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The Great Retirement Con

November 20, 2017
Adam Taggart

Peak Prosperity

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 Jersey, Dallas, 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)

The Crisis of Meaning: Searching for truth and purpose

Mario Tama / Staff | Getty Images

Anxiety, anger, and chronic dissatisfaction signal a country searching for meaning. Without truth and purpose, politics becomes a dangerous substitute for identity.

We have built a world overflowing with noise, convenience, and endless choice, yet something essential has slipped out of reach. You can sense it in the restless mood of the country, the anxiety among young people who cannot explain why they feel empty, in the angry confusion that dominates our politics.

We have more wealth than any nation in history, but the heart of the culture feels strangely malnourished. Before we can debate debt or elections, we must confront the reality that we created a world of things, but not a world of purpose.

You cannot survive a crisis you refuse to name, and you cannot rebuild a world whose foundations you no longer understand.

What we are living through is not just economic or political dysfunction. It is the vacuum that appears when a civilization mistakes abundance for meaning.

Modern life is stuffed with everything except what the human soul actually needs. We built systems to make life faster, easier, and more efficient — and then wondered why those systems cannot teach our children who they are, why they matter, or what is worth living for.

We tell the next generation to chase success, influence, and wealth, turning childhood into branding. We ask kids what they want to do, not who they want to be. We build a world wired for dopamine rather than dignity, and then we wonder why so many people feel unmoored.

When everything is curated, optimized, and delivered at the push of a button, the question “what is my life for?” gets lost in the static.

The crisis beneath the headlines

It is not just the young who feel this crisis. Every part of our society is straining under the weight of meaninglessness.

Look at the debt cycle — the mathematical fate no civilization has ever escaped once it crosses a threshold that we seem to have already blown by. While ordinary families feel the pressure, our leaders respond with distraction, with denial, or by rewriting the very history that could have warned us.

You cannot survive a crisis you refuse to name, and you cannot rebuild a world whose foundations you no longer understand.

We have entered a cultural moment where the noise is so loud that it drowns out the simplest truths. We are living in a country that no longer knows how to hear itself think.

So people go searching. Some drift toward the false promise of socialism, some toward the empty thrill of rebellion. Some simply check out. When a culture forgets what gives life meaning, it becomes vulnerable to every ideology that offers a quick answer.

The quiet return of meaning

And yet, quietly, something else is happening. Beneath the frustration and cynicism, many Americans are recognizing that meaning does not come from what we own, but from what we honor. It does not rise from success, but from virtue. It does not emerge from noise, but from the small, sacred things that modern life has pushed to the margins — the home, the table, the duty you fulfill, the person you help when no one is watching.

The danger is assuming that this rediscovery happens on its own. It does not.

Reorientation requires intention. It requires rebuilding the habits and virtues that once held us together. It requires telling the truth about our history instead of rewriting it to fit today’s narratives. And it requires acknowledging what has been erased: that meaning is inseparable from God’s presence in a nation’s life.

Harold M. Lambert / Contributor | Getty Images

Where renewal begins

We have built a world without stillness, and then we wondered why no one can hear the questions that matter. Those questions remain, whether we acknowledge them or not. They do not disappear just because we drown them in entertainment or noise. They wait for us, and the longer we ignore them, the more disoriented we become.

Meaning is still available. It is found in rebuilding the smallest, most human spaces — the places that cannot be digitized, globalized, or automated. The home. The family. The community.

These are the daily virtues that do not trend on social media, but that hold a civilization upright. If we want to repair this country, we begin there, exactly where every durable civilization has always begun: one virtue at a time, one tradition at a time, one generation at a time.

This article originally appeared on TheBlaze.com.

A break in trust: A NEW Watergate is brewing in plain sight

Gary Hershorn / Contributor | Getty Images

When institutions betray the public’s trust, the country splits, and the spiral is hard to stop.

Something drastic is happening in American life. Headlines that should leave us stunned barely register anymore. Stories that once would have united the country instead dissolve into silence or shrugs.

