Wednesday, November 22, 2017
Tuesday, November 21, 2017
Monday, November 20, 2017
Frankly put: retirement is now a myth for the majority
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):
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.
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:
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:
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.
Sunday, November 19, 2017
By Margaret Manning Shull and originally published at rzim.org
My husband and I had the relatively rare occurrence of a long weekend in which we had made no plans—except to stay at home and relax. We decided to revisit The Lord of the Rings film trilogy by watching one film each night of the weekend. As we watched, we were reminded of the powerful themes of good and evil, power and corruption, military conquest and its ecological impact and how hope is found in unexpected or unseen places. I continue to be amazed by the relevance and impact of these fantasy novels, adapted for film and written over sixty years ago.
In one of the climactic scenes of The Fellowship of the Ring, the young hobbit Frodo laments the world he sees around him with all of its tragedy and darkness. Looking at the difficulty in continuing on the path laid out before him, Frodo mourns, “I wish it need not have happened in my time.” His ever-wise counselor and friend, Gandalf the Grey, consoles him with these words: “So do all who live to see such times, but that is not for them to decide. All we have to decide is what to do with the time that is given to us. There are other forces at work in this world, Frodo, besides the will of evil. Bilbo was meant to find the Ring, in which case you were also meant to have it. And that is an encouraging thought.”(1)
All we have to decide is what to do with the time that is given to us. Watching this scene and hearing these words echoes within me as I look out onto the world. There are always crises of one sort or another that might make even the strongest among us pine for different times, crises that make us wish our journey would be a different and far more pleasant trip. The recent shootings in Las Vegas and Texas, the terrorist rampage in New York City, and the almost daily bombings all around the world give us all-too-familiar examples. The seeming randomness of violence upends any sense of security in a world that is far beyond our control. We long for peace and stability. But often such is not the time that is given to us.
With an unstable world and the fear that instability naturally engenders, how does one find hope? What are we to do with the times we’ve been given? For many, flights of fantasy, wishful thinking, or simply burying heads in the sand offers a strategy for coping. Yet, even the desire to escape—through pleasure, distraction, or nostalgia—belies a longing for something more, something different, and something better. These longings speak to us of what could be and can motivate action for good here and now with the time that is given to us. As Gandalf rightly counseled, “[T]here are other forces at work in this world… beside the will of evil.”
When Jesus prayed what would be one of his last prayers prior to his crucifixion, he prayed for his disciples as he knew he would leave them to do a task far greater and more difficult than they could possibly imagine. Did he pray that God would rescue them from the times they would face? Many men and women in this fellowship would lose their lives as a result of this mission. Yet, Jesus doesn’t pray that they would be saved from the world in which they were living. Jesus prayed, “I do not ask you to take them out of the world, but to keep them from evil…. As you did send me into the world, I also have sent them into the world.”(2) He makes the suggestion that they are not alone in their work anymore than they are alone in the world.
Jesus does not pray for escape, but for purposeful engagement in the very world he also entered. Here in the engagement with this world, Jesus promises peace. Not a peace that comes from escape or from wishful thinking, but a peace that generates hope and meaning in whatever times his followers would find themselves. “These things I have spoken to you, that in me you may have peace. In the world you have tribulation, but take courage; I have overcome the world.”(3) Jesus tasks those who would follow in his way to mission—knowing that tribulation would find them there. He called them to purposeful action in desperate times: “Let your light so shine… that they may see your good works and glorify your Father who is in heaven.”
Like Frodo and the other members of the Fellowship of the Ring, it is easy to look around and see the peril of the journey in this world, or to think that the force of evil will triumph. The natural desire to avoid difficulty and pain and the longing for another kind of world distract the doing of good work in God’s world. Yet, the longing for what is good, beautiful, and right for our world ought not lead to flights of fantasy or to wishful thinking or the desire to escape it. Rather, our longings for a better world might serve as reminders themselves that there are forces beyond us at work. Indeed, our longings can lead us to the one who stands beside us—within and beyond the very time we’ve been given—making all things new.
