here are some articles i recently found:
Standards of Life in the Future: Think Grim
by Ben Stein
Monday, March 6, 2006
I've had a couple of bad experiences recently that sharpened my worry about what life will be like for retirees in the future -- I fear that a catastrophe of declining standards of life is heading our way.
I'm thinking about how bad it has gotten in terms of how customers are treated. A few days ago, I called the saleswoman at an auto dealer who sold me my last car a few years ago. I asked her to come over and show me the newest model of my car and told her if I liked it, I would buy it on the spot.
"Sorry," she said. "Too busy."
"Really? Are you selling that many Cadillacs?"
"Well, I'm not really selling any, but a lot of people are looking and wasting my time," she said.
"But you know I'm a qualified buyer who has bought from you before," I protested.
"Maybe I'll fax you some stats," she said helpfully. I never got them.
How Much Worse for the Masses?
Today, I was supposed to have a nice comfy seat on United Airlines. Full-fare first class. When I got to the gate, the agent said my seat had been changed to one up against the bulkhead, and there was no way she could move me. No apology, not even looking me in the eyes.
On the plane, no flight attendant would help until an older one, from the days when United actually had some self-respect, asked a young man to change with me. He did, and I was happy. But meanwhile, the flight attendant who did help me told me I was the only full-fare first-class passenger in the cabin, and still no one had wanted to help me until she came along.
My point is how terrible service is -- even at the higher end in 2006 -- and then to add this chilling thought: If this is how bad it is at the high end now, can you imagine how awful it'll be for everyone in 2020? When all vestiges of service are gone? When no one speaks English? When all customers are just ciphers?
Look at it this way: Think of the most crowded freeway you're on every day. Imagine what it'll be like in 10 years. That's what hospitals will be like -- if they're not that way right now.
To make the situation worse, retirees and those who will soon retire are far from financial safety (see "Living Hand to Mouth -- and Barely Getting By"). I recently calculated that the Baby Boomers need to have saved -- on average -- $400,000 per household to even start to come up with what they need to live on. Instead, they have saved about $50,000 per household if they have a rental home and about $110,000 if they own their home.
So, what will they do when they retire? What will it be like to cut pills in half, to have to sell your home and move into a trailer, to be faced with unaffordable repairs for your car?
Try this experiment: Imagine you have to slash your spending by half. What goes first? Restaurant meals -- fine. Vacations -- fine. New clothes -- fine. But that won't even come close to cutting spending in half for most people.
The sad fact is that retirees will suffer. And for the leading edge of the Boomers is: It's too late. Many of them cannot escape a drastic ratcheting down in income and lifestyle. A crisis akin to the Great Depression is racing our way: A ruinous drop in standards of life.
Shoring Up Your Retirement Savings
What will it be like to live in the horrible new dog-eat-dog world, with no one caring whether you live or die -- and have no money? What will it be like on that crowded freeway? You don't want to find out.
How do we get to high ground? I suggest -- unless you're already on track to have 15 times what you need to live on at retirement socked away by age 65 -- taking 20 percent of your paycheck if you possibly can, putting it in the Fidelity Fund (FFIDX) or the Vanguard Total Stock Market Index Fund (VTSMX) until you're 55, then putting half of it into the Fidelity Total Bond Fund (FTBFX) or Vanguard Total Bond Market Index Fund (VBMFX).
Maybe if you have a few bucks extra, buy the iShares MSCI Emerging Markets Index ETF (EEM) or the iShares Russell 2000 Value Index ETF (IWN) for developing market or small-cap exposure. But for heaven's sake, do it now.
When you get to 65, put half of it into a fixed or variable annuity -- chosen so you know what every dime in expenses goes for and without buying anything you don't need or understand -- and then know you won't totally run out of money ever (see "A Retirement Portfolio With Staying Power"). Or do something else with a reputable financial planner.
But be very scared -- and start doing something about it now. Tomorrow is too late. Do it now
Prepare for a Gruesome Retirement
By Selena Maranjian (TMF Selena)
It's time for some tough love. I want you to have a comfortable retirement, doing things that you enjoy and things you've always wanted to do. That may mean dining in some fine restaurants, traveling to the Galapagos Islands to see blue-footed boobies, taking your grandchildren to Hershey, Pa., and living in a spiffy retirement community. But judging from some statistics I recently ran across, you're in danger of a retirement that instead features dining on Salisbury steak TV dinners, traveling to the Git'n'Go down the street for a bag of chips, taking your grandchildren to the Salvation Army store with you as you shop for some new clothes, and living in your grouchy daughter's damp basement.
According to the 2005 Retirement Confidence Survey (RCS), we can be confident that many people will have gruesome retirements. Why? Here's a clue: According to a another survey, 31% of Americans would rather scrub a bathroom than plan for retirement. That's right -- if you've been putting off planning for your retirement, you're not alone.
