• Tag Archives Retirement
  • Americans have no savings and with very good reason: housing, education, and health care have seen extraordinary inflation while wages are stagnant.

    It has now become a daily ritual in which story after story of broke Americans plaster the web. Yet somehow on the mainstream press, very little is discussed about this topic. Americans are largely broke because inflation is vey real. Housing, education, and health care costs have soared out of control while wages have remained stagnant. The way Americans continue to pay for these items is by going into loan shark levels of debt. There used to be a pretense that ‘we’ actually cared about having a middle class but that is now thrown out the window. At this point, we are in a full on sprint towards low wage capitalism. Many people live on a paycheck to paycheck diet and are berated about saving more for retirement. The reality is, the new retirement model is working until you die.
    In the land of no savings
    Sunday morning, I wake up and take a stroll through the neighborhood. ‘Did you hear about Bitcoin? Wild right?’ I’m asked by a stranger at the park. ‘Sure seems wild. You own any?’ To which I get the following response, ‘I wish I had some money to even invest!’ I think we live in a world where most Americans are merely spectators to the wild gyrations of the market. They hear about investments too late or mistake speculation with actual investing.

    This post was published at MyBudget360 on December 21, 2017.


  • Another Liberal Governor Demands His State’s Pension Abandon Fiduciary Duties, Sell Fossil-Fuel Investments

    As if public pension managers around the country weren’t having enough difficulty digging themselves out of their massive $3-$5 trillion funding gap, the chorus of liberal governors suggesting they should recklessly abandon their fiduciary obligations to future retirees and choose investments not on their financial merits but rather based on the political preferences of clueless politicians is growing stronger by the day. As Pensions & Investments points out today, New York Governor Andrew Cuomo is the latest such politician to jump on the bandwagon after suggesting that the New York State Common Retirement Fund should “divest from all fossil-fuel holdings.”
    New York Gov. Andrew Cuomo on Tuesday proposed that the New York State Common Retirement Fund halt all new investments “with significant fossil-fuel-related activities” and prepare a plan to divest existing fossil-fuel investments.
    “New York has made incredible strides in securing a clean energy future for this state … yet the Common Fund remains heavily invested in the energy economy of the past,” Mr. Cuomo said in a news release.
    “Moving the Common Fund away from fossil-fuel investments will protect the retirement savings of New Yorkers,” he said. “This proposal lays out a roadmap for the Common Fund to take responsible steps to divest from its fossil-fuel holdings.”

    This post was published at Zero Hedge on Dec 21, 2017.


  • CalPERS Goes All-In On Pension Accounting Scam; Boosts Stock Allocation To 50%

    Starting July 1, 2018 stock markets around the world are going to get yet another artificial boost courtesy of a decision by the $350 billion California Public Employees’ Retirement System (CalPERS) to allocate another $15 billion in capital to already bubbly equities. Of course, if this decision doesn’t make sense to you that’s because it’s not really meant to make sense.
    As Pensions & Investments notes, CalPERS’ decision to hike their equity allocation had absolutely nothing to do with their opinion of relative value between assets classes and nothing to do with traditional valuation metrics that a rational investor might like to see before buying a stake in a business but rather had everything to do with gaming pension accounting rules to make their insolvent fund look a bit better. You see, making the rational decision to lower their exposure to the massive equity bubble could have resulted in CalPERS having to also lower their discount rate for future liabilities…a move which would require more contributions from cities, towns, school districts, etc. and could bring the whole ponzi crashing down.
    The new allocation, which goes into effect July 1, 2018, supports CalPERS’ 7% annualized assumed rate of return. The investment committee was considering four options, including one that lowered the rate of return to 6.5% by slashing equity exposure and another that increased it to 7.25% by increasing the exposure to almost 60% of the portfolio.

    This post was published at Zero Hedge on Dec 19, 2017.


