How much have you saved for retirement? If you are like most Americans, probably not enough.
There are a variety of polls and surveys, but none of them are rosy and optimistic. Most reveal that Americans, weighed down by debt, a lack of significant wage growth, and a consumer spending mentality simply have not socked enough away for retirement. One survey revealed that 28 percent of Americans have less than $1,000 in savings that could be used toward retirement, according to the 2015 Retirement Confidence Survey, Employee Benefit Research Institute and Greenwald & Associates.
Retirement is a different game for generations of citizens today. Company pensions in the private sector are few and far between, which leaves the old-school model of the "three-legged stool" obsolete. Financial planners of yester-year would point to the three potential income streams retirees can lean on during retirement years:
- Company pensions
- Social Security
- Your own savings
Guess what. The stool has fallen down and is broken. Unless you are an American working in the public sector, you probably aren't getting a pension. So, what's next? Social Security. Uh, bad news there too.
According to a recent report from the Congressional Budget Office, under current law they project that Social Security’s trust funds will be exhausted in 2029.
What does that mean? Benefits in 2030 would need to be reduced by 29 percent from the scheduled amounts.
Where do the funds come from? Social Security is funded primarily from payroll. Today, 96 percent of that tax revenue comes from the payroll tax—or 12.4 percent of people’s earnings, the CBO says.
The problem is that the U.S. sees a lopsided demographic impact.
It is estimated that 10,000 Baby Boomers retire every day, which is expected to continue into 2029. Oh—there is that year again. It's not really that far away. As Boomers retire it leaves less workers in the workforce to pay into Social Security. It's all very simple—less coming in, more going out equals a slash in benefits.
So, there went a significant portion of the second leg of your stool.
What's the third leg? Your savings. Now this is where it is time to get serious. With company pensions all but non-existent in the private sector, Social Security crumbling, you will need to rely on you in retirement.
Some simple rules of wealth building include pay yourself first. An argument can be made for diversification into gold as part of your retirement portfolio. Gold is a currency without a country and can help maintain purchasing power. The value of paper money rises and falls. Declines in the U.S. dollar means you can purchase less. The dollar has been rising over the past year, but all markets go in cycles including currencies.
Billionaire investor Warren Buffett highlighted this critical point in his 2014 letter to Berkshire Hathaway shareholders. He wrote about how over the past 50 years, the purchasing power of the U.S. dollar decreased by 87%. That means it now takes $1 to buy something that could be purchased for 13 cents in 1965, as measured by the Consumer Price Index.
Another factor in favor of gold as part of your retirement portfolio is inflation. Gold is a hedge against inflation. While inflation is low now, again markets and economies move in cycles. In the 1980's inflation levels hit 14% in the United States. Inflation is a wealth killer.
A priority on your retirement funds should be getting it back and preserving your wealth, your purchasing power and protection against inflation.
What's in your portfolio now? Time to make a plan. - kitco
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