It is not apathy exactly. It is something deeper — a growing belief that the people in charge either cannot or will not fix what is broken.

When people feel ignored or betrayed, they will align with anyone who appears willing to fight on their behalf.

I call this response the Bubba effect. It describes what happens when institutions lose so much public trust that “Bubba,” the average American minding his own business, finally throws his hands up and says, “Fine. I will handle it myself.” Not because he wants to, but because the system that was supposed to protect him now feels indifferent, corrupt, or openly hostile.

The Bubba effect is not a political movement. It is a survival instinct.

What triggers the Bubba effect

We are watching the triggers unfold in real time. When members of Congress publicly encourage active duty troops to disregard orders from the commander in chief, that is not a political squabble. When a federal judge quietly rewrites the rules so one branch of government can secretly surveil another, that is not normal. That is how republics fall. Yet these stories glided across the news cycle without urgency, without consequence, without explanation.

When the American people see the leadership class shrug, they conclude — correctly — that no one is steering the ship.

This is how the Bubba effect spreads. It is not just individuals resisting authority. It is sheriffs refusing to enforce new policies, school boards ignoring state mandates, entire communities saying, “We do not believe you anymore.” It becomes institutional, cultural, national.

A country cracking from the inside

This effect can be seen in Dearborn, Michigan. In the rise of fringe voices like Nick Fuentes. In the Epstein scandal, where powerful people could not seem to locate a single accountable adult. These stories are different in content but identical in message: The system protects itself, not you.

When people feel ignored or betrayed, they will align with anyone who appears willing to fight on their behalf. That does not mean they suddenly agree with everything that person says. It means they feel abandoned by the institutions that were supposed to be trustworthy.

The Bubba effect is what fills that vacuum.

The dangers of a faithless system

A republic cannot survive without credibility. Congress cannot oversee intelligence agencies if it refuses to discipline its own members. The military cannot remain apolitical if its chain of command becomes optional. The judiciary cannot defend the Constitution while inventing loopholes that erase the separation of powers.

History shows that once a nation militarizes politics, normalizes constitutional shortcuts, or allows government agencies to operate without scrutiny, it does not return to equilibrium peacefully. Something will give.

The question is what — and when.

The responsibility now belongs to us

In a healthy country, this is where the media steps in. This is where universities, pastors, journalists, and cultural leaders pause the outrage machine and explain what is at stake. But today, too many see themselves not as guardians of the republic, but of ideology. Their first loyalty is to narrative, not truth.

The founders never trusted the press more than the public. They trusted citizens who understood their rights, lived their responsibilities, and demanded accountability. That is the antidote to the Bubba effect — not rage, but citizenship.

How to respond without breaking ourselves

Do not riot. Do not withdraw. Do not cheer on destruction just because you dislike the target. That is how nations lose themselves. Instead, demand transparency. Call your representatives. Insist on consequences. Refuse to normalize constitutional violations simply because “everyone does it.” If you expect nothing, you will get nothing.

Do not hand your voice to the loudest warrior simply because he is swinging a bat at the establishment. You do not beat corruption by joining a different version of it. You beat it by modeling the country you want to preserve: principled, accountable, rooted in truth.

Adam Gray / Stringer | Getty Images

Every republic reaches a moment when historians will later say, “That was the warning.” We are living in ours. But warnings are gifts if they are recognized. Institutions bend. People fail. The Constitution can recover — if enough Americans still know and cherish it.

It does not take a majority. Twenty percent of the country — awake, educated, and courageous — can reset the system. It has happened before. It can happen again.

Wake up. Stand up. Demand integrity — from leaders, from institutions, and from yourself. Because the Bubba effect will not end until Americans reclaim the duty that has always belonged to them: preserving the republic for the next generation.

This article originally appeared on TheBlaze.com.

Warning: Stop letting TikTok activists think for you

Spencer Platt / Staff | Getty Images

Bad-faith attacks on Israel and AIPAC warp every debate. Real answers emerge only when people set aside scripts and ask what serves America’s long-term interests.

