Dire Retirement Stats Worth Discussing

Sunday, January 22nd, 2012

2012 will be the year I really plan for my future retirement. I already made a New Year’s resolution to finally hire a financial advisor and when that happens I want to discuss 12 particularly scary retirement statistics.

In my opinion, these “12 Terrifying Retirement Facts Keeping Boomers – And Their Advisors – Up at Night,” recently released by Financial-Planning.com, are essential discussion for advisors and baby boomer clients.

The gist of these facts is that Americans are pretty unprepared for retirement, especially considering that they can no longer count on programs like Social Security, Medicare or pensions to fully cover retirement expenses.

The aging US population, underfunded pensions and potential changes to US government spending policy make it unlikely these programs will exist in the future as they do today.

Even more terrifying — many Americans will likely have to work long past the age of 65. In other words, “retired” may no longer mean a life of leisure. Instead, it may come to mean having to work, if there’s still a concept of retirement at all.

So, what are some of the scary statistics cited by Financial-Planning.com? According to the Employee Benefit Research Institute, nearly 30% of all American workers have less than $1,000 saved for retirement. Another sign that Americans aren’t planning adequately for retirement — between 1991 and 2007, the number of Americans between the ages of 65 and 74 who filed for bankruptcy rose by 178%.

Meanwhile, over the next 20 years, more than 10,000 baby boomers will retire daily and by 2050, there will be nearly 90 million senior citizens in the United States. That is more than double today’s 40 million figure. Finally, 74% of American workers expect to have to work when they are retired, and 40% of baby boomers “plan to work until they drop.”

According to Financial-Planning.com, appreciating these scary numbers can help baby boomers “ensure they’re properly prepared” for the retirement they envision.

I agree. To me, the facts emphasize the importance of upgrading retirement savings now to avoid some of the more dire scenarios like bankruptcy and never-ending work.

That’s why this year I’m doing the legwork necessary to make sure I can retire with the lifestyle I want, one that hopefully will be characterized more by dream trips to Italy and Antarctica than by clocking in at work.

Tags: Baby Boomer, Baby Boomers, Benefit Research Institute, Employee Benefit Research, Employee Benefit Research Institute, Financial Planning, Gist, government spending, Life Of Leisure, Medicare, New Year, Pensions, Planning Retirement, Retirement Expenses, Retirement Facts, Retirement Statistics, Scary Numbers, Scary Statistics, Senior Citizens, Social Security
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The U.S. Recovery’s Catch-22

Friday, October 14th, 2011

by Russ Koesterich, Chief Investment Strategist, iShares

As the iShares global chief investment strategist and a founding member of the Blackrock Investment Institute, I have the opportunity to work with world class investors throughout the firm and access their research and work, including a recent Institute paper “From Keeping Up with the Joneses to Keeping Above Water: The Status of the US Consumer.”

The paper weighs in on the debate regarding whether the US consumer can help fuel a recovery and argues that no, consumer spending is not likely to help. This is because the US consumer faces many headwinds including massive debt, a weak job market and stagnant income, not to mention the possible curbing of transfer payments as the government tries to get its fiscal house in order.

But what I found most interesting in the paper, and worthy of sharing in a quick post, was the idea in the conclusion that the US recovery today is a Catch-22.

Here’s the gist. With the consumer sector unlikely to fuel a US recovery, that leaves the corporate sector as the engine of growth. At first glance, this would seem to be a safe bet. As I mentioned in early September, the silver lining of today’s slow growth environment continues to be the strong financial position of many US companies. Corporate margins are at record highs and leverage levels are near record lows.

But here’s the catch: The domestic corporate sector relies on the US consumer. To continue growing over the next few years, companies need consumer spending to pick up. But of course, such an upswing in consumer demand is unlikely to happen in the near term because of all the headwinds facing the US consumer (think those mentioned above). This leads us to “the great economic Catch-22 of our time,” as the BlackRock paper’s conclusion describes the situation.

So, where does that leave the US recovery? One idea floated in the paper is that spending on US goods by foreign consumers could help corporations be the needed growth engine. But as the paper notes, exports are unlikely to grow enough to completely make up for lower US consumer demand. As a result, in my opinion, this problematic situation is just more evidence that the US recovery is likely to be a long slog, characterized by lackluster growth.

