Tag: finance

Submitted by Michael Snyder of The Economic Collapse blog,

If your neighborhood is not as safe as it used to be, then you have something in common with the rest of the country.  All over America, crime is on the rise.  According to a government survey that was just released, violent crime in the United States increased by 15 percent last year, and property crime was up by 12 percent.  If violent crime keeps increasing at this rate, it will approximately double in just six years.  But as I wrote about the other day, when the next major economic downturn strikes it will probably greatly accelerate the growth of the crime rate in this country.  Desperate people do desperate things, and as you will read about below, there are people out there that are already stealing entire truckloads of food. 

In the future, when people are extremely hungry or crazy for their next drug hit, they won't think twice about invading your home or pulling you out of your vehicle.  The rise in crime that we are witnessing right now is just the beginning.  It is going to get a lot worse than this.

Whenever I do this type of an article, inevitably someone leaves a comment insisting that I am lying because crime rates are going down.

Well, that used to be true.  It is no longer accurate.

As an ABC News article that was just released explains, the crime victimization survey shows that violent crime in America has now increased for two years in a row…

The violent crime rate went up 15 percent last year, and the property crime rate rose 12 percent, the government said Thursday, signs that the nation may be seeing the last of the substantial declines in crime of the past two decades.

 

Last year marked the second year in a row for increases in the crime victimization survey, a report that is based on household interviews.

This is one of the primary reasons why so many people are moving out of the big cities right now.  In the city of Chicago, police are so overwhelmed with crime that they will no longer respond in person "to 911 calls reporting vehicle theft, garage burglary or simple assault".

Things have gotten so bad in Chicago that a 14-year-old girl was sexually assaulted as she was walking to a bus stop this week and it barely made a blip on the news.

But we have come to expect this kind of thing in crime-infested cities such as Chicago.  We don't expect it to happen in "quiet communities" such as Augusta, Georgia…

"When we first moved out here three and a half years ago, my wife and I, it was a quiet community, it was a deal that we felt we couldn't pass up on," Don McIntee says.

 

McIntee lives in the Butler Creek Mobile Home Community, but he's trying to change that. He recently put his home up for sale because he says the crime in his neighborhood is too much to deal with.

 

"I want to live in a place that I feel is secure and safe for my wife because I'm out of town a lot," he says.

And it seems like criminals are becoming more brutal than ever.  For example, one thug actually put his gun into the mouth of a 92-year-old World War II veteran in Fresno, California and threatened to kill him during one recent home invasion…

"I was sound asleep at about one or two o'clock in the morning, all the lights were on and a guy shook me with a gun in my face. (I said) Hey what's going on? (He said) Shut up and he slapped me," he explained.

 

While the suspect held him at gunpoint, three others ransacked his house, taking about 200 dollars in cash and jewelry including his 1941 class ring from Woodlake High School in Tulare County.

 

"They were in there for almost a half hour," said Fresno County Sheriff Department spokesperson Chris Curtice. "So they had plenty of time to search the house, it was the middle of the night."

 

At one point, Joseph said one of the suspects put a gun in his mouth and threatened to kill him. While being ordered into the bedroom closet, he said he hit him in the head with a handgun, causing him to fall to the floor.

Was there any need for that?  That 92-year-old man was certainly no threat to the four home invaders.

But this is what is happening all over the nation now.  Criminals appear to be getting crazier and crazier.

In Houston recently, one team of home invaders decided to storm a house at 8 AM in the morning while people all along the street were leaving their homes to go to work and to school…

It was about 8am — daylight, with people going to work and kids going to school, yet no one apparently saw this coming. The homeowner told me four men, armed with guns, broke in through her garage and forced their way inside her house.

 

The woman's daughter and son-in-law were in the home with her, along with two of their daughters, ages four and six. The homeowner says the gunmen pointed guns at all of them — even the children — and demanded money over and over. They ransacked the house and the cars- and eventually got away with some cash, at least one cell phone and the homeowner's wallet.

Who robs a house at 8 AM in the morning?

That is either incredibly bold or incredibly stupid.

In my article yesterday, I included another example of a crime which is either incredibly bold or incredibly stupid.  One very enterprising carjacker actually decided to try to carjack the police chief of Detroit while he was sitting in a clearly marked police vehicle…

Just four months on the job, Detroit’s new police chief got an early taste of the city’s hardscrabble streets.

