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)

None

A town in Sweden is under fire after denying requests to ring church bells in the 1990s and the 2000s but recently approving a mosque's request to conduct a weekly Islamic call to prayer.

RELATED: Media's anti-Israel, pro-Islam bias sweeps THIS fact under the rug

Authorities in the town of Vaxjo in southern Sweden have given the local mosque a one-year permit to recite the call to prayer every Friday for about four minutes. But Fr. Ingvar Fogelqvist of St. Michael's, the local Catholic church located about a mile from the mosque, says similar requests to ring church bells were denied.

On today's show, Pat and Jeffy talked about this story and favorable bias toward the Muslim faith. The issue isn't that the Islamic call to prayer is allowed; it's that all religions are not being treated equally.

Somebody might want to check the temperature in hell, it might be just a tad chillier than normal.

If you missed Friday's episode of The Glenn Beck Program, you missed something you probably never thought you'd see in this timeline or any other. Glenn actually donned President Trump's trademark red "Make America Great Again" hat and laid out the case for why he thinks Trump will win in a landslide in 2020.

RELATED: The media's derangement over Trump has me wearing a new hat and predicting THIS for 2020

Bottom line: Nancy Pelosi and the mainstream media may have pushed Glenn to this point, but believe it or not, Trump's record will make this next election a walk in the park for number 45. At this point, the sitting president has done enough to earn even Glenn's vote.

Glenn broke down what he thought were the 10 biggest campaign promises that — unlike those made by most politicians — Trump actually kept.

10. Impose a 10% repatriation tax to bring jobs back to America

Not all of Trump's promises were good ones, but regardless of what the consequences may be — he did keep this one.

"Now, I think this one is dangerous," Glenn said on radio Friday. "He did it. Ten percent. Bring all of your money back into the United States. It will create jobs. Yes. It will also create inflation. But it's creating jobs."

9. Withdraw from the Trans-Pacific Partnership (TPP)

This has been one of Trump's most passionate issues.

"The stop the TPP. Uh-huh. Right. Sure you are. Uh-huh. Yes. He did," Glenn admitted.

8. Withdraw from the disastrous Paris Climate Accord

Glenn found himself eating crow on this.

"I'm on record saying he will never do that because his daughter is a huge global warming person and he only listens to the family. Eh. Wrong," Glenn said with a puff of crow feathers coming from his mouth.

7. Bring North Korea to the table and rein them in

This looked impossible. Not so.

"'I'm going to bring North Korea to the table.' Are you? Everybody has tried to do that," Glenn said. "Now, they're at the table. We don't know what's going to happen. So the result of that is unknown. But has anybody else done that?"

6. Stop over-regulation and jump-start the economy

It's the economy, stupid.

"Does anybody feel like America is beginning to get on track somewhat economically? You know why? Because he fulfilled another promise," Glenn said. "Stop over-regulating the American people. Give them their money. Give the companies the opportunity to expand and bring their money back into the country, and maybe they'll build buildings. Maybe they'll build offices. Maybe they'll build new products. Maybe they'll build new factories. Maybe they'll hire a bunch of people."

Glenn went on.

"Now, I know Seattle is trying to do everything they can to make sure everybody in their city is homeless and unemployed, but the rest of the country is enjoying the feeling of, wow, maybe things are going to be okay."

5. Reverse Obama's executive orders

If you're like Glenn, you've gotten used to politicians promising "no new taxes," but you can really tell they're lying if their lips are moving. Guess what? That's apparently not Trump.

"The executive orders? Yeah. He's reversed a lot of Obama's executive orders," Glenn said. "These are outrageous promises."

4. Pull out of the Iran nuclear deal

No big deal...

"'I'm going to cancel the Iran Deal.' Yep. None of these are small. You know, I've got maybe ten minutes. I think we can get that done in the first term. And they did," Glenn said.

3. Give tax cuts to middle-class Americans

Maybe this could have been better, but we'll take it.

"I don't like the tax cut. I think he could go a lot further," Glenn said. "But that's not even his job. His job is to sign things that Congress puts in front of him. Not to design it. You Republicans in Congress, you disgust me. You disgust me. 'Imagine what we could do if we had the House and the Senate and the White House.' I can imagine what you'll do — nothing. You'll do nothing."

