wants to jet around the country and world and stay at five-star hotels in their “retirement,” even if they could afford to do so.

Who we should be focused on are current under-50 crowd, most of whom have gotten “used to” a particular “lifestyle” which they don’t want to give up in order to save (or save more) for retirement. I feel many, if not most of THEM will end up as indigent retirees seeking social services. THAT’s the mammoth in the room, IMO.

[SD Transplant]

Another reality I caught in the media is that savings rates are low. Well, savings isn’t encouraged by our FED, the savers are punished.
– How did it work out for the folks that saved cash for a full 20% down payment for a house……not so well (specifically when looking at 2012 or 2013 data……). They will never catch up.
– Inflation……yeah, we know how that’s going

People may save in retirement like accounts, the rest of the cash if it still sits idle will buy a loaf of bread in another year. There isn’t a way for a regular consumer to win here. BORROW to the hilt is the name of the game….boom times here we go again “YES, it is diferent this time.”

[(former)FormerSanDiegan]

[quote=bearishgurl]
I don’t see a terrible catastrophe on the horizon with boomers being able to retire. Like myself, most lived below their means (during some periods of their life FAR below their “means”) in order to amass savings.
[/quote]

I think you might be projecting your own habits and frugality onto the boomer generation.

I seem to remember boomers as the “me” generation in the 70’s and the “greed is good” generation in the 80’s.

From
http://articles.cnn.com/2011-07-29/politics/baby.boomers_1_baby-boomers-sandwich-generation-retirement-age?_s=PM:POLITICS

“Baby boomers — those born between 1946 and 1964 — have been described as “the pig in the python” and the “sandwich generation.”

They lived well, grew up in relative abundance and, some say, expected their Social Security, health care and government support to be there as they grew old.

Baby boomers grew up during relative prosperity, from the economic boom of the post-World War II ’50s to the “Me” generation of the ’60s through the lucrative uptick in the Reagan ’80s. And then there were the budget surpluses they enjoyed during the Clinton ’90s.

As a result, many were able to buy second homes, take out loans at low interest rates, buy cheap gas and pump money back into the economy.

[The-Shoveler]

[quote=SD Transplant]Another reality I caught in the media is that savings rates are low. Well, savings isn’t encouraged by our FED, the savers are punished.
– How did it work out for the folks that saved cash for a full 20% down payment for a house……not so well (specifically when looking at 2012 or 2013 data……). They will never catch up.
– Inflation……yeah, we know how that’s going

People may save in retirement like accounts, the rest of the cash if it still sits idle will buy a loaf of bread in another year. There isn’t a way for a regular consumer to win here. BORROW to the hilt is the name of the game….boom times here we go again “YES, it is diferent this time.”[/quote]

Would not surprise me, (in fact I am expecting) a Back to late 70’s, cash is trash environment.
If you look at china (and really most of the world besides maybe Europe) they are experiencing 10%+ inflation and they are scrambling for hard assets, the last place they want to park their money is in a CD.

[bearishgurl]

[quote=SD Transplant]Another reality I caught in the media is that savings rates are low. Well, savings isn’t encouraged by our FED, the savers are punished.
– How did it work out for the folks that saved cash for a full 20% down payment for a house……not so well (specifically when looking at 2012 or 2013 data……). They will never catch up.
– Inflation……yeah, we know how that’s going . . . .[/quote]

It depends on what type of residence the (25-34 yo’s) are trying to buy. If they are focused only on the “move-up” and luxury areas, of course they will never “catch up.” If they are focused on a decent family home in a “decent” area, they will eventually have an accepted offer (perhaps even a “rehabbed flipper”) for a 90% Conv loan (with PMI) or on VA/FHA terms, necessitating much less cash at the time of closing.

“Organic sales” of SFRs in SD County are happening, folks, yes, even in the $300 – $450K range.

In past decades, this is what the 25-34 yo group bought to get their foot on the housing ladder and this is still doable today . . . that is, IF the bulk of Gen Y has the will to do it.

[Author]

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