 

While in his patrol car at an intersection on Jefferson two weeks ago, Police Chief James Craig was nearly carjacked, police spokeswoman Kelly Miner confirme
d today.

 

Craig said he was in a marked police car with mounted lights when a man quickly tried to approach the side of his car. Craig, who became police chief in June, retold the story Monday during a program designed to crack down on carjackings.

So what is going on here?

Are criminals becoming bolder or are they just becoming stupider?

I don't have an answer for that question, but one thing seems certain – crime is definitely getting worse.

As I mentioned at the top of this article, some criminals are now actually stealing entire truckloads of food.  A recent CBS News article explained how they are doing this…

To steal huge shipments of valuable cargo, thieves are turning to a deceptively simple tactic: They pose as truckers, load the freight onto their own tractor-trailers and drive away with it.

 

It’s an increasingly common form of commercial identity theft that has allowed con men to make off each year with millions of dollars in merchandise, often food and beverages. And experts say the practice is growing so rapidly that it will soon become the most common way to steal freight.

And what we are talking about is not just a few isolated incidents.  This is literally happening from coast to coast and the dollar values of some of these thefts are staggering…

News reports from across the country recount just a few of the thefts: 80,000 pounds of walnuts worth $300,000 in California, $200,000 of Muenster cheese in Wisconsin, rib-eye steaks valued at $82,000 in Texas, $25,000 pounds of king crab worth $400,000 in California.

As economic conditions continue to deteriorate, I actually expect that we will start seeing armed guards on food trucks in a few years.

Desperate people do desperate things, and as food prices continue to rise I believe that food trucks will become highly prized targets.

America is rapidly changing, and not for the better.

So what are things like in your area of the country?

Are you noticing an increase in crime?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/DcTIBQgrAGQ/story01.htm Tyler Durden

As part of Mike Maloney's recent documentary, Ron Paul was interviewed to discuss the monetary system that he proposes. He begins… "Just get the government out-of-the-way, you know, and let the markets decide and apply the rules of  ’no counterfeiting’  to the people and to the government…" as he goes on to discuss everything from The Founding Fathers to how a gold standard could work…

 

Via Market Sanity,

The following is a bonus feature on the Hidden Secrets of Money episode 4. The video can only be watched by subscribing to Hidden Secrets of Money. However, a full transcript of the interview has been written by Market Sanity for your convenience:

Mike Maloney: If you could create a monetary system for the world, what would it be?

Ron Paul: Just get the government out-of-the-way, you know, and let the markets decide and apply the rules of  ’no counterfeiting’  to the people and to the government.

MM: So you would make fraud and theft illegal for everybody, not just everybody except the financial sector?

RP: Ya. If you and I devised a gold standard and we issued certificates that were guaranteed in gold, then if we ever defrauded people we ought to go to jail for it. That would be the minimal role of government. But you know, today, the Constitution still says – even though they ignore it – that only gold and silver can be used as legal tender.

If the government wanted to issue a gold coin and make sure that it was an honest weight and measure, it still would be legal for the state to do that. But, I think because it’s a mandate on the states; the states should not use anything other than silver and gold. That interpretation should be rather broad too: that the states could do it. The prohibition against the states was that they couldn’t issue bills of credit. The Founders knew what paper money meant because the states were doing it like crazy. That’s one of the reasons why they had the Constitutional Convention was because of the monetary issue. So they [the states] aren’t allowed to print money. And that’s OK, that’s counterfeiting. At the same time, they could use gold and silver.

But I would allow the market to work, because I think we’re more sophisticated on money now through free market understanding. The Founders accepted the notion of a fixed ratio between gold and silver. Bimetallism is not a good economic theory because it’s too rigid. If there’s a discovery of silver, and the price of silver goes down, you know, you want that to be flexible.

But that doesn’t mean the free market wouldn’t use gold and silver. Just look today. It’s so much easier to adjust, you know, with our computers and all. If you walked into a store, I could just imagine. In many places, more likely in foreign countries, they’ll take dollar or their local currencies and have immediate conversion. But you can also have immediate conversion between gold and silver, or certificates in silver or a credit card in silver. You could pay it in silver. You can pay it in dollars or Euros today and it’s immediate.