2. Change strategy and defeat ISIS

The mainstream media have been radio silent on this.

"How about the president's — well, I know I can defeat ISIS. I know I can do it. I'll defeat ISIS. He did," Glenn said. "And did you notice no one in the press even talked about it? All of a sudden, we're not talking about ISIS anymore. How come? Oh, I know. President Trump. That's why."

1. Recognize Jerusalem as the capital of Israel and relocate the US embassy

This one is a true game-changer.

"Now, every president will say to you, when he's running, 'I'm going to make Jerusalem the home.' Well, really? The home of the embassy. Really, are you? Because everybody says that, nobody does it. He did it," Glenn said. "And I think that's going to go down as the biggest game-changer possibly in my lifetime. This is going — it already is — it is changing the game in Iran."

Glenn continued.

"And when it does, this president is going to come out and say something directly to those people, that we support them," he said. "And that's going to add fuel to the fire. And you might see a regime change and a collapse of the Islamic regime in Iran. And it will be 100 percent Donald Trump that made that responsible. One hundred percent. You're going to see changes because of this. He kept that promise. A promise I said, he's not going to do that. Nobody is going to do that. He did."

One chapter of ISIS has ended, but another may be starting

AHMAD AL-RUBAYE/AFP/Getty Images

For the most part, ISIS has fallen in Syria and Iraq. But before we celebrate the demise of this awful terrorist group, before we let our guard down, we should zoom out a bit, because ISIS is spreading. ISIS has largely just scattered out of the region as if someone turned on the kitchen lights and they scrambled.

RELATED: It IS About Islam: This Is a War Against Evil

The Wall Street Journal spoke with Rohan Gunaratna, head of the International Center for Political Violence and Terrorism Research at the Nanyang University in Singapore. “Although Islamic State's ideology has suffered, it still has a huge potential," he told them. “Islamic State has entered a phase of global expansion, very much the same way al Qaeda extended globally in late 2001."

ISIS has spread into West Africa, and throughout much of Southeast Asia, and, as is typical of ISIS, they have done it violently, with a sick venom.

The world is their potential rubble, and their fight is endless.

Again, from the Wall Street Journal: “One chapter of ISIS has finished and another is beginning," said Hassan Hassan, a specialist on Islamic State at the Tahrir Institute for Middle East Policy in Washington. “Their resurgence is coming sooner than expected."

The world is their potential rubble, and their fight is endless.

'The Handmaid's Tale' got it right, just with the wrong religion

Alberto E. Rodriguez/Getty Images

Just in case The Handmaid's Tale's heavy-handed message wasn't already heavy-handed enough, a recent episode made it clear there's always room for further hysteria. Particularly, in relation to depictions of a “patriarchal society" run by Christian doctrine and determined by men — oh those dastardly men.

RELATED: Christian privilege is the new white privilege

The show appropriates Margaret Atwood of the same name, depicting a totalitarian society led by Christian doctrine in which women's bodies are controlled, and they have no rights. The story sounds familiar, but not in the same way Atwood and the show's creators have so smugly assumed.

Just as tone-deaf as 4th wave feminism itself, and tone-deaf in all the exact same places. Most notably, the show's heavy-handed indignation toward Christianity. Toward the patriarchy. Toward conservatives and traditional values. And just like 4th wave feminism, the show completely overlooks the irony at play. Because there is a part of the world where women and children are being raped and mutilated. In fact, in this very real place, the women or girls are often imprisoned, even executed, for being raped, and they are mutilated in unspeakable ways.

Theirs is a cruel, bloody, colorless life.

There is a place, a very real place, where women are forced to cover their entire bodies with giant tarp-like blankets, which is all the more brutal given the endless heat of this place. There is a place where women literally have one-third of the rights of men, a place where women are legally, socially and culturally worth less than men.

They cannot drive cars. They cannot be outside alone. They cannot divorce, they cannot even choose who they marry and often, they are forcibly married at a young age.

They are raped. A lot. Theirs is a cruel, bloody, colorless life. This is the life of tens, perhaps hundreds of millions of women. And, I'll tell you, their religion isn't Christianity.