Check out the RCS numbers below, which reflect the total savings and investments (not including the value of the primary residence) of today's workers, broken down by age groups:
Retirement Savings All 25-34 35-44 45-54 55+
Less than $25,000 52% 70% 50% 41% 39%
$25,000-$49,999 13% 12% 15% 14% 12%
$50,000-$99,999 11% 9% 14% 13% 7%
$100,000-$249,999 12% 5% 10% 17% 23%
$250,000 or more 11% 4% 10% 16% 19%
These numbers might not seem so scary, until you think them through a little. First off, remember that the numbers above ignore Social Security. That may be just as well. I've still got at least two decades until retirement. I recently received my latest statement from the Social Security Administration. The amount I can expect to receive at my full retirement age of 67 isn't much more than my current mortgage payment. My 30-year mortgage won't be finished by the time I hit the big 6-7, and my mortgage and tax payments will likely be much higher because of rising taxes. Making matters worse is the possibility that we can't be entirely sure that Social Security will be around in much the same form in our own golden years.
Pensions? Well, darn few of us have traditional pensions anymore. Check out this snippet from an Associated Press article: "In 1985, 89% of Fortune 100 companies offered traditional pension plans, but that had fallen to 51% by 2004, according to Watson Wyatt Worldwide, a human resources consulting firm. Some 11% of the plans in the Fortune 1000 were frozen or terminated for new employees, up from 5% in 2001."
So let's rely instead on those factors that are under our control -- our savings and investments.
What the facts mean
Let's say you're a typical American 40-year-old worker. According to the table, there's about a 50% chance that your savings and investments total less than $25,000. Let's be generous and assume you have $20,000 socked away. You've also got about 25 to 30 years until you retire. How will that money grow for you? Check it out -- let's assume you earn the market's average long-term return of 10%:
* 2006 (age 40): $20,000
* 2016 (age 50): $51,875
* 2026 (age 60): $135,550
* 2036 (age 70): $349,000
Now let's use some information I've gleaned from our Rule Your Retirement newsletter: In order to make your nest egg last, you should conservatively plan to withdraw about 4% of it per year in retirement, to live on. So 4% of $349,000 is almost $14,000. That's nearly $1,200 per month. Will that be enough? Well, according to an inflation calculator I checked, over the past 30 years, what cost $1 initially ended up costing about $3.75. Let's say that prices only triple over the next 30 years. If so, your $14,000 in 2036 will buy you what $4,700 will buy you today. That's less than $400 per month.
Another way to look at it is to realize that the 4% withdrawal rate should include inflation-indexed increases, so if you're taking out $14,000 in the first year and inflation that year is 3%, the next withdrawal will be 1.03 times $14,000, or $14,420. Can you see how quickly your money will get depleted this way? (Note that you can withdraw more each year. If you're taking out 5% annually over 30 years, you have roughly a 3-in-4 chance of not running out of money, but that's much less of a sure thing.)
If you want to live off the current equivalent of $50,000 per year in 30 years, you might estimate that you'll have to be able to withdraw $150,000 yearly. If that's 4% of your nest egg, it will need to be ... $3.75 million.
It's better ... and worse
Of course, this is just one hypothetical example, and there are lots of other concerns that make matters both better and worse. For example:
* Many of us are well past 40 and still have less than $25,000 socked away. Heck, 39% of those 55 and older are in that camp.
* But remember that we can all make the situation better by investing regularly. A rule of thumb is to save and invest 10% of your income, but more is better.
* Many of us will have home equity to tap, if need be, in retirement. We'll also likely be receiving at least something from Social Security, and perhaps even a little from a pension.
* Keep in mind that the stock market's return over the next 10, 20, and 30 years isn't likely to match the historic average of 10%. It may well be higher -- or lower, meaning you can end up with a considerably smaller nest egg than you expected. It's similar with individual stocks. Look at Intel(Nasdaq: INTC) as an example. Between March 1996 and March 2006, its stock advanced roughly 200%. But over the decade starting three years earlier, between March 1993 and March 2003, its stock rose about 365%.
* Don't assume that your stash of company stock will save you. Having too much of your financial future resting on the fate of one company is risky. If you'd acquired shares of stock in the Gap(NYSE: GPS) five years ago, for example, you'd be underwater by more than 20% today. Investors in Coca-Cola(NYSE: KO) haven't fared much better, leaving investors who've hung on for the past 10 years not much richer than when they started. This doesn't mean these companies won't ultimately surge and reward us, but if anyone was counting on them to do so by a certain time, they've likely been disappointed.
Personally, I'm not a big fan of Ben Stein because of his constant talk and love for annuities. I did like the Fool article better. However, neither of these authors mentioned the fact that many baby-boomers will be receiveng an inheritence before or by the time they retire (mid-sixties). I remember reading somewhere that cureently, we have the richest senior-citizens ever, compared to past generations of senior-citizens.