America is in a retirement crisis. The latest data is ugly. Investment advice has been bad. So how can individuals find good investments that will deliver on their financial needs?
A new report shows that America’s pending retirement crisis is far worse than previously thought. Beyond the failure of 401ks and savings initiatives, America is battling big questions about social security, transparency and fairness in financial advisory services, and of course the mechanics of politics. So just how ugly is it out there? How can individuals turn the game around for a bright financial future?
“Truly Scary” Retirement Savings Figures
A Business Insider report, with data from online news platform Slate, Census Bureau, National Institute on Retirement Security, employer consultant Willis Towers Watson, the Economic Policy Institute, and a Survey of Consumer Finances paints a dismal picture of retirement finances in America.
Key Points Based on Data from 2000 to 2013:
- Less than half of families between the ages of 32 and 61 have any meaningful savings
- The median family in this age group has just $5,000 in retirement savings
- Families with a head of household who graduated college were 33% more likely to have “something” put aside for retiring
- The top 1% averages more than $1M in tax protected retirement accounts
- 76% of working Americans are pessimistic about their fate in retirement
- Around 30% believe they will run out of money within 15 years of quitting work
- The Obama Administration believes conflicts of interest are costing Americans $17B per year at their financial advisors’ hands
Even though some will be quick to point out that the 2008 crisis happened during this period, the truth is that this data also incorporates two of the most prosperous and fastest periods of growth in our history. That means the problems are far more deeply rooted than just a temporary market phase.
Social Security Benefits & Politics
Neither politics, national economics, nor social security are easy to manage. Business Insider’s report dances with the stances 2016 presidential candidates. Adjustments to social security benefits are not easy to make. Raising them means money has to be raised somewhere else, and few want to pay more in taxes. Many financial analysts would also argue that social security has been juggles, twisted, and used as a tool of fear, and self-promotion for political candidates for decades.
Still, what we do know is that right now the Social Security Administration has sent out letters admitting that doesn’t expect to be able to fulfill its benefit promises, regardless of the fact that individuals have paid in for decades, and are still being asked to pay in. Yet, many individuals (almost 50%) appear to be betting their whole retirement and survival on collecting it.
Whether the money paid in should be returned to tax payers, and the system disbanded is a big argument. What everyone should be able to agree on is that all Americans need to have their own independent retirement plan in place to protect themselves.
The Fiduciary Fight
The battle over regulation, transparency, and fiduciary responsibility between financial advisers and services and their customers is shaping up to be a big one. It is an area ripe for major innovation, and we are starting to see some progress. However, Business Insider points out that the lobbying arm of the mutual fund industry, the Investment Company Institute often claims Americans will be just fine in retirement, which many might call a ludicrous claim given the data.
The struggle is that there is little transparency in marketing and reporting, and often little alignment between investors’ interests and what makes the most money for advisers and financial firms. And the fees are too darn high. In fairness; some firms and leaders in this space are changing these dynamics. Yet, millions aren’t really aware how badly they are being served, or where to find anything that may be better.
How to Change the Game
The first step in getting on track and ahead of the game for individuals and families is gaining the right perspective, and developing a sufficiently appropriate sense of urgency. It is all too easy to put off your needs in 5, 10, or 30 years from now, in favor of instant gratification now. Do you want that delicious coffee, new Benz, new Hermes bag, and a bigger house now? Or do you want an extra game of golf or day on the beach in 30 years, if you even live that long?
This situation won’t change unless individuals and families feel the real urgency, take their survival seriously, and plan for it.
The Hunt for Better Investments
To get ahead, and save themselves from a personal retirement crisis individuals need better investments.
Based on the above that could be defined as investments that;
- Have low fees
- Are diversified
- Provide control
- Have great tax advantages
- Can provide compounding gains
- Offer passive income
Mobile home park investments may be a great example of this. Investors that add them to their portfolios now can enjoy years of compounding growth, with protection from taxes. They can even start gaining monthly income from them which can be reinvested or spent if retirement is close. Mobile home park investments even provide great ability to control the own future value and performance of your investments. Perhaps that’s why one percenters like Warren Buffett and Sam Zell have used them to grow their billions.