Читать книгу Cocktail Investing - Hawkins Lenore Elle - Страница 8

If you are a data lover like us and want to know more about just how startlingly dire the situation may become, read on. We really geek out on the stats in this next section.

Congratulations!

We say that because saving money is a good thing, despite what the elected officials in Washington, D.C., would have you believe in our consumer-driven economy. How often have you heard how we need to get consumers spending? It's as if the key to a successful economy is to spend every dime you make, and then borrow some more! As thrilled as we are that you are taking steps forward, the reality is if that's all you are doing, then you have a much tougher road ahead of you – and one you may not see the end of.

There are two other big concerns that most people face. One is being able to afford the level of care required as you get older. According to a Harris Poll, nearly three quarters (74 percent) of respondents said they worry about having enough money to retire and two-thirds (67 percent) of respondents said they worry about being able to afford unexpected healthcare costs.5 Among those who are not yet retired, 7 in 10 worry about being able to pay for their healthcare costs when they retire. And worried is exactly what the findings of Age Wave, a think tank that specializes on aging, say you should do, because out-of-pocket healthcare costs in retirement may equal $318,800 if retirement lasts 30 years; $220,600 for 25 years; $146,400 for 20 years; $91,200 for 15 years; $50,900 for 10 years. And in case you were wondering, these estimates do not include the cost of long-term care.

And that brings us to the next big concern – the really big concern – having enough saved and invested to actually retire. Three-quarters of U.S. adults who are not yet retired say they worry about having enough money to retire, and 70 percent say planning for retirement is a key priority to them. One thing those still in the workforce are not planning to use is Social Security – only about a third say they have faith in Social Security being there when they retire. If you have such concerns, or even if you don't, we would suggest you point your web browser at USDebtClock.org to better understand the country's mounting debt and how much is attributed to entitlements such as Medicare, Medicaid, and Social Security. Perhaps Social Security will be around when you retire, but we would hate for you to be banking on that only to find out the program was significantly altered when it was your turn to collect.

Pundits say you will need 60 to 85 percent of your gross household income today to sustain the same lifestyle after you retire. A different perspective from Fidelity Investments says that, depending on factors such as your ability to save, your starting age to save, and retirement age, you'll need eight times your ending salary. Data from Sentier Research recently pegged average household income at $53,891; for reference, that is still 4.8 percent lower than it was at the start of the Great Recession in December 2007. If your ending salary was in that range, then at minimum you would need another $430,000 on top of the amount you would need to fund education needs and healthcare concerns. Odds are, however, that would not be enough given the impact of inflation, which saps the purchasing power of your saved dollars. If you are the sole breadwinner in the family, that means eight times your ending salary needs to be stretched even further – perhaps you need to be saving more than you think?

This is hardly an outrageous thought when you consider that these figures are the averages. Depending on your current lifestyle or the one you aspire to have, it could mean needing far more than that. For others who are earning below the median income, and per data from the Social Security Administration, roughly 50 percent of American wage earners fall into that camp, while 47 million receive food stamps and 47 million live in poverty, it means having to close an even bigger gap.

We've already mentioned inflation and how it cuts into purchasing power. Ask any retired person living on a fixed income how much beef they've been eating over the last year or two, given the more than 50 percent increase in beef prices! The same goes for the other parts of the protein complex: pork, chicken, dairy products, coffee, and more. As the standard of living improves across the globe, it means there will be more mouths looking for the same foods that you've enjoyed. Not a bad thing (do you really think others should not be allowed to enjoy chocolate or a nice cup of coffee in the morning?), but simple laws of supply and demand tell us that if global demand is climbing past a certain point, then supply is constrained and prices will rise. This is particularly true of the more complex proteins like beef. It takes a lot of feed to produce just one pound of beef versus the relatively smaller amounts required to produce one pound of fish.

Another easy factor to observe is that we are simply living longer lives.

If you don't see that when you are out and about in your daily lives – well we've got some data to share with you. According to a report from the Stanford Center on Longevity (SCL), in 1950 a 65-year-old man could expect to live to age 78, or an additional 13 years. By 2010, a man age 65 could expect to live to age 82, or 17 years longer. A woman age 65 in 1950 could expect to live another 15 years, to age 80, but by 2010 her life expectancy was 84.

