Why A “Safe Retirement” Is Becoming Too Difficult to Obtain

no safe retirementPhoto by 401(K) 2012 | CC BY | Cropped

From Birch Gold Group

It used to be that you could save money for retirement, put some of it into Treasuries and/or CDs, and your “nest-egg” would be primed to give you retirement security.

That clear retirement path ended in 2000, according to John Mauldin in a recent SeekingAlpha article (emphasis ours):

Until 2000 or so, it was a simple matter to put all your savings in CDs, Treasury bonds, or tax-free muni bonds and generate a steady income. Better yet, you could do this with no risk, just by keeping your money in FDIC-insured banks. This is not possible today due to low rates.

Of course, saving money for retirement is not an easy task. But before 2000, the leverage you could gain from the “simple” plan Mauldin identified was greater. That leverage came from better interest rates that CDs and Treasuries provided.

For example, if you managed to save one million dollars for retirement before 2000, that provided an adequate annual income from CD, pension, and Treasury distributions for most retirees. Add a check from the once-trusted Social Security system, and the idea of having a “safe retirement” was attainable.

But this is 2019. According to Mauldin, the outlook now is pretty dire:

Neither you nor a massive pension plan acting on your behalf can generate enough risk-free income to assure you a comfortable retirement.

He alludes to some of the same points we’ve shined a light on over the last year and a half to explain why, such as the Government’s plan to drop rates and print money, all while hoping to raise rates and drive real economic growth without risking retirees’ futures.

That plan doesn’t appear to be working so well, and may actually be leading pensions down a road to nowhere.

Pensions May Be Heading Into a “Black Hole”

In August of 2018, a paper from the Wharton School explained the dire situation for public pensions, one which they may never escape from:

Moody’s Investors Service recently estimated that public pensions are underfunded by $4.4 trillion. That amount, which is equivalent to the economy of Germany, accounts for one-fifth of national debt. It’s a significant concern for public employees who were banking on a fully funded retirement to get them through their golden years.

The Wharton paper continued by explaining the Government’s role in driving public pensions closer towards a “black hole” that it can’t avoid:

Government administrators believed their investment returns would be bigger, and they believed retired employees would die sooner. They used overly optimistic actuarial assumptions, and they thought the long-term nature of the investments could handle higher risk.

Currently, we have states choosing between repairing severely worn infrastructure and paying pension distributions. Washington appears to be throwing their hands up when facing this decision, choosing instead to create ridiculous taxes as a result of desperation.

Most state’s pension programs are in a poor state of health according to the most recent official reports available (see map below):

funded state pensions

Corporate pensions are suffering a $240 billion shortfall of their own. These programs were “fully funded” in 2007, and have yet to recover.

With the worldwide pension crisis approaching $400 trillion, it doesn’t look like there is any good way out of this maze of pension destruction. Politicians like to point to tired solutions like increased contributions or higher taxes.

It’s obvious we need better ideas, and part of your solution will likely require retirement “self-reliance.”

Preserve Your Best Chance for a Secure Retirement

Growing benefit cuts and funding gaps mean your own pension plan won’t be “guaranteed” stable any longer. Politicians can only come up with tax increases, new taxes, and a slew of seemingly desperate solutions. That won’t help your retirement.

It’s critical to start making your portfolio as resilient as possible so you can enjoy as safe a retirement as possible.

Creating a savings plan and diversifying your assets are good places to start. Having assets such as precious metals in your portfolio can add much-need security to your retirement plan. Making moves now, before an emergency, is a smart way to protect your hard-earned savings.

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