The search for truth has always required something very much in short supply these days: honesty. Not performative questions, not scripted outrage, not whatever happens to be trending on TikTok, but real curiosity.

Some issues, often focused on foreign aid, AIPAC, or Israel, have become hotbeds of debate and disagreement. Before we jump into those debates, however, we must return to a simpler, more important issue: honest questioning. Without it, nothing in these debates matters.

Ask questions because you want the truth, not because you want a target.

The phrase “just asking questions” has re-entered the zeitgeist, and that’s fine. We should always question power. But too many of those questions feel preloaded with someone else’s answer. If the goal is truth, then the questions should come from a sincere desire to understand, not from a hunt for a villain.

Honest desire for truth is the only foundation that can support a real conversation about these issues.

Truth-seeking is real work

Right now, plenty of people are not seeking the truth at all. They are repeating something they heard from a politician on cable news or from a stranger on TikTok who has never opened a history book. That is not a search for answers. That is simply outsourcing your own thought.

If you want the truth, you need to work for it. You cannot treat the world like a Marvel movie where the good guy appears in a cape and the villain hisses on command. Real life does not give you a neat script with the moral wrapped up in two hours.

But that is how people are approaching politics now. They want the oppressed and the oppressor, the heroic underdog and the cartoon villain. They embrace this fantastical framing because it is easier than wrestling with reality.

This framing took root in the 1960s when the left rebuilt its worldview around colonizers and the colonized. Overnight, Zionism was recast as imperialism. Suddenly, every conflict had to fit the same script. Today’s young activists are just recycling the same narrative with updated graphics. Everything becomes a morality play. No nuance, no context, just the comforting clarity of heroes and villains.

Bad-faith questions

This same mindset is fueling the sudden obsession with Israel, and the American Israel Public Affairs Committee in particular. You hear it from members of Congress and activists alike: AIPAC pulls the strings, AIPAC controls the government, AIPAC should register as a foreign agent under the Foreign Agents Registration Act. The questions are dramatic, but are they being asked in good faith?

FARA is clear. The standard is whether an individual or group acts under the direction or control of a foreign government. AIPAC simply does not qualify.

Here is a detail conveniently left out of these arguments: Dozens of domestic organizations — Armenian, Cuban, Irish, Turkish — lobby Congress on behalf of other countries. None of them registers under FARA because — like AIPAC — they are independent, domestic organizations.

If someone has a sincere problem with the structure of foreign lobbying, fair enough. Let us have that conversation. But singling out AIPAC alone is not a search for truth. It is bias dressed up as bravery.

Anadolu / Contributor | Getty Images

If someone wants to question foreign aid to Israel, fine. Let’s have that debate. But let’s ask the right questions. The issue is not the size of the package but whether the aid advances our interests. What does the United States gain? Does the investment strengthen our position in the region? How does it compare to what we give other nations? And do we examine those countries with the same intensity?

The real target

These questions reflect good-faith scrutiny. But narrowing the entire argument to one country or one dollar amount misses the larger problem. If someone objects to the way America handles foreign aid, the target is not Israel. The target is the system itself — an entrenched bureaucracy, poor transparency, and decades-old commitments that have never been re-examined. Those problems run through programs around the world.

If you want answers, you need to broaden the lens. You have to be willing to put aside the movie script and confront reality. You have to hold yourself to a simple rule: Ask questions because you want the truth, not because you want a target.

That is the only way this country ever gets clarity on foreign aid, influence, alliances, and our place in the world. Questioning is not just allowed. It is essential. But only if it is honest.

This article originally appeared on TheBlaze.com.

The melting pot fails when we stop agreeing to melt

Spencer Platt / Staff | Getty Images

Texas now hosts Quran-first academies, Sharia-compliant housing schemes, and rapidly multiplying mosques — all part of a movement building a self-contained society apart from the country around it.

It is time to talk honestly about what is happening inside America’s rapidly growing Muslim communities. In city after city, large pockets of newcomers are choosing to build insulated enclaves rather than enter the broader American culture.

