The Great Retirement Con

The Origins Of The Retirement Plan

Back during the Revolutionary War, the Continental Congress promised a monthly lifetime income to soldiers who fought and survived the conflict. This guaranteed income stream, called a "pension", was again offered to soldiers in the Civil War and every American war since.

Since then, similar pension promises funded from public coffers expanded to cover retirees from other branches of government. States and cities followed suit -- extending pensions to all sorts of municipal workers ranging from policemen to politicians, teachers to trash collectors.

A pension is what's referred to as a defined benefit plan. The payout promised a worker upon retirement is guaranteed up front according to a formula, typically dependent on salary size and years of employment.

Understandably, workers appreciated the security and dependability offered by pensions. So, as a means to attract skilled talent, the private sector started offering them, too. 

The first corporate pension was offered by the American Express Company in 1875. By the 1960s, half of all employees in the private sector were covered by a pension plan.

Off-loading Of Retirement Risk By Corporations

Once pensions had become commonplace, they were much less effective as an incentive to lure top talent. They started to feel like burdensome cost centers to companies.

As America's corporations grew and their veteran employees started hitting retirement age, the amount of funding required to meet current and future pension funding obligations became huge. And it kept growing. Remember, the Baby Boomer generation, the largest ever by far in US history, was just entering the workforce by the 1960s.

Companies were eager to get this expanding liability off of their backs. And the more poorly-capitalized firms started defaulting on their pensions, stiffing those who had loyally worked for them.

So, it's little surprise that the 1970s and '80s saw the introduction of personal retirement savings plans. The Individual Retirement Arrangement (IRA) was formed by the Employee Retirement Income Security Act (ERISA) in 1974. And the first 401k plan was created in 1980.

These savings vehicles are defined contribution plans. The future payout of the plan is variable (i.e., unknown today), and will be largely a function of how much of their income the worker directs into the fund over their career, as well as the market return on the fund's investments.

Touted as a revolutionary improvement for the worker, these plans promised to give the individual power over his/her own financial destiny. No longer would it be dictated by their employer.

Your company doesn't offer a pension? No worries: open an IRA and create your own personal pension fund.

Afraid your employer might mismanage your pension fund? A 401k removes that risk. You decide how your retirement money is invested.

Want to retire sooner? Just increase the percent of your annual income contributions.

All this sounded pretty good to workers. But it sounded GREAT to their employers.

Why? Because it transferred the burden of retirement funding away from the company and onto its employees. It allowed for the removal of a massive and fast-growing liability off of the corporate balance sheet, and materially improved the outlook for future earnings and cash flow.

As you would expect given this, corporate America moved swiftly over the next several decades to cap pension participation and transition to defined contribution plans.

The table below shows how vigorously pensions (green) have disappeared since the introduction of IRAs and 401ks (red):

(Source)

So, to recap: 40 years ago, a grand experiment was embarked upon. One that promised US workers: Using these new defined contribution vehicles, you'll be better off when you reach retirement age.

Which raises a simple but very important question: How have things worked out?

The Ugly Aftermath

America The Broke

Well, things haven't worked out too well.

Three decades later, what we're realizing is that this shift from dedicated-contribution pension plans to voluntary private savings was a grand experiment with no assurances. Corporations definitely benefited, as they could redeploy capital to expansion or bottom line profits. But employees? The data certainly seems to show that the experiment did not take human nature into account enough – specifically, the fact that just because people have the option to save money for later use doesn't mean that they actually will.

First off, not every American worker (by far) is offered a 401k or similar retirement plan through work. But of those that are, 21% choose not to participate (source).

As a result, 1 in 4 of those aged 45-64 and 22% of those 65+ have $0 in retirement savings (source). Forty-nine percent of American adults of all ages aren't saving anything for retirement.

In 2016, the Economic Policy Institute published an excellent chartbook titled The State Of American Retirement (for those inclined to review the full set of charts on their website, it's well worth the time). The EPI's main conclusion from their analysis is that the switchover of the US workforce from defined-benefit pension plans to self-directed retirement savings vehicles (e..g, 401Ks and IRAs) has resulted in a sizeable drop in retirement preparedness. Retirement wealth has not grown fast enough to keep pace with our aging population.