I would let the market decide it. It could be that they want to use a basket of commodities. I’m still old-fashioned enough that if I’m thinking in terms of a unit of an account, and I have a bunch of them on paper or on a credit card…if I want to put them in a handful of silver or a handful of gold, I like that idea. That for me is the ultimate test, but it doesn’t mean another system wouldn’t work if you followed these basic rules.

It would not be flawless because people have the tendency to break the rules, but happens when a government has the worldwide fiat currency and breaks the rules for 40 years? That is such gross distortion, and that’s why the imbalances are so great right now of the debt and the debt system and all the malinvestment. They did not prevent the correction, they just propped it up in 09′. So the correction didn’t occur, and if you want the system to continue you really have to allow the correction to happen. That, of course, is why we haven’t had a recovery.

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ryh2Fib0kaU/story01.htm Tyler Durden

As part of Mike Maloney's recent documentary, Ron Paul was interviewed to discuss the monetary system that he proposes. He begins… "Just get the government out-of-the-way, you know, and let the markets decide and apply the rules of  ’no counterfeiting’  to the people and to the government…" as he goes on to discuss everything from The Founding Fathers to how a gold standard could work…

 

Via Market Sanity,

The following is a bonus feature on the Hidden Secrets of Money episode 4. The video can only be watched by subscribing to Hidden Secrets of Money. However, a full transcript of the interview has been written by Market Sanity for your convenience:

Mike Maloney: If you could create a monetary system for the world, what would it be?

Ron Paul: Just get the government out-of-the-way, you know, and let the markets decide and apply the rules of  ’no counterfeiting’  to the people and to the government.

MM: So you would make fraud and theft illegal for everybody, not just everybody except the financial sector?

RP: Ya. If you and I devised a gold standard and we issued certificates that were guaranteed in gold, then if we ever defrauded people we ought to go to jail for it. That would be the minimal role of government. But you know, today, the Constitution still says – even though they ignore it – that only gold and silver can be used as legal tender.

If the government wanted to issue a gold coin and make sure that it was an honest weight and measure, it still would be legal for the state to do that. But, I think because it’s a mandate on the states; the states should not use anything other than silver and gold. That interpretation should be rather broad too: that the states could do it. The prohibition against the states was that they couldn’t issue bills of credit. The Founders knew what paper money meant because the states were doing it like crazy. That’s one of the reasons why they had the Constitutional Convention was because of the monetary issue. So they [the states] aren’t allowed to print money. And that’s OK, that’s counterfeiting. At the same time, they could use gold and silver.

But I would allow the market to work, because I think we’re more sophisticated on money now through free market understanding. The Founders accepted the notion of a fixed ratio between gold and silver. Bimetallism is not a good economic theory because it’s too rigid. If there’s a discovery of silver, and the price of silver goes down, you know, you want that to be flexible.

But that doesn’t mean the free market wouldn’t use gold and silver. Just look today. It’s so much easier to adjust, you know, with our computers and all. If you walked into a store, I could just imagine. In many places, more likely in foreign countries, they’ll take dollar or their local currencies and have immediate conversion. But you can also have immediate conversion between gold and silver, or certificates in silver or a credit card in silver. You could pay it in silver. You can pay it in dollars or Euros today and it’s immediate.

I would let the market decide it. It could be that they want to use a basket of commodities. I’m still old-fashioned enough that if I’m thinking in terms of a unit of an account, and I have a bunch of them on paper or on a credit card…if I want to put them in a handful of silver or a handful of gold, I like that idea. That for me is the ultimate test, but it doesn’t mean another system wouldn’t work if you followed these basic rules.

It would not be flawless because people have the tendency to break the rules, but happens when a government has the worldwide fiat currency and breaks the rules for 40 years? That is such gross distortion, and that’s why the imbalances are so great right now of the debt and the debt system and all the malinvestment. They did not prevent the correction, they just propped it up in 09′. So the correction didn’t occur, and if you want the system to continue you really have to allow the correction to happen. That, of course, is why we haven’t had a recovery.

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ryh2Fib0kaU/story01.htm Tyler Durden

Originally posted at Monty Pelerin’s World blog,

Is Obama through? That is, have his lies and incompetence finally caught up with him and emasculated what remains of his effectiveness. Has he taken the concept of “lame duck” to new levels?

