Planning for Retirement Just Got Much Harder

Thinking about the future


If you thought planning for retirement was difficult, it got a lot harder.

That’s because saving for retirement must now account for two significant life changes: you are living longer, and you won’t make much on your investments.

Living longer is considered a good thing since science and medicine can do wonders. However, the quality of life for millions of people who have too little to live on is not enticing.

Here are two news events that show that retirement will become a dream for many people.

First, a report by David Blanchett, Morningstar’s head of retirement research, and Michael Finke and Wade Pfau, who both teach at The American College of Financial Services, found that the international equity premium historically “has been three to five percent” says Blanchett. “So, if the long-term averages hold, we can’t expect returns to stay as high as they’ve been historically in the U.S.”

A bad combination: People living longer, but with less money.

On the longevity side, men and women at age 65 will live 10% longer, according to the Society of Actuaries. Men aged 65 can expect to live an average age of 86.6, and women to 88.8.

However, on the investment return side, the numbers are going in the other direction. Since historical rates of return are projected to continue to be lower, the only other variable that makes a difference is savings.  In this regard, people who wanted to maintain their pre-retirement incomes (a noble goal) would need to save (starting at age 25) a total contribution from their 401(k) and employer contributions of 4.3% for low earners and up to 9% for high earners, assuming historical rates of return.  In a low-return situation, the best saving rates ranged from 7% to 16%. 

Now, these savings rates require significant discipline. In a capitalist, consumer-based society, this isn’t easy. When you add to the Trump administration’s stated goals of cutting Social Security, Medicare, and Medicaid, the problems get worse.

Trump’s appointees would cut Social Security even though Social Security is the nation’s most efficient annuity program, even though 61% of retirees rely on it for at least half their income, according to the Social Security Administration. If this sounds cruel, Trump has already pushed to cur the Affordable Care Act, which would leave millions without health insurance.  He would do the same for Social Security if it would propel his John Birch Society agenda.

Second, on March 30, 2017, Senate Republicans in the Senate voted 50-49 to roll back a rule passed by the Obama administration that would allow states to create retirement accounts for low-wage workers in the private sector who don’t get retirement benefits from their employers. The House passed the measure in February 2017, and it now goes to Trump’s desk for a signature.

Under this pro-worker rule, states could set up auto-enrollment IRAs for private-sector employees. Those employees who did not have access to IRA accounts could then contribute to their IRAs via payroll deductions. States would administer the plans and be responsible for investing in employee contributions or providing employees with a list of investment options. Republicans opposed the plan since it would cut into the lucrative 401(k) business now dominated by central global banks and investment firms.

Retirement Planning in the Trump Era

So, where does this leave people planning for retirement in the Trump era?

The current retirement crisis has been developing for decades under both political parties. The reality is that no one in Washington cares about retirees unless they can be brought into a solid voting bloc.  The seething populism engulfing the nation does not have a specific retirement improvement platform.  Health care, cutting taxes, and raising the military budget capture the stage, but retirement is too depressing to discuss nationally.  Only AARP speaks on behalf of retirees, and they often get distracted since they push insurance over retirement policy.

Financial planners also fail to realize that they are, too, product salespeople, not political-economic reformers. They are commission generators, not retirement activists. 

So, retirees are primarily on their own. Retirees should unite against cuts in Medicare, Social Security, and Medicaid. Those services will make or break millions of incomes. Retirees should also assume that the American Dream of retiring with financial security is over. Now, that is something to tell your grandchildren.

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Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry. He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial. He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site,, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).


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