The same report shows that the average length of retirement in 1950 was 8 years for men, increasing to 19 years by 2010. This is due to the combination of earlier retirement ages and longer life expectancies. (There are no comparable figures for women, since women didn't enter the paid workforce in substantial numbers until the 1970s.)

Another SCL report shows that the percentage of older employees in the workforce is back on the upswing. In 1950, 45 percent of men age 65 and older were still working. This percentage declined to about 15 percent by 1990, but increased slowly to about 22 percent by 2010. (It's worth noting that this figure encompasses all men over age 65, including men in their 80s and 90s. The percentages of men working in their late 60s and early 70s are much higher.)

Another important difference between then and now is that in 1950, retirement hadn't yet been glamorized by the media as the “golden years,” an extended period of travel and recreation. Most retirees didn't retire to pursue their hobbies and interests – rather, they stopped working because they were unable to continue. After retirement, they lived simply and modestly in the communities where they had worked and lived all their lives. And it bears repeating, the average length of retirement today is far longer than it was several years ago. The rise in the standards of living has been a blessing, of course, but it also has been accompanied by a rise in expectations – expectations that require a lot more funds to fulfill than in years past.

According to the Administration on Aging (yes, there is such an institution, and it can be found at www.aoa.gov), by the end of 2009 (that latest year for which data are available), persons 65 years or older numbered 39.6 million, roughly 13 percent of the U.S. population, or one in every eight Americans. By 2030, the AOA estimates there will be about 72.1 million older persons, more than twice the number in 2000. Keep in mind, the current domestic population according to the U.S. Census is 319 million people and some simple math tells us that as the number of retirees more than doubles from the current 48 million, we will be facing a retirement crisis.

Living longer lives is not a new concept. When we trace back to 1900, we find the percentage of Americans 65+ has more than tripled (from 4.1 percent in 1900 to 12.9 percent by 2009). In looking at the data, it becomes clear that it's not just more people who are 65+, but the population cohort itself is living longer. In 2008, the 65–74 age group (20.8 million) was 9.5 times larger than in 1900, while the 75–84 group (13.1 million) was 17 times larger and the 85+ group (5.6 million) was 46 times larger. This really put the data into perspective for us: A child born in 2007 could expect to live 77.9 years, about 30 years longer than a child born in 1900.

As a result of increasing longevity and the decline in the average number of children people are having, the domestic population is skewing older. That pace began to accelerate even further in 2011, when the Baby Boomer generation (those born between January 1, 1946, and December 31, 1964) started turning 65. Beginning January 1, 2011, every single day more than 10,000 Baby Boomers will reach the age of 65. That is going to keep happening every single day for the next 19 years and will add roughly 70 million to the 65+ category.

But what if you're a few decades or more away from entering your Golden Years and are a member of Generation X?

If you were born between the early 1960s and the early 1980s, then you're probably between the ages of 33 and 53 years old. Even more likely, between 2007 and 2010, you saw a drop in your wealth coming out of the Great Recession. Perhaps you lost your job for a while or thought you were going to…maybe you were one of the lucky ones who didn't have those concerns, but if you did, it meant falling behind in your savings and investing efforts. Unlike those at or near the door of retirement, Gen-Xers as well as Millennials (if you were born between the early 1980s and early 2000s) have time on their side when it comes to saving and investing for their retirement and other life goals.

Despite the time factor that affords the power of compound investing, more Millennials have opted to choose cash as their favorite long-term investment than any other age group, according to a new Bankrate.com. Per that report, 39 percent of Millennials surveyed said cash was their preferred way to invest money they don't need for at least 10 years – that was three times the number who picked the stock market.

The eschewing of the stock market by Millennials is likely to prove a costly mistake and raises the question as to where and how you are building your nest egg. If you are a diligent saver and have been putting money in the bank, the returns you are getting given the low interest rate environment won't help you much. Simply saving in a bank account is not going to get you where you need to be for an eventual retirement. Over the last few years, the Federal Reserve's easy money polices and artificially low interest rates have left you earning next to nothing in your savings accounts or with CDs. The Fed has begun raising interest rates again, but even if we get back to average interest rates on savings accounts and CDs, they will barely put a dent in the amount you'll need over the course of your life.