  • Here’s How Much Retirees Are Spending To Support Their Adult Kids

    At one point in time in America, living at home with mom and dad after crossing out of your teenage years and into your 20s was embarrassing and something that was generally avoided at all costs. And while hard times come and go, 20-somethings who were forced back into their parents’ care worked their tails off until they could save up enough money to once again regain their freedom.
    But, these days millennials seem to be embracing the free room and board provided by their parents. According to a new study from the Census Bureau, roughly one-third of all millennials live at home with their parents and one-fourth of them can’t be bothered with enrolling in school or finding a job.
    Of course, while living at home can help millennials cut down on costs, according to a new study from Nerd Wallet, it can also have a devastating impact on the retirement savings potential of their overly accommodating parental units…to the tune of a quarter million dollars. Here are some of the key takeaways from Nerd Wallet’s survey.
    Parents could miss out on almost a quarter-million dollars in retirement savings by paying their adult kids’ expenses: According to NerdWallet analysis, a parent’s retirement savings could be $227,000 higher if they chose to save the money that would otherwise go to their child’s living expenses and tuition. Parents paying college costs could be missing out on almost $80,000 in retirement savings: More than a quarter of parents of children 18 and older (28%) are paying or have paid for their adult children’s tuition or student loans. The average parent takes out $21,000 in loans for their child’s college education, but the hit to retirement savings is almost quadruple that amount.

    This post was published at Zero Hedge on Dec 9, 2017.


  • If Vanguard Is Right, You’ll Need to Save More For Retirement

    Vanguard is one of the largest mutual fund companies in the world with 20 million investors and approximately $4.5 trillion in global assets under management as of September 30, 2017, according to its website. When it expounds on the outlook for the stock market, people tend to listen closely.
    Yesterday, Vanguard issued its economic and stock market outlook for the medium term, writing: ‘For 2018 and beyond, our investment outlook is modest, at best. Elevated valuations, low volatility, and secularly low interest rates are unlikely to be allies for robust financial market returns over the next five years.’
    Exactly how ‘modest’ does it expect stock market returns to be over the medium term? The report goes on to define ‘modest’ as follows:
    ‘Based on our ‘fair-value’ stock valuation metrics, the medium-run outlook for global equities has deteriorated a bit and is now centered in the 4% – 6% range. Expected returns for the U. S. stock market are lower than those for non-U. S. markets, underscoring the benefits of global equity strategies in the face of lower expected returns.’
    If your retirement savings strategy has factored in an annualized stock market return of 7 percent or higher and Vanguard is right about the potential for a return of 4 to 6 percent, those planning to retire in less than 10 years will need to either save more for retirement or extend out the date of retirement.

    This post was published at Wall Street On Parade on November 28, 2017.


  • The Importance Of Knowing

    At Peak Prosperity, we strive to help people advance in three key areas: Knowing, Doing and Being.
    Doing and Being are the resilience-building steps we recommend. Helping folks develop their own personal action plans in these areas is the main focus of the seminars we run.
    But Knowing? That’s the essential first part to master. Without sufficient understanding and insight to guide you, any action you take is merely groping in the dark.
    That’s why Chris and I spend the majority of our time info-scouting: following the data and analyzing where macro trends are likely to head next given the latest developments.
    We dedicate so much time and energy to this because it’s not the domino that’s falling today that matters. What’s much more important is: Which dominoes will fall tomorrow as a result?
    And make no mistake, the pace of falling dominoes is accelerating. From the geo-politically destabilizing regime change in Saudi Arabia, to the ending of the central bank liquidity bubble, to the largest species extinction wave in millennia, to the bursting retirement dreams of the Baby Boomer generation, to the fast-worsening net energy predicament — change is afoot. The relative calm of the false ‘recovery’ that the world’s central planners engineered in response to the Great Financial Crisis has reached its terminus.
    Now, more than ever in recent years, understanding where events are headed next is critical to preserving your wealth and well-being.

    This post was published at PeakProsperity on Monday, November 27, 2017,.