Dan Henninger describes Obama’s credibility problem:

Bluntly, Mr. Obama’s partners are concluding that they cannot do business with him. They don’t trust him.

Henninger’s observation does not bode well for US – International relations. Nor is it likely to provide support for new domestic initiatives.

The International ramifications are especially dangerous. It is difficult to think of one ally that supports the US as strongly as it did when Obama took office. More damaging is the spectacle that the US has become for the rest of the world. Obama, supported strongly upon election by most of the world, is now held in lower esteem Internationally than in the US.

Nations that thought of the US as a model of democracy, economic strength and leadership justifiably are questioning these assumptions. Some now see us as just another country moving toward Banana Republic governance.

Domestically, matters may be worse for Obama. Republicans, who distrusted him from the beginning, are even firmer in this belief as a result of the budget shutdown and other false promises. Democrats see the tactics and competence of the man and his Administration. As he is perceived to shift from asset to liability, their loyalty will shift.

Political ideology is not absolute. Democrats love liberalism and progressivism but not nearly as much as they love their office and place in power. If it comes to a choice, ideology and political loyalty will be abandoned in order to retain office.

Mr. Henninger’s quote limited his observation to “partners,” which can be construed as other political leaders or figures. However, Mr. Obama still has most of his voter support. Obama still has the ability to lie and much of  his support base is too disinterested to care. Many are incapable of  understanding politics beyond the cult of personality and “what’s in it for me.” Many would vote for Ted Cruz if he convinced them he would provide more freebies than Obama.

While Obama’s cult status is gone, his popularity among the masses remains. He has lost his ability to work with “partners” but not with the masses. What remains may still be enough for Obama to continue to weaken the US economically and politically.

His popularity always was dependent on his unusual and unconscionable ability to lie and convince people that there was a “free-lunch” if they supported him. His messianic overtones were merely Hollywood enhancements to his mendacity.

How much remains of Obama’s ability to remain effective depends on what the “uninformed” followers believe. Some of these will never question him. Others may be influenced by the shallowness that passes for today’s media. The media have been Obama’s most loyal ally. Whether that continues in the light of the ObamaCare fiasco is moot.

It is going to be hard to support ObamaCare for the media when Obama supporters experience the sticker-shock at enrollment (if the enrollment system ever gets fixed). Many believe they are going to get free health care. Most believe they are going to get large savings and better plans. All are in for rude surprises.

The failure of ObamaCare likely means the end of media protection for Obama. Survival for them is just as strong a motivation as survival for politicians.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/X4Fi76W3JHM/story01.htm Tyler Durden

The average 401(k) and other defined contribution (DC) plan participant now defers over 8% of their annual income toward retirement savings through their plan and social security taxes, making it one of the largest expenses for households. However, as HelloWallet found, retirement readiness remains stubbornly low: the typical worker near retirement only has about 2 years of replacement income saved, or about 15 years short of the median lifespan post-retirement.

 

One explanation for the stubbornly low retirement readiness of workers may be an increase in household debt. With more household income going to pay off debt, households may have less money to save and face higher costs of living in retirement. In fact, over 60% of workers accumulated more debt than they contributed to retirement savings between 2010 and 2011.

 

 

The study, which analyzed consumer finance data from the Federal Reserve and the U.S. Census Bureau, underscores the need for retirement plan sponsors to provide participants with holistic, independent financial guidance. Without that support, increases in 401(k) and other DC account balances will be off-set by growing liabilities on the other side of a participant's ledger.

The research finds that 20% of participants in 401(k) retirement programs added more credit card debt to their family balance sheet than they contributed to retirement savings. Other findings in the research include:

• Monthly debt payments for households near retirement increased by 69% between 1992 and 2010, now totaling $.22 for every $1.00 earned by DC plan participants near retirement.
• DC participants who accumulate debt faster than retirement savings have 50% less of their annual income saved for retirement compared to DC participants who contribute more to their retirement funds than they accumulate in debt.
• Most DC participants who accumulate debt faster than retirement savings are over 40 years old, college educated, earn over $50,000, and have insufficient emergency savings.

"Through retirement plans and social security taxes, the average 401(k) participant now contributes over 11 percent of their paycheck to retirement savings every month, yet the typical worker near retirement has only about 2 years of replacement income saved," said HelloWallet founder and CEO Matt Fellowes, a former Brookings Scholar who led the study. "The growth in household debt is one big reason why retirement readiness is so stubbornly low."