That trend is accelerating, and the longer we ignore it, the harder it becomes to address.

As Texas goes, so goes America. And as America goes, so goes the free world.

America has always welcomed people of every faith and people from every corner of the world, but the deal has never changed: You come here and you join the American family. You are free to honor your traditions, keep your faith, but you must embrace the Constitution as the supreme law of the land. You melt into the shared culture that allows all of us to live side by side.

Across the country, this bargain is being rejected by Islamist communities that insist on building a parallel society with its own rules, its own boundaries, and its own vision for how life should be lived.

Texas illustrates the trend. The state now has roughly 330 mosques. At least 48 of them were built in just the last 24 months. The Dallas-Fort Worth metroplex alone has around 200 Islamic centers. Houston has another hundred or so. Many of these communities have no interest in blending into American life.

This is not the same as past waves of immigration. Irish, Italian, Korean, Mexican, and every other group arrived with pride in their heritage. Still, they also raised American flags and wanted their children to be part of the country’s future. They became doctors, small-business owners, teachers, and soldiers. They wanted to be Americans.

What we are watching now is not the melting pot. It is isolation by design.

Parallel societies do not end well

More than 300 fundamentalist Islamic schools now operate full-time across the country. Many use Quran-first curricula that require students to spend hours memorizing religious texts before they ever reach math or science. In Dallas, Brighter Horizons Academy enrolls more than 1,700 students and draws federal support while operating on a social model that keeps children culturally isolated.

Then there is the Epic City project in Collin and Hunt counties — 402 acres originally designated only for Muslim buyers, with Sharia-compliant financing and a mega-mosque at the center. After public outcry and state investigations, the developers renamed it “The Meadows,” but a new sign does not erase the original intent. It is not a neighborhood. It is a parallel society.

Americans should not hesitate to say that parallel societies are dangerous. Europe tried this experiment, and the results could not be clearer. In Germany, France, and the United Kingdom, entire neighborhoods now operate under their own cultural rules, some openly hostile to Western norms. When citizens speak up, they are branded bigots for asserting a basic right: the ability to live safely in their own communities.

A crisis of confidence

While this separation widens, another crisis is unfolding at home. A recent Gallup survey shows that about 40% of American women ages 18 to 39 would leave the country permanently if given the chance. Nearly half of a rising generation — daughters, sisters, soon-to-be mothers — no longer believe this nation is worth building a future in.

And who shapes the worldview of young boys? Their mothers. If a mother no longer believes America is home, why would her child grow up ready to defend it?

As Texas goes, so goes America. And as America goes, so goes the free world. If we lose confidence in our own national identity at the same time that we allow separatist enclaves to spread unchecked, the outcome is predictable. Europe is already showing us what comes next: cultural fracture, political radicalization, and the slow death of national unity.

Brandon Bell / Staff | Getty Images

Stand up and tell the truth

America welcomes Muslims. America defends their right to worship freely. A Muslim who loves the Constitution, respects the rule of law, and wants to raise a family in peace is more than welcome in America.

But an Islamist movement that rejects assimilation, builds enclaves governed by its own religious framework, and treats American law as optional is not simply another participant in our melting pot. It is a direct challenge to it. If we refuse to call this problem out out of fear of being called names, we will bear the consequences.

Europe is already feeling those consequences — rising conflict and a political class too paralyzed to admit the obvious. When people feel their culture, safety, and freedoms slipping away, they will follow anyone who promises to defend them. History has shown that over and over again.

Stand up. Speak plainly. Be unafraid. You can practice any faith in this country, but the supremacy of the Constitution and the Judeo-Christian moral framework that shaped it is non-negotiable. It is what guarantees your freedom in the first place.

If you come here and honor that foundation, welcome. If you come here to undermine it, you do not belong here.

Wake up to what is unfolding before the consequences arrive. Because when a nation refuses to say what is true, the truth eventually forces its way in — and by then, it is always too late.

This article originally appeared on TheBlaze.com.