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)

From the moment the 33-year-old Thomas Jefferson arrived at the Continental Congress in Philadelphia in 1776, he was on the radical side. That caused John Adams to like him immediately. Then the Congress stuck Jefferson and Adams together on the five-man committee to write a formal statement justifying a break with Great Britain, and their mutual admiration society began.

Jefferson thought Adams should write the Declaration. But Adams protested, saying, “It can't come from me because I'm obnoxious and disliked." Adams reasoned that Jefferson was not obnoxious or disliked, therefore he should write it. Plus, he flattered Jefferson, by telling him he was a great writer. It was a master class in passing the buck.

So, over the next 17 days, Jefferson holed up in his room, applying his lawyer skills to the ideas of the Enlightenment. He borrowed freely from existing documents like the Virginia Declaration of Rights. He later wrote that “he was not striving for originality of principle or sentiment." Instead, he hoped his words served as “an expression of the American mind."

It's safe to say he achieved his goal.

The five-man committee changed about 25 percent of Jefferson's first draft of the Declaration before submitting it to Congress. Then, Congress altered about one-fifth of that draft. But most of the final Declaration's words are Jefferson's, including the most famous passage — the Preamble — which Congress left intact. The result is nothing less than America's mission statement, the words that ultimately bind the nation together. And words that we desperately need to rediscover because of our boiling partisan rage.

The Declaration is brilliant in structure and purpose. It was designed for multiple audiences: the King of Great Britain, the colonists, and the world. And it was designed for multiple purposes: rallying the troops, gaining foreign allies, and announcing the creation of a new country.

The Declaration is structured in five sections: the Introduction, Preamble, the Body composed of two parts, and the Conclusion. It's basically the most genius breakup letter ever written.

In the Introduction, step 1 is the notificationI think we need to break up. And to be fair, I feel I owe you an explanation...

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another…

The Continental Congress felt they were entitled by “the Laws of Nature and of Nature's God" to “dissolve the political bands," but they needed to prove the legitimacy of their cause. They were defying the world's most powerful nation and needed to motivate foreign allies to join the effort. So, they set their struggle within the entire “Course of human events." They're saying, this is no petty political spat — this is a major event in world history.

Step 2 is declaring what you believe in, your standardsHere's what I'm looking for in a healthy relationship...

This is the most famous part of the Declaration; the part school children recite — the Preamble:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

That's as much as many Americans know of the Declaration. But the Preamble is the DNA of our nation, and it really needs to be taken as a whole:

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

The Preamble takes us through a logical progression: All men are created equal; God gives all humans certain inherent rights that cannot be denied; these include the rights to life, liberty, and the pursuit of happiness; to protect those rights, we have governments set up; but when a government fails to protect our inherent rights, people have the right to change or replace it.

Government is only there to protect the rights of mankind. They don't have any power unless we give it to them. That was an extraordinarily radical concept then and we're drifting away from it now.

The Preamble is the justification for revolution. But note how they don't mention Great Britain yet. And again, note how they frame it within a universal context. These are fundamental principles, not just squabbling between neighbors. These are the principles that make the Declaration just as relevant today. It's not just a dusty parchment that applied in 1776.

Step 3 is laying out your caseHere's why things didn't work out between us. It's not me, it's you...

This is Part 1 of the Body of the Declaration. It's the section where Jefferson gets to flex his lawyer muscles by listing 27 grievances against the British crown. This is the specific proof of their right to rebellion:

He has obstructed the administration of justice...

For imposing taxes on us without our consent...

For suspending our own legislatures...

For quartering large bodies of armed troops among us...

Again, Congress presented these “causes which impel them to separation" in universal terms to appeal to an international audience. It's like they were saying, by joining our fight you'll be joining mankind's overall fight against tyranny.

Step 4 is demonstrating the actions you took I really tried to make this relationship work, and here's how...

This is Part 2 of the Body. It explains how the colonists attempted to plead their case directly to the British people, only to have the door slammed in their face:

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury...

They too have been deaf to the voice of justice... We must, therefore... hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

This basically wrapped up America's argument for independence — we haven't been treated justly, we tried to talk to you about it, but since you refuse to listen and things are only getting worse, we're done here.

Step 5 is stating your intent — So, I think it's best if we go our separate ways. And my decision is final...

This is the powerful Conclusion. If people know any part of the Declaration besides the Preamble, this is it:

...that all political connection between them and the State of Great Britain, is and ought to be totally dissolved...