Margaret Manning Shull is a member of the speaking and writing team at Ravi Zacharias International Ministries in Bellingham, Washington.
(1) Tolkein, J.R.R. The Lord of the Rings: The Fellowship of the Ring. DVD. Directed by Peter Jackson. New York City: New Line Cinema, 2001.
(2) John 17:15-18.
(3) John 16:33.
(2) John 17:15-18.
(3) John 16:33.
Saturday, November 18, 2017
Friday, November 17, 2017
By Dr. Mercola
Regrets. We all have them — things said or done; things left unsaid or undone. Paths that weren’t followed; opportunities missed due to fear or insecurity. The list is long, but one of the biggest regrets in life reported by a large number of people is not being there for someone at the end of life.1 In other words, being too busy with “life” to tend to those near death.
Interestingly, while a regret can be phrased either as an action or as an inaction (“I wish I had not quit high school,” versus “I wish I had stayed in high school”), regrets framed as actions tend to be more emotionally intense than regrets about inactions, but inactions tend to be longer lasting.2
Emma Freud, a columnist for The Guardian, recently explored themes of regret on social media, covering everything from relationships, work-life balance and personal passions, to addiction, illness and death. If you’re so inclined, you can take a look at some of the thousands of responses she received.3 Chances are, you’ll recognize yourself in some of them.
Top Five Regrets of the Dying
According to Bronnie Ware, a former palliative care nurse who ended up writing a book, “The Top Five Regrets of the Dying,” based on her conversations with the dying, the biggest, most commonly cited regrets at the end of life are — beginning with the most common regret of all:4
- Not having the courage to live a life true to oneself but rather doing what was expected
- Working too much, thereby missing children’s youth and their partner’s companionship
- Not having the courage to express one’s feelings
- Not staying in touch with friends
- Taking life too seriously and allowing worries to diminish happiness
Ware goes a step further, however, in that she also delves into solutions for these regrets — ways for you to avoid falling into the same traps. The No. 1 regret is a valuable reminder to not give up too many of your dreams to please others (or conform to conventional standards). “It is very important to try and honor at least some of your dreams along the way,” Ware says. “From the moment that you lose your health, it is too late. Health brings a freedom very few realize, until they no longer have it.”
Living Life on Your Own Terms Is Key to Dying Without (Too Many) Regrets
Virtually every man in Ware’s care listed No. 2: Missing out on family time because of excessive work. “All of the men I nursed deeply regretted spending so much of their lives on the treadmill of a work existence,” she writes, adding:
“By simplifying your lifestyle and making conscious choices along the way, it is possible to not need the income that you think you do. And by creating more space in your life, you become happier and more open to new opportunities, ones more suited to your new lifestyle.”
No. 4 is a closely related topic. Oftentimes we get so busy we forget to keep in touch with old friends, and over time the relationship fizzles out. Then, in old age, loneliness creeps in. It can be difficult to build a friendship at any age, but it certainly does not get easier with advancing age, when poor health starts limiting your ability to get out and about to socialize. As noted by Ware, love and relationships are usually the only things of true, remaining importance when the end of life draws near.
As for No. 3, Ware notes that many “developed illnesses relating to the bitterness and resentment they carried” as a result of holding their feelings in and opting to keep quiet just to keep the peace. If you’re in this category, consider Ware’s commonsense advice:
“We cannot control the reactions of others. However, although people may initially react when you change the way you are by speaking honestly, in the end it raises the relationship to a whole new and healthier level. Either that or it releases the unhealthy relationship from your life. Either way, you win.”
Last but not least, at the end of life, many finally realize that happiness is an inside job. It’s a choice, not a side effect of living any particular kind of life. “[D]eep within, they longed to laugh properly and have silliness in their life again,” Ware writes, wisely noting that once you’re on your deathbed, you will not be worrying about what others think of you, so why not choose happiness now, while you still have a lot of life left?
The Importance of Relationships and Self-Care
Longevity research strongly supports Ware’s overall findings. The same things that people report regretting are also the things centenarians “get right.” In interviews and surveys with centenarians,5 including the ones interviewed in “How to Live to 100,” two of the most important factors contributing to longevity are having a strong social network of family and friends, and keeping a sense of humor.