"While there is no question about the fundamental value and importance of the 401(k), our research finds that it is just one piece of the puzzle," said Fellowes. "Until we work on improving all components of retirement readiness, it will be very hard for employers to fundamentally move the needle."  

While US companies invest $118 billion annually in 401(k) programs for their employees, and retirement savings is now one of the largest budget line items for US households, HelloWallet's new research suggests that these investments are not always producing the intended outcomes. In many cases, better holistic financial guidance could provide employees with the knowledge necessary to crawl out of their debt deficit and steadily build a secure retirement.

To receive a complete copy of the study, click here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZmS8rVRL148/story01.htm Tyler Durden

Authored by Thomas Sowell via RealClearPolitics blog,

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/VMXyzXhMv98/story01.htm Tyler Durden

Authored by Thomas Sowell via RealClearPolitics blog,

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/VMXyzXhMv98/story01.htm Tyler Durden

Following our earlier comments on the vulnerabilities of the Obamacare websites, the fact that the United States National Security Agency suddenly went offline Friday is still surprising. As RT reports, NSA.gov has been unavailable globally as of late Friday afternoon, and Twitter accounts belonging to people loosely affiliated with the Anonymous hacktivism movement have suggested they are responsible.

 

It is perhaps not entirely coincidental that there is a major “Stop Watching Us” rally scheduled for Saturday in Washington, DC.

 

where the following letter was sent to Congress:

 

Via RT,

Twitter users @AnonymousOwn3r and @TruthIzSexy both were quick to comment on the matter, and implied that a distributed denial-of-service attack, or DDoS, may have been waged as an act of protest against the NSA

 

 

So If it's a attack comming from me, or maybe from a country? won't say! It's just looks like a start of a cyber war

— Anonymous Own3r (@AnonymousOwn3r) October 25, 2013

 

 

'Sir' @BarackObama you haz problem? Perhaps you should check your national fucking security cos the NSA wont load? http://t.co/e6P0NHQYcO xD

— S.3xe (@TruthIzSexy) October 25, 2013

 

 

Allegations that those users participated in the DDoS — a method of over-loading a website with too much traffic — are currently unverified, and @AnonymousOwn3r has previously taken credit for downing websites in a similar fashion, although those claims have been largest contested.

 

 

The question, of course, is whether this is retalization from Europe (or Brazil) for the 'denied' allegations over spying?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_QlPPxLr2hI/story01.htm Tyler Durden

Following our earlier comments on the vulnerabilities of the Obamacare websites, the fact that the United States National Security Agency suddenly went offline Friday is still surprising. As RT reports, NSA.gov has been unavailable globally as of late Friday afternoon, and Twitter accounts belonging to people loosely affiliated with the Anonymous hacktivism movement have suggested they are responsible.

 

It is perhaps not entirely coincidental that there is a major “Stop Watching Us” rally scheduled for Saturday in Washington, DC.

 

where the following letter was sent to Congress:

 

Via RT,

Twitter users @AnonymousOwn3r and @TruthIzSexy both were quick to comment on the matter, and implied that a distributed denial-of-service attack, or DDoS, may have been waged as an act of protest against the NSA

 

 

So If it's a attack comming from me, or maybe from a country? won't say! It's just looks like a start of a cyber war

— Anonymous Own3r (@AnonymousOwn3r) October 25, 2013

 

 

'Sir' @BarackObama you haz problem? Perhaps you should check your national fucking security cos the NSA wont load? http://t.co/e6P0NHQYcO xD

— S.3xe (@TruthIzSexy) October 25, 2013

 

 

Allegations that those users participated in the DDoS — a method of over-loading a website with too much traffic — are currently unverified, and @AnonymousOwn3r has previously taken credit for downing websites in a similar fashion, although those claims have been largest contested.

 

 

The question, of course, is whether this is retalization from Europe (or Brazil) for the 'denied' allegations over spying?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_QlPPxLr2hI/story01.htm Tyler Durden

Our advice to recently graduating Millennials? Live long.