  • Baby Boomers Will Suck Massive Amounts of Capital From the Market, Says Demographic Expert

    Baby Boomers have been a huge tailwind for equities and bonds from the 1980s until today, but now as they exit the workforce and increasingly move into retirement, this monumental demographic shift will exert enormous pressure on interest rates, bond prices, and equity market valuations.
    This is the thesis of Will Denyer at Gavekal Research who we spoke with on our FS Insider podcast last week (see Major Demographic Shift Underway Spells Trouble for Bond Market).
    Here’s what he had to say…
    WWII to Present
    From 1946 to 1980, we saw a booming population that resulted in increased demand for houses, schools, cars, and a wide range of consumer goods and services, Denyer stated. This created a tendency for upward pressure in prices and interest rates.
    ‘Then everything reversed basically in the early 1980s,’ he said. Boomers entered the workforce en masse and, starting around 35 years of age, Boomers entered their peak earnings, peak production, and peak savings period, which lead to an abundance of capital and production, placing downward pressure on consumer prices and interest rates.
    Savings not only bid up the price of bonds while driving down yields but also bid up the valuation of equities. What developed was a long-term bull market in bonds and equities.

    This post was published at FinancialSense on 11/22/2017.


  • The Great Retirement Con

    The Origins Of The Retirement Plan
    Back during the Revolutionary War, the Continental Congress promised a monthly lifetime income to soldiers who fought and survived the conflict. This guaranteed income stream, called a “pension”, was again offered to soldiers in the Civil War and every American war since.
    Since then, similar pension promises funded from public coffers expanded to cover retirees from other branches of government. States and cities followed suit — extending pensions to all sorts of municipal workers ranging from policemen to politicians, teachers to trash collectors.
    A pension is what’s referred to as a defined benefit plan. The payout promised a worker upon retirement is guaranteed up front according to a formula, typically dependent on salary size and years of employment.
    Understandably, workers appreciated the security and dependability offered by pensions. So, as a means to attract skilled talent, the private sector started offering them, too.
    The first corporate pension was offered by the American Express Company in 1875. By the 1960s, half of all employees in the private sector were covered by a pension plan.
    Off-loading Of Retirement Risk By Corporations
    Once pensions had become commonplace, they were much less effective as an incentive to lure top talent. They started to feel like burdensome cost centers to companies.
    As America’s corporations grew and their veteran employees started hitting retirement age, the amount of funding required to meet current and future pension funding obligations became huge. And it kept growing. Remember, the Baby Boomer generation, the largest ever by far in US history, was just entering the workforce by the 1960s.

    This post was published at PeakProsperity on Friday, November 17, 2017,.


  • It Begins: Pension Bailout Bill To Be Introduced This Week

    Over the past year we have provided extensive coverage of what will likely be the biggest, most politically charged, and most significant financial crisis facing the aging U. S. population: a multi-trillion pension storm, which was recently dubbed “one of the most heated battles of a lifetime” by John Mauldin. The reason, in a nutshell, why the US public pension problem has stumped so many professionals is simple: for lack of a better word, it is an unsustainable Ponzi scheme, in which satisfying accrued pension and retirement obligations requires not only a constant inflow of new money, but also fixed income returns, typically in the 6%+ range, which are virtually unfeasible in a world where global debt/GDP is in the 300%+ range. Which is why we, and many others, have long speculated that it is only a matter of time before the matter receives political attention, and ultimately, a taxpayer bailout.
    That moment may be imminent. According to Pensions and Investments magazine, Democratic Senator Sherrod Brown from Ohio plans to introduce legislation that would allow struggling multiemployer pension funds to borrow from the U. S. Treasury to remain solvent.
    The bill, which is co-sponsored by another Democrat, Rep. Tim Ryan, also of Ohio, could be introduced as soon as this week or shortly after. It would create a new office within the Treasury Department called the Pension Rehabilitation Administration. The funds would come from the sale of Treasury-issued bonds to financial institutions. The pension funds could borrow for 30 years at low interest rates. The one, and painfully amusing, restriction for borrowers is “they could not make risky investments”, which of course will be promptly circumvented in hopes of generating outsized returns and repaying the Treasury’s “bailout” loan, ultimately leading to massive losses on what is effectively a taxpayer-funded pension bailout.

    This post was published at Zero Hedge on Nov 9, 2017.


