For three decades, consumption has outpaced savings in America. How are our spending habits affecting retirement funding?
Over the next two minutes, Steve reveals four negative trends that have emerged.
Transcript:
Here are some not-so-good trends negatively affecting retirement funding.
First, current savings rates are half that of previous generations. Half!
Since 1985, consumption has taken over savings. The total dollar amount that never made it to savings – since the trend started up to 2014 – is about $16 trillion.
Second, pensions have been replaced by 401(k)s. The savings rate there is 5%, but needs to be about 15%.
If the 401(k) savings rate had been 15% since 1985, we would have another $27 trillion in place for our golden years. That’s 50% more than the national debt.
And the average person is also now responsible for managing their retirement money. I’m sure I don’t have to tell you how that has been going.
Third, savings are so scarce that there is no money to handle emergencies – and we can’t print money as the government does to pay for them.
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We have iPhones, tablets and wrist computers, but can’t cover the cost of unexpected car repairs.
Fourth, most are – and will be – Social Security and Medicare dependent. But not by choice. That may work out for some. But the folks behind us will be crushed by the bills. And it is only going to get worse.
If there is not a drastic shift from consumption to savings, the boomers and the generations behind us are in deep kimchi.
And our government – that can’t seem to see beyond the next election cycle – should not be counted on to do anything to help.
This is in our laps. And we – the same ones who have spent ourselves into retirement at the poverty level – will have to fix it.
Good investing,
Steve