The importance of social support has also been scientifically verified. An American meta-analysis6 of published studies found strong social support is actually the No. 1 factor that determines longevity and survival. The influence of social support on mortality is so great, it surpasses the influence of weight and even eclipses the influence of smoking.
A 2012 article7 in Forbes Magazine listed 25 top regrets reported by people. Here — in addition to all of the regrets already listed — one of the biggest regrets was not standing up to bullies, be it in school or at work. In hindsight, many feel they should have spoken out and taken a firm stand, even at the risk of losing their job.
Another regret that is bound to be pertinent for a vast majority of people these days is allowing the smartphone to take up too much of our time and attention. Related to that one is the regret of “not teaching my kids to do more stuff,” be it raking leaves, learning to throw a ball, cleaning their room, camping or any number of other activities. On this list of regrets you also have “not taking care of my health when I had the chance.” Indeed, many pay no attention to their health at all unless or until there’s a problem.
Unfortunately, by that time, you have a struggle ahead of you, as most health problems are far easier to prevent than they are to treat. Not to mention the emotional and financial strain and stress a chronic health problem can cause. At the end of life, many wish they’d made self-care a priority. Hopefully, if you’re reading this, you’ve not let self-care slide off your radar. Remember, some of the simplest lifestyle strategies can have tremendous impact, such as:
- Getting sufficient amounts of sleep every night
- Walking daily (preferably outdoors, in nature) and getting plenty of physical movement throughout the day
- Meditating or regularly engaging in some form of stress relief
- Limiting exposure to electromagnetic fields
- Eating real food
At the End of Life, Most Wish They’d Lived More in the Moment
Another common regret is regretting not living more in the moment. As constant connectivity via smartphones and other technologies increases, more and more people are bound to experience this regret at the end of their life as the years wear on. “Living in the now” is a major component of happiness, and a significant way to grow in gratitude, both of which also have an impact on health and longevity.
It’s really difficult to cultivate gratitude if you’re constantly running; always looking ahead, or, alternatively, looking to the past. Gratitude requires you to be in the moment, and appreciate what’s in front of you right now. A commonly recommended practice that can be very helpful is to keep a daily gratitude journal. This can be done in a paper journal, or you can download a Gratitude Journal app from iTunes.8
In one 2015 study,9 participants who kept a gratitude diary and reflected on what they were grateful for four times a week for three weeks reported improvements in depression, stress and happiness. A mindfulness intervention, consisting of a mindfulness diary and mindfulness meditation, led to similar improvements. Remember, you tend to get more of what you focus on, so be mindful of the kinds of thoughts you entertain.
Your brain can actually become “hardwired” to feel anxiety, depression, irritability or anger the longer and the more frequent such thoughts are allowed to persist. As noted by Robert Emmons in “The Little Book of Gratitude:” “Everything we do creates connections within networks of the brain, and the more you repeat something, the stronger those connections get. The mind can change the brain in lasting ways. In other words, what flows through the mind sculpts the brain.”
If you struggle with pessimism, give the Emotional Freedom Techniques (EFT) a try. EFT is a form of psychological acupressure based on the energy meridians used in acupuncture. It’s an effective way to quickly restore your inner balance and healing and helps rid your mind of negative thoughts and emotions. In the video below, EFT practitioner Julie Schiffman demonstrates how to tap for gratitude.
Your Life Is Your Own, Live It the Way You Want To
The take-home message here is this: If you’re currently doing, or avoiding doing, something you know you’d regret if you only had weeks left to live, change course now. Don’t wait years or decades. Eventually, you’ll run out of time and be left holding a bag of regrets.
Your life is your own — you’re the only one who can live it successfully, so follow your dreams and passions, and let go of unnecessary baggage and false limitations. At the end of your life, you’ll realize you don’t care about what other people think of you nearly as much as you believe today, and — if you’re like most — you’ll come to the realization that happiness is in fact an ever-present choice.