Follow us:

Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: Retirement
June 21, 2013 at 10:34 AM

Vote: Are you prepared for retirement?

This week the National Institute on Retirement Security released a report showing that 90 percent of working-age households aren’t saving enough for retirement. About 45 percent have nothing saved. The result is a retirement savings gap between $6.8 trillion and $14 trillion. For those near retirement, the median retirement account balance is $12,000, and for all households it totals $3,000.

The findings confirm that the American Dream of retiring comfortably after a lifetime of work will be impossible for many. Based on 401(k)–type account and IRA balances alone, some 92 percent of working households do not meet conservative retirement savings targets for their age and income. Even when counting their entire net worth, 65 percent still fall short.

This is not exactly new-news. The baby boomers were the first generation to be forced into 401(k)s instead of pensions, and all too often they were given little schooling about the mechanics or stakes of this dramatic change. The new benefits were hostage to the stock market and the participants were completely on their own. Company matching contributions became more rare. In addition, changes in the economy such as globalization and the decimation of unions left huge portions of the workforce without any job-related retirement benefits at all, even as overall wages were stagnating. Much wealth was lost in the housing crash. This squeeze is worse for younger workers facing lower wages and high college debt. To make matter worse, politicians keep wanting to cut “entitlements,” including Social Security that is essential to senior citizens (it would be better to call them what they are: Earned benefits). And if we’re expected to work until we die, there have to be jobs and employers willing to hire older workers.

In a heavily unequal America, the top 20 percent or so will do fine. What about you? (Honor system: Answer if you are not retired already, having benefited from the middle class at its zenith).

Read on for some of the important stories you might have missed.

More

Comments | More in Retirement, Stock market, Student loans

March 19, 2013 at 10:44 AM

The Alpo Generation

The Wall Street Journal reports today, “Workers and employers in the U.S. are bracing for a retirement crisis, even as the stock market sits near highs and the economy shows signs of improvement.” According to a report by the Employee Benefit Research Institute, 57 percent of workers surveyed had less than $25,000 in total household savings and investments (excluding their homes), up from 49 percent with so little in 2008. According to the report, “Retirement savings may be taking a back seat to more immediate financial concerns: Just 2 percent of workers and 4 percent of retirees identify saving or planning for retirement as the most pressing financial issue facing most Americans today. Both workers and retirees are most likely to identify job uncertainty (30 percent of workers and 27 percent of retirees) and making ends meet (12 percent each).” Only 18 percent were very confident they would have a financially secure retirement.

This is only the latest evidence of the challenges facing large numbers of aging Americans. This is the first generation that will retire heavily dependent on the social experiment called 401(k)s — and they’re proving to be a disaster. In 2010, the median household retirement account balance for those between 55 and 64 was only $120,000. And that’s if they have a 401(k) or set up an IRA in an era of diminishing wages and benefits: One third of households don’t have a retirement account of any kind. The average monthly Social Security benefit of $1,230 won’t go far.

The Great Recession destroyed 40 percent of Americans’ personal wealth — unless you’re in the 1 percent — and, as the Washington Post reported:

For the first time since the New Deal, a majority of Americans are headed toward a retirement in which they will be financially worse off than their parents, jeopardizing a long era of improved living standards for the nation’s elderly, according to a growing consensus of new research.

More

Comments | More in Poverty, Retirement, Stock market, Working America

August 23, 2010 at 10:15 AM

Goodbye, Shareholder Nation

Back in the jubilant late 1990s, I wrote one of the first newspaper blogs on the stock market. I called it “Shareholder Nation.” It marked what appeared to be the rise of a broad investor middle class (and was where I first wrote these haikus). Average Americans had the opportunities that were once reserved for the very rich and it was going to produce momentous changes. To be sure, there were tradeoffs: Traditional pensions were fading, and Shareholder Nation would be conflicted by its several hats: As investors, employees, customers and citizens.

It turned out to be mostly a sham. To paraphrase an old expression, never confuse a clever blog title with a bull market. Most average investors have been savaged by two speculative bubbles and the secular bear market that is now nearly a decade old. They’ve learned that they are just along for the ride at a casino rigged against them (flash trading, anyone?), however much your neighbor claims to be a successful day trader or having bought Ford at just the right time. Now many will have to return to work, if they can find jobs, or postpone retirement.

Even the mainstream media is catching on. The New York Times on Sunday led with a story about the exodus of average Americans from the stock market, reporting that “investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year.”

