A $1m US retirement fund will run out for 72% of retirees

Economic growth

SHARE THIS STORY

US ageing

The BabyBoomer-led Supercycle of economic growth meant the US suffered just 17 months of recession between 1983-2007.  Now populations are ageing, and there is boundless evidence to prove that older people have lower incomes, and also spend less as they already have most of what they need.

As a result, historians will likely be amazed when they find today’s policymakers ignore this data, and assert that old age only matters for the economy in terms of higher costs for health and social security.  But this will be too late for the millions of ordinary people who are suffering the consequences of their major error.

The chart highlights the scale of the challenge ahead.  It shows the number of US adults in the New Old 55+ generation between 1950 – 2030 (blue column), and their percentage of the adult population aged >20 years (red line):

  • The 27m New Olders were just 26% of the total adult population in 1950, as life expectancy was only 69 years
  • They were 30% between 1965-2005, as large numbers of Boomers balanced rising life expectancy
  • But by 2010, the average Boomer had joined the New Old, whilst life expectancy was 79 years and still rising
  • In 2010, the 77m New Olders were thus 34% of all adults, and will be 41% in 2030

A detailed study in the New York Times (NYT) highlights the implications.  It warns that even at top income levels, 72% of couples with a $1m retirement fund will likely run out of cash before they both die:

“A typical 65-year-old couple with $1 million in tax-free municipal bonds want to retire. They plan to withdraw 4 percent of their savings a year — a common, rule-of-thumb drawdown. But under current conditions, if they spend that $40,000 a year, adjusted for inflation, there is a 72 percent probability that they will run through their bond portfolio before they die.”

Even worse, of course, is that most people will not have a $1m fund. A follow-up NYT study notes the median financial net worth of US households headed by someone aged 55-64 is just $61k.

Equally worrying is that that the costs of Social Security and Medicare are already 37% of all Federal spending, and will be 42% by 2023.  Whilst latest forecasts suggest Medicare will run out by 2026, and Social Security by 2033.

PREVIOUS POST

Sinopec adapts to the New Normal

23/07/2013

The 2013 edition of the blog’s study on Sinopec* is now available, and hi...

Learn more
NEXT POST

US housing starts stumble as rental demand weakens

25/07/2013

US housing is core to the US economy.  And as the US economy is 22% of the glob...

Learn more
More posts
Debt, deflation, demographics and Brexit set to challenge London house prices
17/05/2020

London property websites haven’t used the word “reduced” for many years. But it...

Read
The bill for two decades of doomed stimulus measures is due
03/05/2020

The Financial Times kindly made my letter on the risks now associated with central bank stimulus the...

Read
Local supply chains replace global trade as world starts to “do more with less”
26/04/2020

Something quite dramatic is happening in the global economy.  Of course, Wall Street analysts still...

Read
Financial markets enter their Convulsion phase
19/04/2020

Many companies and investors are still comparing today’s downturn to the 9-month hiccups seen afte...

Read
World risks moving from Denial into Anger as the Paradigm of Loss moves forward
12/04/2020

The head of the IMF has warned again on the likely scale of the economic depression ahead: “Gl...

Read
The world has wasted 3 months – there is little time now left to avoid a Covid-19 catastrophe
05/04/2020

It is now 3 months since China’s state television broadcast the first news of the Wuhan virus,...

Read
A new recession era to emerge
22/03/2020

Contingency planning has become mission-critical. The longer the coronavirus pandemic continues, the...

Read
Chain’s smartphone and auto sales tumble as coronavirus hits demand
08/03/2020

China is the world’s largest market for smartphones and autos – responsible for c30% of ...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more