Everything You Want to Know About Retirement
Board: Macro Economics
Each year the non-partisan Employee Benefit Research Institute (EBRI) conducts The Retirement Confidence Survey.  They have been doing the survey for the last 23 years, so they can view long term trends. This year they surveyed 1,254 individuals consisting of 1,003 workers and 251 retirees. The goal is a get a representative sample of the US population. They report the margin of error at +/- 3%. The phone interview is fairly comprehensive and takes about 20 minutes to complete.
EBRI recently released the 2013 report. It is chocked full of data and has 43 graphs in it. It weighs in at 36 pages and is a SLOW read since it contains so much data to consider. It truly is a Rorschach test of a report. If you asked 10 people to pick out the 5 main points, there might be zero overlap between the responses. Instead of listing the highlights that EBRI chose, I have picked out a few significant points. I chose these because they fit a theme that is NOT discussed in the paper.
Yoda’s top points:
1) Workers age 45 or older think they need to be saving 21% to 43% of income to live comfortably in retirement. Page 9, Figure 4. (Yoda: my guess is that close to 0% of these folks are saving that much. How many people do you know that save >20% of income towards retirement? Maybe 5% or 10% of people.)
2) 16% of workers and 22% of retirees DEFINITIVELY could not come up with $2,000 if an unexpected need arose. Page 10, Figure 6.
3) 34% of workers and 29% of retirees have NOT saved anything towards retirement. Pages 15-16, Figures 15-16. (Yoda: the report does not specify, but I think it is unlikely that all of these folks have defined benefit pensions. Without that, they are 100% dependent on Social Security income.) 76% of workers with household income <$35k have NOT saved anything Page 16, Figure 17.
4) 64% of retirees have <$50k in savings and investments. 31% have less than $1k. Page 18, Figure 20 (Yoda: How will a 4% withdrawal rate work on the $1k of savings?)
5) When do you expect to retire? Age 70 or older has increased from 9% of respondents in 1991 to 26% in 2013. Correspondingly age 60-64, has decreased from 31% to 14%. Page 28, Figure 24 (Yoda: Workers are getting the message they can NEVER retire.)
BOTTOM LINE is that the ability of the average American to retire and maintain their standard of living is HOPELESS IMO. By standard of living, I mean being able to maintain a comparable level of spending as before retirement. Yes, some expenses go down, mostly due to Medicare, but the incomes are dropping greater than the change in medical costs.
The Frontline special focused on excessive fees paid to Wall Street. Everything they said was true, but I maintain a larger problem is simply NOT setting aside enough money. Excessive Wall Street fees can NOT account for having less than $50k in savings/investments when you retire.
Improved investment returns WILL NOT solve this problem. Short of everyone winning the lottery, there is no rational belief that you can improve investment returns enough to turn $50k into say $500k in retirement.
SIGNIFICANCE TO METARites is something I have stated before. We will NOT let these people dramatically lower their standard of living. They will NOT be eating Alpo in retirement. Since there are more “non-savers” than savers, they will have the voting/lobbying power in retirement.
The giant sucking sound WILL BE from the savers/investors that DID save a lot aka “rich” retirees. Whether the retirement assets are in 401K’s, 403B’s, Regular IRA’s, ROTH IRA’s, CD’s or taxable investment accounts will NOT matter. All of these components together will classify you as being “rich.” Somehow, assets will be transferred from the rich to the poor retirees. You cannot precisely say how it will be done, but I ask you to read this report over and see if you arrive at a different conclusion.
Maybe Yoda is delusional and this is a dream. Maybe it is NOT that bad. Maybe rich retirees will be allowed to remain rich. Yoda sincerely hopes he is 100% wrong with this interpretation.
 EBRI 2013 Retirement Confidence Survey