The stats illustrated by the EPI's charts are frightening on a mean, or average, level. For instance, for all workers 32-61, the average amount saved for retirement is less than $100,000. That's not much to live on in the last decades of your twilight years. And that average savings is actually lower than it was back in 2007, showing that households have still yet to fully recover the wealth lost during the Great Recession.

But mean numbers are skewed by the outliers. In this case, the multi-$million households are bringing up the average pretty dramatically, making things look better than they really are. It's when we look at the median figures that things get truly scary:

Nearly half of families have no retirement account savings at all. That makes median (50th percentile) values low for all age groups, ranging from $480 for families in their mid-30s to $17,000 for families approaching retirement in 2013. For most age groups, median account balances in 2013 were less than half their pre-recession peak and lower than at the start of the new millennium.

(Source)

The 50th percentile household aged 56-61 has only $17,000 to retire on. That's dangerously close to the Federal poverty level income for a family of two for just a single year.

Most planners advise saving enough before retirement to maintain annual living expenses at about 70-80% of what they were during one's income-earning years. Medicare out-of-pocket costs alone are expected to be between $240,000 and $430,000 over retirement for a 65-year-old couple retiring today.

The gap between retirement savings and living costs in one's later years is pretty staggering:

  • Nearly 83% of retired households have less saved than Medicare costs alone will consume.
  • One-third of retired households are entirely dependent on Social Security. On average, that's only $1,230 per month a hard income to live on. (source)
  • 34 percent of older Americans depend on credit cards to pay for basic living expenses such as mortgage payments, groceries, and utilities. (source

As for Medicare, the out-of-pocket costs could easily soar over retirement. The Wall Street Journal reports that the current estimate of Medicare's unfunded liability now tops $42 Trillion. Such a mind-boggling gap makes it highly likely that current retirees will not receive all of the entitlements they are being promised.

And the denial being shown by baby boomers entering retirement is frightening. Many simply plan to work longer before retiring, with a growing percentage saying they plan to work "forever". 

But the data shows that declining health gives older Americans no choice but to leave the work force eventually, whether they want to or not. Years of surveys by the Employment Benefit Research Institute show that fully half of current retirees had to leave the work force sooner than desired due to health problems, disability, or layoffs.

Add to this the nefarious impact of the Federal Reserve's prolonged 0% interest rate policy, which has made it extremely hard for retirees with fixed-income investments to generate a meaningful income from them.

The number of Americans aged 65 years and older is projected to more than double in the next 40 years:

Will the remaining body of active workers be able to support this tsunami of underfunded seniors? Don't bet on it.

Especially since their retirement savings prospects are even more dim. With long-stagnant real wages and punishing price inflation in the cost of living, Generation X and Millennials are hard-pressed to put money away for their twilight years:

(Source)

Public Pensions: Broken Promises

And for those "lucky" folks expecting to enjoy a public pension, there's a lot of uncertainty as to whether they're going to receive all they've been promised.

Due to underfunded contributions, years of portfolio under-performance due to the Federal Reserve's 0% interest rate policy, poor fund management, and other reasons, many of the federal and state pensions are woefully under-captialized. The below chart from former Dallas Fed advisor Danielle DiMartino-Booth shows how the total sum of unfunded public pension obligations exploded from $292 billion in 2007 to $1.9 trillion by the end of 2016:

(Source)

And the daily headlines of failing state and local pension funds (Illinois, Kentucky, New JerseyDallas, Providence -- to name but a few) show that the problem is metastasizing across the nation at an accelerating rate.

Affording Your Future

The bottom line when it comes to retirement is that you're on your own. The vehicles and the promises you've been given are proving woefully insufficient to fund the "retirement" dream you've been sold your whole life.

That's the bad news.

But the good news is that the dream is still attainable. There are strategies and behaviors that, if adopted now, will make it much more likely for you to be able to afford to retire -- and in a way you can enjoy.

In Part 2: Success Strategies For Retirement, we detail out these best practices for a solvent retirement, including providing 14 specific action steps you can start taking right now in your life that will materially improve your odds of enjoying your later years with grace.

For far too many Americans, "retirement" will remain a perpetual myth. Don't let that happen to you.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

DOGE's top 5 BIGGEST cuts

Andrew Harnik / Staff | Getty Images

President Trump has only been in office for a month, and already, he seems to have accomplished more than most presidents do in their entire careers.