Because according to a just conducted analysis by NerdWallet, looking at the future of the average recent college graduate, and more importantly looking at the mountain of student loans each graduate will be saddled with and the implications for the earliest possible retirement age onset, Millennials may well have no choice but to postpone their retirement by about a decade, to the ripe old age of 73.

The reason for this, of course, is the magic of compounded interest: that “manageable” debt load grows and grows and grows even assuming one dutifully pays interest on time. And with unemployment at graduation running at 18%, that is a rather generous scenario. Still, even under base case assumption, the median student loan of $23,300 will end up costing students over $115K by the time they retire.

What does that mean in practical terms? “When will students be able to retire given that many are spending the first ten years (or more) of their careers paying off their hefty loans? NerdWallet… found that while retirement is certainly not impossible, for most it will have to wait until their early to mid 70s— over 10 years later than the current average retirement age of 61.” It goes without saying that all else is assumed equal. Alas, in the America’s welfare state future, few things will be equal, and most things will be far worse.

Which, one wonders, may be the secret plan after all: since by now everyone knows that the US’ welfare state is unsustainable for the mid- and certainly long-term future, what better way to avoid draining it, than to force those who would otherwise benefit into at least ten more years of work to pay off debts accumulated over 50 years earlier.

Quite a brilliant strategy when one thinks about it. And to think, all that was required was record low interest rates, fooling everyone into believing all those tens of thousands of dollars of debt, was cheap.

From NerdWallet

Key Takeaways:

• Most of today’s college grads won’t be able to retire until 73 due to high debt load —12 years later than the current average retirement age
• Given a life expectancy of 84, grads will only have 11 years to enjoy retirement
• The median debt load of $23,300 will cost students over $115,000 (in today’s dollars) by the time they retire
• Employer 401(k) matches are crucial, and will compose 50% of retirement savings

Student Debt Will Follow Graduates To Retirement

With the total amount of outstanding student debt approaching $1 trillion, the plight of debt-straddled college students is more important than ever. In the past 30 years, not only has the number of high school graduates enrolled in four-year universities increased by 11%, but college tuition has also soared over 200%. As more students attend college at a cost higher than ever before, Millennials have increasingly turned to loans to help finance their education. While much of the college debt dialogue is over immediate issues like employment and repayment, there is another glaring challenge that graduates will have to deal with for years to come: retirement.

When will students be able to retire given that many are spending the first ten years (or more) of their careers paying off their hefty loans? NerdWallet conducted a study that examined the financial profile of a typical college graduate and found that while retirement is certainly not impossible, for most it will have to wait until their early to mid 70s— over 10 years later than the current average retirement age of 61.

Quick Facts On Students And Their Debt

Here are some quick facts to give context on exactly what students are grappling with:

• Median debt for a student upon graduation: $23,300
• Percentage of students who are unemployed at graduation: 18%
• The median starting salary for those who do have jobs: $45,327
• Standard loan repayment plan: 10 years
• Average yearly loan repayment: $2,858
• Number of college graduates currently estimated to be in default: Over 7 million

$23,300 In Loans Ends Up Costing $115,096 By Retirement

The goal of the study was to find realistic retirement projections for the typical college graduate and create projections that applied to a broad range of students. The study compared three different financial profiles: the median graduate, with median debt and salary; the struggling graduate, with high debt and a below average salary; and well-off graduate, with low debt and an above-average salary.

Graduate Retirement Outcomes

Clearly, student debt has an impact on retirement outcomes. Currently, the average retirement age is 61. But for most of today’s college grads, the realistic retirement age will be closer to their mid-70s. Given an average life expectancy of 84, this will leave only 10-12 years for people to spend in retirement. The main reason for this is that although the median college graduate leaves with a seemingly manageable $23,300 debt load, 7% of a student’s earnings go toward yearly loan payments of $2,858 for the first ten years of his or her career. This prevents any meaningful contributions toward retirement. In fact, by the age of 33, when the typical college grad has finally paid off their standard 10-year loans, he or she can only be expected to have saved $2,466 for retirement—over $30,000 less than if the student had graduated with no debt. Even worse, the foregone savings carry a serious opportunity cost, as this money would have been earning a compounded rate of return every year until retirement. At the projected retirement age of 73, the lost savings directly attributable to student debt is $115,096, nearly 28% of total retirement savings.