  • Pension Panic In Paradise: Maui Residents Outraged Over 52% Spike In Pension Contributions

    Earlier this year, Maui County residents in the island state of Hawaii were somewhat less than ecstatic to learn that their property taxes were going to increase by approximately $29.7 million for fiscal 2018. According to County Council member statements at the time, the additional funding was needed to help provide better public services for Maui residents.
    That said, fast forward just a few months and it looks like a substantial portion of those tax increases won’t go to provide better public services for Maui residents at all but rather will be plowed into the state’s massively underwater pension fund. As The Maui Newspoints out today, Maui’s contributions to the state Employees’ Retirement System will surge 52% over just the next couple of years…and that’s if everything goes to plan.
    ‘This is a massive, massive increase,’ Williams said.
    Maui County paid $31 million into the pension fund in fiscal 2017. But now, its payments will increase to approximately $34 million in fiscal 2018, $36 million in fiscal 2019, $42 million in fiscal 2020 and $47 million in fiscal 2021.
    This amounts to a total of $36 million in extra payments by Maui County over the next four years alone – and its contributions are set to remain just as high every year afterward.
    Williams said the extra payments were needed to help the public pension system avert a crisis in unfunded liabilities, currently estimated at about $12.4 billion.

    This post was published at Zero Hedge on Nov 8, 2017 4.


  • The New Fed Next Year Could Be Off the Charts

    Dudley to Quit. 5 Vacancies on the FOMC. No one knows what the Fed will look like.
    The next slot on the Fed opens up: New York Fed President William Dudley will announce his retirement as soon as next week, ‘several people familiar with his plans’ told CNBC. He may stay on till his replacement is found and approved, likely to happen in the spring or summer next year. The New York Fed has already formed a search committee, the people said.
    This is unexpected; his 10-year term will expire in 2019. He could have stayed on for the sake of stability. He is one of the most influential figures on the Fed’s policy-setting Federal Open Markets Committee (FOMC) and is considered a ‘dove.’
    The 12-member FOMC is composed of:
    The seven members of the Board of Governors which is in the process of being nearly completely turned over The president of the New York Fed who is retiring. And on a one-year rotating basis four presidents of the remaining 11 regional Federal Reserve Banks. The president of the New York Fed is special among the heads of the regional Fed banks: That person always serves as vice chair of the FOMC and, unlike the rest of them, votes at every meeting.
    So next year the FOMC will be a different animal.

    This post was published at Wolf Street on Nov 5, 2017.


  • NY Fed President Bill Dudley Retiring

    The Federal Reserve’s “smooth transition” from Janet Yellen to Jay Powell is set for a major speedbump.
    Just two short days after Donald Trump confirmed what weekly trial balloons had reported for weeks, namely that Janet Yellen is being replaced with most “dovish” alternative possible in the face of former Carlyle partner and 5 year Fed governor Jerome Powell, the person who according to some is even more instrumental to Fed policy than Janet Yellen, NY Fed president Bill Dudley is reportedly leaving.
    ***
    Late on Saturday evening, CNBC’s Steve Liesman reported that Fed vice chairman Bill Dudley, a former Goldman managing director and chief economist, not to mention a key figure in “the unprecedented government response to the financial crisis”, is set to join Janet Yellen among the ranks of the unemployed (if only until he hits the speaking circuit and writes a book explaining that the Fed is the cause of the world’s problems) and announce his retirement as soon as next week.

    This post was published at Zero Hedge on Nov 5, 2017.