They left no room for doubt. The relationship was over, and America was going to reboot, on its own, with all the rights of an independent nation.

And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.

The message was clear — this was no pitchfork mob. These were serious men who had carefully thought through the issues before taking action. They were putting everything on the line for this cause.

The Declaration of Independence is a landmark in the history of democracy because it was the first formal statement of a people announcing their right to choose their own government. That seems so obvious to us now, but in 1776 it was radical and unprecedented.

In 1825, Jefferson wrote that the purpose of the Declaration was “not to find out new principles, or new arguments, never before thought of… but to place before mankind the common sense of the subject, in terms so plain and firm… to justify ourselves in the independent stand we are compelled to take."

You're not going to do better than the Declaration of Independence. Sure, it worked as a means of breaking away from Great Britain, but its genius is that its principles of equality, inherent rights, and self-government work for all time — as long as we actually know and pursue those principles.

On June 7, 1776, the Second Continental Congress met in Philadelphia at the Pennsylvania State House, better known today as Independence Hall. Virginia delegate Richard Henry Lee introduced a motion calling for the colonies' independence. The “Lee Resolution" was short and sweet:

Resolved, That these United Colonies are, and of right ought to be, free and independent States, that they are absolved from all allegiance to the British Crown, and that all political connection between them and the State of Great Britain is, and ought to be, totally dissolved.

Intense debate followed, and the Congress voted 7 to 5 (with New York abstaining) to postpone a vote on Lee's Resolution. They called a recess for three weeks. In the meantime, the delegates felt they needed to explain what they were doing in writing. So, before the recess, they appointed a five-man committee to come up with a formal statement justifying a break with Great Britain. They appointed two men from New England — Roger Sherman and John Adams; two from the middle colonies — Robert Livingston and Benjamin Franklin; and one Southerner — Thomas Jefferson. The responsibility for writing what would become the Declaration of Independence fell to Jefferson.

In the rotunda of the National Archives building in Washington, D.C., there are three original documents on permanent display: the Constitution, the Bill of Rights, and the Declaration of Independence. These are the three pillars of the United States, yet America barely seems to know them anymore. We need to get reacquainted — quickly.

In a letter to his friend John Adams in 1816, Jefferson wrote: “I like the dreams of the future, better than the history of the past."

America used to be a forward-looking nation of dreamers. We still are in spots, but the national attitude that we hear broadcast loudest across media is not looking toward the future with optimism and hope. In late 2017, a national poll found 59% of Americans think we are currently at the “lowest point in our nation's history that they can remember."

America spends far too much time looking to the past for blame and excuse. And let's be honest, even the Right is often more concerned with “owning the left" than helping point anyone toward the practical principles of the Declaration of Independence. America has clearly lost touch with who we are as a nation. We have a national identity crisis.

The Declaration of Independence is America's thesis statement, and without it America doesn't exist.

It is urgent that we get reacquainted with the Declaration of Independence because postmodernism would have us believe that we've evolved beyond the America of our founding documents, and thus they're irrelevant to the present and the future. But the Declaration of Independence is America's thesis statement, and without it America doesn't exist.

Today, much of the nation is so addicted to partisan indignation that "day-to-day" indignation isn't enough to feed the addiction. So, we're reaching into America's past to help us get our fix. In 2016, Democrats in the Louisiana state legislature tabled a bill that would have required fourth through sixth graders to recite the opening lines of the Declaration. They didn't table it because they thought it would be too difficult or too patriotic. They tabled it because the requirement would include the phrase “all men are created equal" and the progressives in the Louisiana legislature didn't want the children to have to recite a lie. Representative Barbara Norton said, “One thing that I do know is, all men are not created equal. When I think back in 1776, July the fourth, African Americans were slaves. And for you to bring a bill to request that our children will recite the Declaration, I think it's a little bit unfair to us. To ask our children to recite something that's not the truth. And for you to ask those children to repeat the Declaration stating that all men's are free. I think that's unfair."

Remarkable — an elected representative saying it wouldn't be fair for students to have to recite the Declaration because “all men are not created equal." Another Louisiana Democrat explained that the government born out of the Declaration “was used against races of people." I guess they missed that part in school where they might have learned that the same government later made slavery illegal and amended the Constitution to guarantee all men equal protection under the law. The 13th, 14th, and 15th Amendments were an admission of guilt by the nation regarding slavery, and an effort to right the wrongs.