Nothing defines Trump's first month more than the newly established Department of Government Efficiency, or DOGE. Equally controversial as it is popular, the department, headed by tech billionaire Elon Musk, has made it its mission to root out wasteful government spending. DOGE has already combed through a handful of agencies and eliminated billions of dollars of waste, and it doesn't show any signs of slowing down anytime soon.

DOGE is part of Trump's initiative to curb runaway government spending and to start to chip away at the Fed's crushing debt. At the time this article was written, U.S. debt sat at over $36 trillion, with an estimated $1.9 trillion a year federal budget deficit. According to the U.S. debt clock, Musk and the DOGE crew have already saved more than $136 billion, and that number only keeps growing.

To help track DOGE's progress, we've assembled a list of their top five biggest cuts:

1. USAID

MANDEL NGAN / Contributor | Getty Images

The United States Agency for International Development, or USAID, has been hit with the some of largest cuts out of any government agency and will potentially even be shut down. This comes after Musk and his team revealed theabsurd things USAID was funding, including a transgender opera in Colombia. The total cut came out to approximately $6.5 billion.

2. Department of Education

SAUL LOEB / Contributor | Getty Images

The Department of Education is another agency that faces extinction, much like USAID. The American school system has been found seriously lacking, with many students struggling to meet expectations despite the torrent of cash spent on education. Trump's new Secretary of Education pick, Linda McMahon, has sworn to turn the agency around and even oversee the closure of the department. DOGE has reportedly cut almost $1 billion in waste within the agency.

3. Institute of Educational Sciences

Steven Gottlieb / Contributor | Getty Images

The IES, or Institute of Educational Sciences, is tasked with tracking the academic progress of America's students and helping improve outcomes. The changes made by DOGE will not affect NAEP, also known as "The Nation's Report Card," and the College Scorecard, which tracks the spending, costs, and outcomes of universities. The agency was all but gutted by Musk's deep cuts, totaling $900 million.

4. Social Security Administration

Bloomberg / Contributor | Getty Images

For years, we've speculated that the Social Security Administration was a colossal waste of resources, but after Elon Musk posted a screenshot from the SSA database showing that there was a significant number of people over the age of 100 that were still consideredalive by the agency, it seems our suspicions are proved true. It's no small wonder Musk was able to trim over $230 million from the SSA.

5. General Services Administration

Bloomberg / Contributor | Getty Images

The GSA is the latest agency to be hit by the DOGE crew. The administration, which manages federal property and contracts, has started a massive "reduction in force" push, thinning the numbers of employees by a large margin. As of yet, upwards of $300 million have been cut by the once-bloated agency.

What happened to Europe?

Once upon a time, America and Europe fought side-by-side to overthrow authoritarian regimes and resist communist dictators. Now European leaders are adopting the policies Europeans once fought against—and calling AMERICA out for "abandoning liberal democracy." But as Europeans get arrested for their speech, their elections rigged, and their religion squashed, Glenn felt compelled to notify their leaders of the truth: America didn't abandon democracy, Europe abandoned its people.

With this in mind, over the weekend Glenn authored an open letter to the leaders of Europe, calling them to return to the core values of Western democracy that we fought so hard for and to listen to the voices of their citizens who cry out for change. Glenn encouraged his audience to read his letter and spread the word:

Glenn took to X to get as many eyes on his letter as possible. He also filmed a short video in his home stressing the importance of Europe's awakening. America cannot afford to prop up NATO anymore and Europe needs to be ready to hold its weight. Big changes are coming and for the sake of the Western values we have fought so long to preserve, we want Europe by our side, ready to face the future. We must change our ways before we tear ourselves apart.

Trump's education secretary has BIG plans for the DoE

SAUL LOEB / Contributor | Getty Images

Our education system is broken, and the Department of Education is a massive failure. But that all ends now.

It's no secret that America's school system is seriously lacking in many ways. President Trump pointed out that despite our massive spending per pupil, we are behind most of the developed world in most metrics. Our scores continue to plummet while our student debt and spending skyrocket—it's utterly unacceptable performance and America's students deserve better.

That's where Linda McMahon, Trump's pick for Secretary of Education comes in.

