The Retirement Bubble

The silly “retirement planning” nonsense continues with no end in sight. Over at MarketWatch, their home page makes a big deal about this, ” Special Report: Retirement Outlook – You’ll need to save more for your retirement than you think. Marshall Loeb offers a simple retirement-savings formula right for today.” When you go to Mr. Loeb’s simple formula, you will find something more simplistic than simple. Here is his formula for retirement planning success:

“If you’re 40 or younger, you should be saving or investing at least 5% of your pretax pay every year. If you’re between 40 and 45, you should step up your saving by at least 10% a year. After age 45, put away 10% a year. Do you think you can’t scrape up any savings at all? Consider this: When you get your next raise, bank it and continue to live off your old income. Also, arrange with your bank or employer to have a fixed amount deducted from every paycheck and deposited in a savings account or a stock mutual fund of your choice.”

Good grief, this is utterly irrelevant to a huge group of the population and of little use to many others. At the very least, it falls short of being “a simple retirement-savings formula right for today“. Mr. Loeb, one out of every six (actually 17.3%) in the work force are unemployed and still looking, unemployed and have given up looking, or our part-timers who need full-time employment. Many others are struggling with lowered income, the threat of future job loss, mortgage payments beyond reason, and a host of other problems. We are indeed in the midst of a financial crisis, although you would never guess that reading Mr. Loeb’s advice.

People who can actually put aside 5-10% of pre-tax income are very likely a minority group and, quite frankly, if I’m 45 and get 50K a year and somehow put 5K of that aside, after taxes, will I be ready to finance a 30-year or 40-year retirement at 65? I don’t think so.

Let us take a moment to consider another version of reality. As Reuters reports, according to a survey commissioned by homebuilder Pulte Homes, of those who turn 50 this year, 41% say they will never be financially capable of retiring and 23% have not even started to save. Yes sir, Mr. Loeb, a quarter of those hitting 50 this year have not even started to save.

But there is good news too! As Reuters adds, “Still, the study reveals deep financial concerns on the part of potential Del Webb buyers who are turning 50 in 2010. Even those who do plan to retire say they will do so later, at a median age of 67 compared with 63 for the older survey respondents.”

There you go! Finally, some real retirement planning that makes sense. Put retirement off for a few years and earn additional income. Or do what 41% are doing. Just put retirement out of your mind for now. Those folks can go back into a planning mode later if circumstances allow, but for now, they are dealing with life as it is, not as they wish it was.

Give that some thought, Marshall. Both are simple solutions “right for today”.

I try to offer something more positive and constructive in the Life Sabbatical, but I would take the advice of 64% of those turning 50 this year over that of Marshall Loeb any day of the week.
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