Yet, the progressive logic goes something like this: many of the men who signed the Declaration of Independence, including Thomas Jefferson who wrote it, owned slaves; slavery is evil; therefore, the Declaration of Independence is not valid because it was created by evil slave owners.

It's a sad reality that the left has a very hard time appreciating the universal merits of the Declaration of Independence because they're so hung up on the long-dead issue of slavery. And just to be clear — because people love to take things out of context — of course slavery was horrible. Yes, it is a total stain on our history. But defending the Declaration of Independence is not an effort to excuse any aspect of slavery.

Okay then, people might say, how could the Founders approve the phrase “All men are created equal," when many of them owned slaves? How did they miss that?

They didn't miss it. In fact, Thomas Jefferson included an anti-slavery passage in his first draft of the Declaration. The paragraph blasted King George for condoning slavery and preventing the American Colonies from passing legislation to ban slavery:

He has waged cruel war against human nature itself, violating its most sacred rights to life and liberty in the persons of a distant people who never offended him, captivating and carrying them into slavery in another hemisphere... Determined to keep open a market where men should be bought and sold, he has prostituted his negative for suppressing every legislative attempt to prohibit or to restrain this execrable commerce.

We don't say “execrable" that much anymore. It means, utterly detestable, abominable, abhorrent — basically very bad.

Jefferson was upset when Georgia and North Carolina threw up the biggest resistance to that paragraph. Ultimately, those two states twisted Congress' arm to delete the paragraph.

Still, how could a man calling the slave trade “execrable" be a slaveowner himself? No doubt about it, Jefferson was a flawed human being. He even had slaves from his estate in Virginia attending him while he was in Philadelphia, in the very apartment where he was writing the Declaration.

Many of the Southern Founders deeply believed in the principles of the Declaration yet couldn't bring themselves to upend the basis of their livelihood. By 1806, Virginia law made it more difficult for slave owners to free their slaves, especially if the owner had significant debts as Jefferson did.

At the same time, the Founders were not idiots. They understood the ramifications of signing on to the principles described so eloquently in the Declaration. They understood that logically, slavery would eventually have to be abolished in America because it was unjust, and the words they were committing to paper said as much. Remember, John Adams was on the committee of five that worked on the Declaration and he later said that the Revolution would never be complete until the slaves were free.

Also, the same generation that signed the Declaration started the process of abolition by banning the importation of slaves in 1807. Jefferson was President at the time and he urged Congress to pass the law.

America has an obvious road map that, as a nation, we're not consulting often enough.

The Declaration took a major step toward crippling the institution of slavery. It made the argument for the first time about the fundamental rights of all humans which completely undermined slavery. Planting the seeds to end slavery is not nearly commendable enough for leftist critics, but you can't discount the fact that the seeds were planted. It's like they started an expiration clock for slavery by approving the Declaration. Everything that happened almost a century later to end slavery, and then a century after that with the Civil Rights movement, flowed from the principles voiced in the Declaration.

Ironically for a movement that calls itself progressive, it is obsessed with retrying and judging the past over and over. Progressives consider this a better use of time than actually putting past abuses in the rearview and striving not to be defined by ancestral failures.

It can be very constructive to look to the past, but not when it's used to flog each other in the present. Examining history is useful in providing a road map for the future. And America has an obvious road map that, as a nation, we're not consulting often enough. But it's right there, the original, under glass. The ink is fading, but the words won't die — as long as we continue to discuss them.

'Good Morning Texas' gives exclusive preview of Mercury One museum

Screen shot from Good Morning Texas

Mercury One is holding a special exhibition over the 4th of July weekend, using hundreds of artifacts, documents and augmented reality experiences to showcase the history of slavery — including slavery today — and a path forward. Good Morning Texas reporter Paige McCoy Smith went through the exhibit for an exclusive preview with Mercury One's chief operating officer Michael Little on Tuesday.

Watch the video below to see the full preview.

Click here to purchase tickets to the museum (running from July 4 - 7).

Over the weekend, journalist Andy Ngo and several other apparent right-leaning people were brutally beaten by masked-gangs of Antifa protesters in Portland, Oregon. Short for "antifascist," Antifa claims to be fighting for social justice and tolerance — by forcibly and violently silencing anyone with opposing opinions. Ngo, who was kicked, punched, and sprayed with an unknown substance, is currently still in the hospital with a "brain bleed" as a result of the savage attack. Watch the video to get the details from Glenn.