The former WWE CEO and leader of the U.S. Small Business Administration during Trump's first term, McMahon laid out her harsh criticisms of the DoE during a confirmation hearing on the 13th and revealed her promising plans to turn things around. McMahon described the public education system as "in decline" and promised that under her authority, the DoE would be reoriented towards student success.

Here are the top three changes to the Department of Education:

1. Dismantling the Department of Education

SAUL LOEB / Contributor | Getty Images

From the beginning Trump's orders for McMahon were clear: oversee the end of the Department of Education.

During her Thursday hearing, McMahon clarified what dismantling the DoE would entail. As Democrats have repeatedly pointed out, Trump does not have the authority to destroy the DoE without Congressional consent, as an act of Congress created it. That is why Trump and McMahon's plan is to start by shutting down programs that can be stopped by executive action, then approach Congress with a plan to dismantle the Department for good. The executive orders have already begun to take effect, and once McMahon is confirmed she will author a plan for Congress to close the Department.

McMahon also promised that the end of the Department of Education does not mean an end to all the programs currently undertaken by the doomed department. Programs that are deemed beneficial will be transferred (along with their funding) to departments that are more suited to the task. The example given by McMahon was IDEA (Individuals with Disabilities Education Act) funding, which instead of being cut would be transferred to the Department of Health and Human Services.

2. School Choice

Robert Daemmrich Photography Inc / Contributor | Getty Images

In a huge win for parents across the country, McMahon pledged her support for School Choice. School Choice is the idea of allowing parents to enroll their student in any school of their choice, including religious schools and private schools. It would also mean that part or all of the funding that would have gone to a relocated child would follow them and continue to pay for their education.

This gives parents the ability to remove their children from failing schools and seek a better education for them elsewhere. A growing body of evidence suggests that the way we run our schools isn't working, and it is time to try something new. School Choice opens up education to the free market and will allow for competition.

Our children deserve better than what we can currently offer them.

3. COVID and DEI

SAVO PRELEVIC / Contributor | Getty Images

Trump's government-wide crackdown on DEI will ironically serve to increase inclusion in many American schools.

McMahon said as much during her Senate hearing: “It was put in place ostensibly for more diversity, for equity and inclusion. And I think what we’re seeing is, it is having an opposite effect. We are getting back to more segregating of our schools instead of having more inclusion in our schools.” She also spoke in support of Title IX, and the push to remove biological males from women's and girl's sports. In the same vein, McMahon pledged to push back against the rise of antisemitism on college campuses, which many Universities have failed to adequately address.

On Friday, February 14th, President Trump signed an executive order barring any school or university with COVID-19 vaccine mandates from receiving federal money. This only applies to the COVID-19 vaccine, and other vaccine mandates are still standing.

POLL: What DARK government secrets will Trump uncover?

Mark Wilson / Staff | Getty Images

Will the dark secrets of the Deep State finally see the light of day? Or will they slip back into darkness, as they have many times before?

The Trump administration is gearing up to fulfill one of Trump's most anticipated campaign promises: to make the contents of the JFK files, along with other Deep State secrets, available to the public. Kash Patel, who has promised to publicize the highly anticipated files, is expected to be confirmed next week as Trump's director of the FBI. Moreover, the House Oversight Committee created a new task force headed by Rep. Anna Paulina Luna called "Task Force on Declassification of Federal Secrets," which is tasked with investigating and declassifying information on the JFK, RFK, and MLK assassinations, UFOs, the Epstein list, COVID's origins, and 9/11. This all comes after the FBI found 2,400 "new" records relating to the assassination of President Kennedy following Trump's executive order to release the files.

Glenn discussed this topic with the cast of the Patrick Bet David podcast. Glenn expressed his confidence in Trump's radical transparency—on the condition that Kash Patel is confirmed. The cast was not as optimistic, expressing some doubt about whether Trump will actually unveil all that he has promised. But what do you think? What files are likely to see the light of day? And what files will continue to linger in the dark? Let us know in the poll below

Do you think the JFK, RFK, and MLK files will be unveiled?

Do you think the 9/11 files will be unveiled?

Do you think the COVID files will be unveiled?

Do you think the UFO files will be unveiled?

Do you think the Epstein list will be unveiled?