Surprisingly, for the struggling graduate, the retirement outcome isn’t dramatically different. Despite being in nearly twice as much debt and starting with 10% less pay, the expected retirement age is still just 75, only two years later than the median case. The main reason for this is social security. Much has been discussed about whether or not social security will be around by the time Millennials retire. To be conservative, social security benefits are factored into the study at $11,070 (75% of current average) per year beginning at age 67. That said, a substantial reduction in benefits or the disappearance of the program altogether would significantly alter the retirement equation. If the current social security payouts were to remain unchanged for the next 50 years, the benefits would provide future retirees a significant boost by covering nearly 15% of their required yearly income in retirement.

Well-off Grads Retire 7 Years Earlier

The retirement prospects for the well-off grad are significantly better than the others as illustrated in the graph above.  By graduating with a reduced debt load and landing a job that pays 22% more, the well-off grad can expect to retire at age 67. This is a huge departure from the other cases, and demonstrates the importance of contributing to a retirement
plan early on in one’s career. Compared to the median grad, the extra $40,406 that the well-off graduate is able to contribute during the first ten years of his or her career results in a $446,452 difference in retirement savings by age 73.

So How Do You Beat The Odds?

Given these circumstances, should students resign themselves to an eternity of work with little to look forward to in their latter years? Not necessarily. Though an increasing retirement age does appear to be an inevitable economic reality, being conscious of this problem and tailoring financial and career planning accordingly can go a long way toward achieving retirement objectives. There are many factors that influence the ultimate age at which people are able to retire, but there are a few variables that have a particularly large impact. Making above-average yearly contributions to a retirement account, working for an organization with a decent 401(k) match, and making sure to invest money in index tracking mutual funds are three ways to help add years to retirement.

Employer 401(k) Match Is Crucial

As fewer and fewer companies offer defined benefit plans, Millennials will have to depend upon employer 401(k) plans to save for retirement. According to a recent Fidelity survey, the current median yearly matching contribution is $3,420. As shown below, these employer contributions are expected to make up roughly 50% of the retirement equation for Millennials. By working for a company that offers a yearly matching contribution of $4,420 ($1,000 more than the median), potential retirees can reduce their expected retirement age by up to three years.

 401(k) Match Composes Half of Retirement Savings

Make Above-average Contributions To Retirement Accounts

While working for a generous employer can do wonders for retirement, not everyone is in a position to be overly selective about whom to work for. Another important component of retirement planning is the yearly contribution rate. Making above-average contributions can significantly improve retirement outcomes. Though the study projects a 6% annual post-tax contribution (the average personal savings rate for Americans), increasing that number to 10% reduces the expected age of retirement from 73 to 69.

Invest In Index Funds

Contributing money towards retirement won’t be helpful if the money is simply left in a savings account or a CD. To earn a return, Millennials need to be willing to take some risk and construct an equity-oriented portfolio. This may be difficult for today’s grads who have seen the stock market seemingly implode every five years, but unfortunately, retirement will be impossible if people invest too conservatively. The study assumed a 6% yearly return on retirement savings which is a conservative figure given the historical performance of the market. That said, it is a rate of return that can’t be achieved by completely avoiding equity exposure. The best way for an individual to overcome this problem is by investing in index tracking mutual funds, which will offer a market return with low fees.

Retirement Isn’t Hopeless, But It Will Be Difficult

Far more than their parents, Millennials will have to rely upon proactive financial management to achieve their retirement goals. Each generation is afflicted with distinctive financial ills, but the challenge of college debt is unique to Millennials. The decline of pension plans, the uncertainty surrounding social security and the college debt epidemic have placed the onus on graduates to make conscious, forward-thinking decisions about their retirement.

Methodology

Future retirement statistics were projected by profiling three potential situations that students might find themselves: the median graduate, with median student debt and median starting salary; the struggling graduate, with a high debt load and a below-average salary; and the well-off graduate, with a low debt load and an above-average salary. The study factored in a range of other relevant variables to create the projections: average 2012 social security benefit, average 2012 401(k) match, 30 year average national salary growth rate, 30 year average inflation rate, 30 year annualized S&P 500 returns, life expectancy, 30 year average personal savings rate, 2012 Stafford loan interest rates, and standard loan repayment terms.

All projected figures are inflation adjusted and discounted back to 2013 dollar-terms.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0hOUYJxZulo/story01.htm Tyler Durden