Under-saved and Under-invested

Ten thousand Americans become eligible for retirement benefits every day.

It is the aging of the baby-boom generation, a demographic bulge so outsized that someone once described it as looking like a python that swallowed a pig.

Let me give that to you again, more specifically. Every day another 10,000 additional Americans reach the age of eligibility for full retirement benefits, both Social Security and Medicare.

For many who have not saved adequately and invested wisely, the “golden years” is an advertising slogan. For them, old age represents a dark period of want.

USA Today recently reported that 14 percent of Americans 65 and older have no retirement savings.

For many Americans, old age represents a dark period of want.

None.

Same with 26 percent of those nearing retirement, ages 50 to 64.

Because of their numbers, the boomers have always had a lopsided impact on their times, from Davy Crockett, hula hoops, and the growth of suburbia in the ’50s; to college antics and the Beatles in the ’60s; from careers and homes in the ’70s to their own families — the “echo boom” generation born 1977 to 1997.

And now all 78 million of the boomers are at or are closing in on their retirement years. With their savings and investment deficit, many of these people are highly dependent on social welfare spending, chiefly Social Security and Medicare.

That means they are dependent on institutions with a gloomy outlook. The so-called Social Security “trust fund” was supposed to run dry in 2049. But that was before the events of 2008.

Thanks to the 2008 meltdown, an event that Ben Bernanke now says was worse than the Great Depression, the trust fund will be exhausted in 2030.

But to even make that grim claim is to ignore the reality that the money that people have paid in over a lifetime has been spent.

There is no fund. And there shouldn’t be any trust.

To put the size of the shortfall in perspective, the government would have to come up with $15 trillion today, banked and earning interest, to meet its Social Security promises. That $15 trillion is in addition to all the Social Security taxes already scheduled to be taken.

You may have noticed that there is no $15 trillion pile of money laying around anywhere. It’s an amount equal to roughly 90 percent of U.S. GDP.

In other words, not only has a big chunk of the eligible population not saved for its retirement, the government, which promised to do their saving for them, hasn’t saved the money either.

Maybe one of the reasons that so many Americans haven’t saved and invested is that the governing classes and their economists have long-trumpeted spending as the keys to prosperity.

Although we know that savings and investments drive productivity and create real wealth, presidents and professors alike encourage deficit spending by the government along with more and more consumer spending.

How has that “spend our way to prosperity” philosophy worked out so far?

Not well. Thanks to the accumulation of debt, we are in an era of subpar growth. It also has something to do with the fact that one out of seven Americans, more than 46 million altogether, are on food stamps.

The always dependable Michael Shedlock of Mish’s Global Economic Analysis has just calculated that thanks to Obamacare’s Medicaid expansion along with means-tested Obamacare assistance, “welfare rolls expanded from 35.4 percent of the population in 2012 to about 40 percent in 2014.”

[Editor’s note: The truth is finally coming out … the Obama Administration is secretly shipping weapons to Islamic rebels! And in Charles’ exclusive report, BETRAYAL in the White House, he gives you what you need to protect your hard-earned wealth and even grow richer as this crisis unfolds.]

The number of people dependent on government promises is swelling. This includes the aging who have under-saved and under-invested.

The government will be forced to try to squeeze more resources from an economy that has lost its edge.

It would be nice to be able to believe that a new high-growth era will bail out the coming crisis of Social Security and Medicare underfunding, a shortfall that now totals as much as $200 trillion. Unfortunately, weak and no growth stories abound around the globe: France and even Germany, Italy and Russia, Brazil and Japan.

Can the U.S. economy, the third-largest exporter, manage real growth if the rest of the world is in a slump, particularly when three-quarters of what we sell abroad are industrial supplies and capital goods?

None of this is very good news, but it underscores the importance of your own investments, since the promises of the state have proven empty.

If the state had managed the currency responsibly, the coming crisis of those who have under-saved and under-invested would be minimized. Imagine for example someone turning 65 this year who entered the workforce after college in 1971 at the age of 22.

The average Social Security recipient’s monthly check today is $1,294. That doesn’t go very far. But if the dollar had retained its purchasing power all that time, that $1,294 check would have the same purchasing power as $7,612 today.

Unfortunately, in 1971 the U.S. dollar’s last links to gold were severed.

We have turned our entire economy, the withering value of our currency, and even our retirement savings over to people in Washington who were not worthy of the trust.

In the long run, gold prices end up being the beneficiaries of the state’s recklessness.

That is why gold is a crucial component of your investment planning.

Feel free to comment on these or any other issues. Click here to participate in the discussion.

Best wishes,

Charles Goyette