IRA, 401K, Pensions, Social Security & Demographic time bomb -- Retirement Crisis Looming  !!
Channel: The Survival Economist
Date: 2022-07-27

Social Security is 14 years short of insolvency; pensions are largely underfunded and in sharp decline, and personal savings are at historic lows. We predict a national crisis in public sector pensions within the next decade that will leave state and local governments bankrupt and taxpayers on the hook for trillions of dollars. The pension crisis is the most significant single theme of our generation. Welcome to The Atlantis Report. Social Security is expected to be insolvent in 2033. In 1950, there were 16.5 workers for every Social Security beneficiary. Today, there are less than three workers paying in for each recipient. Company-sponsored pensions have been in rapid decrease since the 1980s. Today, less than one out of every five private-sector employees has a pension. As a group, American workers are evaluated to be $6.6 TRILLION short of what they need to retire comfortably. 10,000 Baby boomers are reaching “retirement age” every day. Forty percent of Baby boomers anticipate to work “until they drop.” Demographics are the biggest story of our time. And it's all about the story of the baby boomer generation. This was the largest generation of people the world had ever known in the wealthiest countries and across the globe. Now, that generation drove all of the macroeconomic forces that we come to recognize as usual. When they first came into the labor force back in the 1970s when they 20 or so years old, what they did was they bid up the demand for goods. Because if you think about it, a record number of people came in to buy their first suits, their first house, their first car, their first table, their first chair. Everything was new. That demand created a tremendous problem for the world to address, and it created the inflationary environment of the '80s. Yes, there were monetary grounds behind that, as well. But really, a lot of it was driven by demographics. Now, as that generation moved through their lifetimes, they had a particular set of behavior patterns that impacted the financial world first and foremost. The main one is the fact that after the Second World War, that young generation decided they didn't want to be their parents, as nearly everybody does. And they said, we don't want to be austere. Their parents had lived through two world wars. What they wanted to do was spend. They wanted to be free of the shackles of the things that their parents had had in the past. So what happened was Wall Street, being smart as ever, came up with this genius idea. It was the pension plan. Now, pension plans had existed for a long time before. But really, this is where the pension plan became everything. Wall Street fed them a story. The story was simple. You don't need to save as much money as your parents. You don't need to spend or save 20% of your income. What you need to do is give it to us. We're the smart guys, and we'll turn into more money. And that means you'll have more money to spend. So that started the most significant stock market boom in all of recorded history. Now, the other thing that happened is as consumption became a more substantial part of the economy-- and that was driven by government policy as well-- as the baby boomers were offered another piece of magic from Wall Street. They were provided credit. So in the '80s, Ronald Reagan and Margaret Thatcher basically allowed credit to be available to everybody. So suddenly, the credit boom took off. So there we have two monetary booms happening at the same time. The baby boomers have stopped saving, have given a little bit of money from their 401(k)s to Wall Street that starts accumulating quickly. Their income has also then gone into credit, the servicing of credit to buy more and more goods. That trend continued for a long time. The trend of consumption within the US economy continues to this day. It's massively outsized because of this credit boom. That meant that Wall Street became outsized too. It was taking the money from the pension system, and investing that-- or speculating with it-- and also making money from the credit side. Now, that all ended in a complete blow-up that happened in 2008.

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