  • GOP Tax Plan “Talking Point” Highlights Released

    Moments ago, the GOP released the “talking point” highlights of the republican tax plan which, as previewed earlier this morning, will keep the 20% corporate tax cut as permanent, and which allegedly will assure that a family of 4 making $59,000 will get a $1,182 tax cut.
    As discussed previously, the bill keeps a top rate of 39.6% for the highest-earners and doubles the standard deduction for middle class families. It expands the child tax credit to $1,600 from $1,000 and will not make any changes to the 401(k) plans. The bill also ‘makes no changes to the popular retirement savings options that Americans have today – including 401(k)’s and Individual Retirement Accounts, or I. R. A.s. Americans will be able to continuing making both traditional, pretax contributions and ‘Roth’ contributions in the way that works best for them.’
    So far so good; where there will be problems however, is that the bill also includes the repeal of an itemized deduction for medical expenses, a key provision for households with extraordinary health-care costs. It also repeals the tax credit for adoption and the deduction of student-loan interest. The bill also limits the home mortgage interest deduction: for new home purchases interest would be deductible only on loans up to $500,000, down from $1 million, although existing loans would be grandfathered.
    A key issue will be the treatment of the state and local tax deduction, which lawmakers are proposing to cap at $10,000. That will not be enough for Republicans in some high-tax states, where middle-class families make heavy use of the deduction. As the NYT notes, “the compromise, as it had been sketched out this week, would preserve the deduction for property taxes, but not for state and local income taxes, and it appeared as if there would be a cap on the deduction. But at first glance, it did not appear as if that was enough to win over all of the New York and New Jersey members.”

    This post was published at Zero Hedge on Nov 2, 2017.


  • Watch Live: Republicans Explain How This Is The Greatest, Most Awesome Tax Cut Plan Ever In History

    Having ‘oversold’ Trump’s tax reform plan to the market and the public, it appears the former is disappointed (for now) in the talking points that have been released so far.
    As discussed previously, the bill keeps a top rate of 39.6% for the highest-earners and doubles the standard deduction for middle class families. It expands the child tax credit to $1,600 from $1,000 and will not make any changes to the 401(k) plans. The bill also ‘makes no changes to the popular retirement savings options that Americans have today – including 401(k)’s and Individual Retirement Accounts, or I. R. A.s. Americans will be able to continuing making both traditional, pretax contributions and ‘Roth’ contributions in the way that works best for them.’
    So far so good; where there will be problems however, is that the bill also includes the repeal of an itemized deduction for medical expenses, a key provision for households with extraordinary health-care costs. It also repeals the tax credit for adoption and the deduction of student-loan interest. The bill also limits the home mortgage interest deduction: for new home purchases interest would be deductible only on loans up to $500,000, down from $1 million, although existing loans would be grandfathered.
    A key issue will be the treatment of the state and local tax deduction, which lawmakers are proposing to cap at $10,000. That will not be enough for Republicans in some high-tax states, where middle-class families make heavy use of the deduction. As the NYT notes, “the compromise, as it had been sketched out this week, would preserve the deduction for property taxes, but not for state and local income taxes, and it appeared as if there would be a cap on the deduction. But at first glance, it did not appear as if that was enough to win over all of the New York and New Jersey members.”

    This post was published at Zero Hedge on Nov 2, 2017.


  • Kentucky Teachers Blast Pension Reform Plan; Warn That 401(k) Plans Will “Dismantle Public Education”

    Graves County Superintendent Kim Dublin in Kentucky is apparently concerned that forcing her teachers to accept the same retirement plans offered to almost every private sector employee in the country would literally “dismantle public education” as we know it.
    Speaking to a local NBC affiliate in Kentucky, Dublin told reporters that she relies on the excessive generosity of Kentucky taxpayers to underwrite her state’s lavish defined benefit plans that she uses as a recruiting tool to attract the ‘best talent’.
    A local school leader says she believes proposed changes to Kentucky’s pension system would dismantle public education.
    Any day now, Kentucky Republican Gov. Matt Bevin could call for a special session for a vote on pension reform.
    Some changes include putting new teachers – or teachers who have fewer than five years of experience – onto a 401k style system. Teachers with more than five years in the classroom will still be able to retire with a full pension after 27 years.
    That would limit how long they could continue paying into a pension after reaching that number of years. The current proposal allows for three additional years.
    Graves County Superintendent Kim Dublin is concerned by many aspects of the proposal.
    She says the current pension system allows her to recruit and retain qualified teachers. ‘Our success is because of people, not programs,’ she says.

    This post was published at Zero Hedge on Oct 31, 2017.