Copyright © iShares

Tags: Blackrock, Catch 22, Chief Investment Strategist, Consumer Sector, Consumer Spending, Corporate Sector, Early September, Financial Position, First Glance, Founding Member, Gist, Growth Environment, Ishares, Keeping Up With The Joneses, Massive Debt, Record Highs, Record Lows, Safe Bet, Silver Lining, Transfer Payments, Upswing
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BMO: Go To Cash – In Plain English

Tuesday, June 8th, 2010

This is by no means meant to alarming, but it is worth sharing. The author has gone to some length to explain the rationale for such a report, and considering the source, it is at the very least interesting. We’re very interested in your comments.

This note comes courtesy of ZeroHedge.com.

In a surprising development, the most bearish, and easily most comprehensive, report that we have read in a long time on the broader markets, comes from Canada of all places, via BMO’s Quant/Tech desk. The report’s title is simple enough: Go To Cash – In Plain English. Not much clarification needed. Here is the gist: “We advocate switching out of equity positions and going to cash. The European sovereign debt crisis appears to be nowhere near over. The global credit environment is worsening. Cost of capital is going up and availability is going down. There are large gaps between where the credit market prices risk and where the equity market is priced. Equity is lagging the deterioration in credit conditions. Moves in currency, equity and commodity markets are mirroring the moves in the credit market. Global growth, in a credit-constrained environment, will slow. Profits will be squeezed by the higher cost of capital…We advocate a zero weight toward equity, and that investors convert their equity positions to cash.”

Full report below, and here is a link to the original report with far more technical data.

Go To Cash

Tags: Attachment Size, BMO, Canadian Market, Clarification, Commodity Markets, Currency, Debt Crisis, Desk, Deterioration, Equity Positions, Fact And Fiction, Gaps, Gist, Global Credit, Global Growth, Investors, Long Time, Plain English, Profits, Rationale, risk, Simple Message, Sovereign Debt, Zero Weight
Posted in Canadian Market, Markets | 1 Comment »

Albert Edwards: Back in the bear camp

Wednesday, January 28th, 2009

Albert Edwards, London-based strategist of Société Générale, has always been a firm favourite among Investment Postcards’ readers. His latest research report appeared a few days ago and saw him firmly back in the bear camp after turning short-term bullish at the end of October. (See the previous posts “Albert Edwards: Turning More Bullish” [October 24] and “Market Fundamentals are Appalling” [July 5]).

Edwards’s “Global Strategy” report is sub-titled “Technicals say it is time to bail out. Cut exposure and prepare for rout. US depression looking likely. China’s 2009 implosion could get ugly.” The executive summary below provides the gist of his thinking.

“After increasing our equity exposure at the end of October we believe that the market is set to quickly slide sharply towards our 500 target for the S&P. While economic data in developed economies increasingly reflects depression rather than a deep recession, the real surprise in 2009 may lie elsewhere. It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the Yuan. A subsequent trade war could see a re-run of the Great Depression.

- Economic data has been truly dreadful through the fourth quarter. Over a year ago we forecast deep US recession. As it had not suffered one since the early 1980s, we thought this outturn would shock. Yet recent data has been consistent with something far worse than deep recession. There is no agreed definition of a “depression” as opposed to a deep recession. But The Economist magazine is probably more qualified than many to take a view. They consider a peak-to-trough decline in GDP in excess of 10% a reasonable definition. We had been thinking of deep GDP declines of the order of 5% peak to trough but we are now thinking that this view might be too optimistic.

- But, until yesterday, equity markets had been paddling quite happily sideways for most of the last few months. They have been broadly flat since we increased our equity weighting sharply on 23 October. Within that time the intra-day peak-to-trough rally in the S&P was a creditable 28% from 740 low of November 21, but we do not claim to have captured that. Nevertheless we feel very comfortable that the technicals at the end of October cried out to close our extreme underweight equity exposure. They now tell us to cut exposure again.

- 2008 was a shock for investors. But 2009 could be an even bigger shock. There is evidence that the Chinese economy is imploding. Investors should consider what would happen if China descends into social chaos. Yuan devaluation could spark a 1930’s style trade war. Do you really trust the politicians to ‘do the right thing’?”

Source: Albert Edwards, Global Strategy Weekly, Société Générale, January 15, 2009 (hat tip: David Fuller, Fullermoney).

Tags: Albert Edwards, Bear Camp, China, Chinese Economy, David Fuller, Economic Data, Economist, Economist Magazine, Equity Exposure, Gist, Global Strategy, Global Strategy Weekly, Great Depression, Implosion, London, Market Fundamentals, October 24, Recession, Regime Change, Rout, S&P, Societe Generale, Strategist, Strategy Report, Target, The Economist, Trade War, Trough, United States
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