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Missed Fortune – Why Boomers Are Singing the Retirement Blues

Posted on | July 17, 2011

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Boomers Are In Trouble Come Retirement

Recently in the Wall Street Journal was an article titled “Retiring Boomers find 401(k) Plans Fall Short“.  It didn’t paint a pretty picture.

The article stated that the median household headed by a person age 60-62 with a 401(k) account has less than 1/4 of what is needed to maintain their current standard of living.

The plans that were supposed to see them through old age are falling well short of what will actually be required.  This data was compiled the Federal Reserve and analyzed the Center for Retirement Research at Boston College.

Most 401(k) participants have far too little savings for retirement, even when including their Social Security and pension savings.

Even a couple with a 401(k) well into six figures could face the prospect of running out of savings before reaching age 85.  That means these people could expect to work much longer than they had intended.

401(k)s used to be a gold mine for money management firms.  Tax deferred income will not save you if taxes are going up and they most certainly are rising.

Some advisers still say to stay the course and to keep putting off taxes for the future but if you keep doing what you’ve always done, you’re going to keep getting what you’ve always gotten.

In 30 years the 401(k) went from a small program to a multi trillion dollar industry supporting money managers.  The current median amount most people contribute to their 401(k)s is a measly 9% counting the employer contribution.

It doesn’t have to be this way.

Though many people feel like they lost their future when the market declined in 2008, there were others who didn’t lose a penny in that year or the subsequent down market.

Those who applied Missed Fortune strategies have not  only protected their serious money in a down market, but they did it safely in the worst 4 year period since the Great Depression.

Most people who follow the Missed Fortune strategies have 50 percent more than they did just 4-5 years ago.  You can do it too.

You’ll need to take ownership of your future.

Taxes & Inflation Will Destroy Retirement Savings

If you had a million dollar nest egg you’d have it made, right? Think again.

A million dollars earning 7.2 percent interest a year should allow you to pull out $72,000 annually without depleting the principal. That’s about 6,000 a month.  An average couple that earns over 68,000 a year are are in a 33% marginal tax bracket.

The Congressional Budget Office estimates that because of our tremendous national debt, by mid century most Americans will be paying at least 50-60% of their income in taxes.

If you paid a third of your income in tax on 6000 a month, that leaves you $4,000 of net spendable income per month. If you’re thinking, “I could probably squeeze by on that” don’t forget to factor in inflation.

Say that inflation stays around 5 percent.  At that rate the cost of living will double every 15 years and the purchasing power of the dollar will be cut in half.

This means that 30 years down the road you’ll only be able to buy the same gallons of gas, loaves of bread, prescriptions, golf greens fees, etc. for $4,000 a month that you can currently buy for $1,000 a month.

Can you live on a $1,000 a month?

That million dollar nest egg generating $6,000 a month of taxable income is only going to have the same purchasing power as $1,000 a month today.

You must have a hedge against the tax and inflation power curve by linking your return to those things that inflate.

You need a strategy where your money accumulates tax free not tax deferred.  At tomorrow’s tax rates, a $3 million nest egg can perform as well as a $6 million nest egg if it’s tax free.

If you lost money in the last 10 years and find yourself worried about outliving your money, stop following the herd.

You need to learn how to reposition yourself and get something better in place.

You must learn how to safely regain what you’ve lost and have it be tax free.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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