  • As A Dog Returns To Its Vomit, Stock Jockeys Return To The Ponzi Stocks

    Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. – Sir John Templeton
    I’ve always admired John Templeton. Not as the ‘father’ of the modern mutual fund but because I considered him to have been one of the most intelligent thinkers in at least my lifetime (55 years). In 2003 he gave an interview from his retirement ‘perch’ in the Bahamas to one of the financial media organizations. He stated at the time that he would not invest in the U. S. housing market until ‘home prices go down to one-tenth of the highest price homeowners paid.’ Imagine what he would say today…
    ‘As a dog returneth to his vomit, so a fool returneth to his folly’ (Proverbs 26:11). That proverb is particularly applicable to today’s ‘everything bubble,’ especially stocks and housing. The current en vogue is to compare today’s market to 1987, when the Dow crashed 22.5% in one day. Honestly, I don’t think it matters whether you use 1929, 1987,
    2000 or 2007. By just about any conceivable financial metric, the current stock market is the most overvalued, and thereby the most dangerous, in U. S. history. The other ‘vomit’ to which analysts ‘returneth’ are the attempts to explain why today’s extreme valuations are ‘different’ from the extreme overvaluations at previous pre-crash market tops. I find the ‘interest rates are record lows now’ to be the most amusing.

    This post was published at Investment Research Dynamics on October 31, 2017.


  • Stocks Slide On Report House Considering Capping 401(k) Plans Despite Trump Vow

    After a NYT report last Friday that as part of Trump tax reform, 401(k) plan contributions could be capped at $2,400 annually, Trump was quick to deny tweeting on Monday that “There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!”
    There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!
    – Donald J. Trump (@realDonaldTrump) October 23, 2017
    That, however, appears not to be the case because as NBC and the WSJ report, Republicans are still weighing adjustments the 401(k) program, according to the chief of the House tax writing committee, contradicting Trump’s statement this week that it would be unchanged in the forthcoming tax overhaul proposal.
    Speaking at a Christian Science Monitor breakfast with reporters, House Ways and Means Chairman Kevin Brady, R-Texas, declined to rule out changes when asked whether Trump’s position had killed the idea. “We think in tax reform we can create incentives for Americans to save more and save sooner which can help,” Brady said. “We are exploring a number of ideas in those areas.” While he did not offer details, Brady said there were “continuing discussions with the president” on the topic.
    That could be a signal that Republicans might pinch pretax savings for high-income households and use the money to beef up an underused tax break known as the saver’s credit, which acts like a government matching contribution to retirement accounts for low-and middle-income Americans.

    This post was published at Zero Hedge on Oct 25, 2017.


  • The Republican Trump Resistance Is Transforming Moderates Into Mavericks

    The meeting with Republican Senators yesterday, outside of Flake and Corker, was a love fest with standing ovations and great ideas for USA!
    — Donald J. Trump (@realDonaldTrump) October 25, 2017

    Most observers of the American political discourse would probably agree that President Donald Trump is reshaping the Party of Lincoln in new and profound ways. Already, the president has dealt several stunning rebukes to the party’s establishment: from gatecrashing the Republican primary, to filling his administration with ‘Democrats’ Like Gary Cohn and Steve Mnuchin, to threatening the status quo of international trade.
    But as Bloomberg points out, Trump’s push to foment a GOP revolution has come back to haunt him as his administration strains to pass what would be the first comprehensive tax-reform bill in 30 years. Trump had courted a rebellion – and now he’s got one. But instead of the party wholehearted embracing Trumpism, establishment Republicans like Bob Corker and Jeff Flake – both of whom have opted not to run again as they feud with the president – are positioning themselves as obstructionists of the Trump agenda.
    And given the Republicans’ razor-thin majority in the senate, the two of them have nearly enough leverage to sink every major piece of legislation between now and the midterms. And in his surprise retirement speech, Flake promised to do everything he can to make Trump’s life hell. Meanwhile, Corker has accused Trump of pushing American to the brink of chaos.

    This post was published at Zero Hedge on Oct 25, 2017.