More

Comments | More in Retirement, Stock market

July 20, 2010 at 9:45 AM

For the stock market, like the economy, rebounding may take many years

The most fascinating “charticle” I’ve read lately comes from Doug Short at the Business Insider blog. He looks at the time it took the stock market to regain its footing after the crash of 1929 and what that might tell us today. For even though a wealthier America with a stronger safety net and decades of middle-class affluence might not look like the black-and-white despair of the Great Depression, we’ve been through a historic economic collapse. And history shows there’s no fast recovery.

As most history buffs know, the Dow Jones Industrial Average didn’t reach its 1929 levels again until 1954. Short did some deeper analysis with the broader S&P Composite Index. Total return took 20 years to rebound permanently above its pre-Depression levels. The price didn’t recover and stay above that earlier peak until…December 1985.

Here’s the rub: The 1950s recovery was built on a foundation of dividends and dividends reinvested. Yes, dear readers, in the misty past people who bought stocks did so to be owners of companies they believed in, they bought and held, and the value of their investment was largely based on dividends. Since the 1980s, stocks have been bought and sold much more quickly, by institutional investors as well as individuals, with the goal of rising prices. This has driven corporate America’s increasing focus on short-term earnings and mergers to keep the stock price rising.

That’s not the only thing that could complicate a market rebound.

More

Comments | More in Retirement, Stock market

May 13, 2009 at 10:05 AM

Re Social Security and Medicare: Take a deep breath

Top of the News: Yesterday’s report that Social Security will “run out of money” in 2037 and Medicare will “be broke” in 2017, earlier than expected, gave rise to much media hysteria. This will also be a political Rorscach test, with conservatives and liberals drawing their own conclusions.

Former Labor Secretary Robert Reich, who was a trustee of the Social Security and Medicare trust funds, has a sensible, calm bit of context on these periodic alarms. The big problem is Medicare, not Social Security.

More

Comments | More in Politics and the economy, Retail, Retirement, Trade

April 3, 2009 at 10:15 AM

Why the unemployment epidemic will get in the way of a rally

Top of the News: The March unemployment report should add to suspicions that we’re in a sucker’s rally on Wall Street. Unemployment is a trailing indicator — thus, the economy could find bottom and begin a, realistically, tepid recovery before the jobless numbers show it. But the 663,000 jobs lost in March, raising the national unemployment rate to 8.5 percent, are part of a much deeper dynamic that will make real corporate earnings improvements, and real stock price increases, difficult to sustain.

Add in the broader numbers of people working part-time when they want fulltime work and those who have given up actively looking and the rate rises to a borderline depression 15.6 percent. Former Labor Secretary Robert Reich today pointed out how all those lost jobs have a multiplier effect on the broader economy. “This is still not the Great Depression of the 1930s, but it is a Depression.” He, along with UC Berkeley economist Brad DeLong and others say the Obama stimulus is far too small to offset the production the economy is losing.

More

Comments | More in Jobs/Unemployment, Retirement, Stock market, Working America

March 6, 2009 at 10:10 AM

Behind the jobless report, signs of a long recession

Top of the News: Last month, I wrote that jobs — and job retention by states and regions — would soon eclipse the housing market as the epicenter of concern in this recession. Today’s Labor Department report that non-farm payrolls fell 651,000 in the short month of February, pushing unemployment to 8.1 percent, was actually in line with the expectations of chastened analysts. It’s what’s behind the numbers that’s more unsettling.

The department revised its numbers of job losses for December and January to reflect much more severe declines — the worst in 60 years. The depth and breadth of the reductions show how global and cross-sector the downturn is being felt. Some 4.4 million net jobs have been lost since December 2007, and the numbers of long-term unemployed are also growing. And we’re not even counting the “underemployed” or those who have given up looking (that would pull the real employment rate up to 14.8 percent, vs. 13.9 percent in January).

Even before the revised numbers, Christopher Portman, a senior economist at Oxford Economics wrote on Knowledge@Wharton, “In terms of the global economy, 2009 will be the worst year since World War II and even since the 1930s.” With so many sick sectors, with so much bad debt, with a fundamental “reset” facing the economy — this downturn has the potential to be long, especially if time and treasure is spent trying to revive the unsustainable (zombie banks, call your office). All indicators point to deeper joblessness to come in Washington state, but we’re in better shape than most right now.

More

Comments | More in Jobs/Unemployment, Retirement