America's retirement crisis: The perfect economic storm

I hate to be the bearer of bad news. But then again, it must not bother me very much, since I am going to give you a big pile of bad news right now. Given that I earned a Masters Degree in the "morbid science" of statistics, I figured I would start the day by fulfilling my occupational expectation.

The first piece of bad news is that you are going to die. One day, your heart will stop beating and the 2.5 billion breaths you'll take during your lifetime will come to an end. Hopefully, it won't be painful, but I can't guarantee that. The truth is, however, that death might not be the worst part of it all.

The toughest news is that before you die, you are likely going to experience a long, slow period of physical and psychological decline called "old age". In conjunction with this decline, you are going to see your financial resources dwindle as quickly as the muscles in your body. Not only will the scale of your resources decline, but your expenses will likely mount as you go to one doctor's visit after another, all with the hope of delaying the inevitable. That period of life is called "retirement", and most Americans are not financially prepared for it.

Now that you are sufficiently depressed (there's no point in lying to you, I'm not very good at that), I will give you some facts to chew on. I also hope that in light of these realities, you will engage in something that the rest of America is not doing: preparing for retirement. While retirement planning has always been important in the past, it has never been more important than it is for you right now. The Perfect Economic Storm is coming, one in which all the scary clouds merge together into one big ball of fiscal devastation that can only be created by God himself. When your financial meteorologist (me) gives you that information, it's your decision to get your family prepared. Let's break down the components of the storm, shall we?

1) Americans are living longer: US citizens who live to be 65 years of age are expected to have another 18 years of life on earth. Given that many of us can't survive three months without a paycheck, how do we expect to be able to last 18 years? And no, the answer is not with Social Security, which I explain below.

2) The cost of healthcare is rising: According to the National Coalition on Healthcare, 46 million Americans are not insured. However, the US spends more money on healthcare than other industrialized nations, and those governments provide health insurance to their citizens. As a percentage of the economy, healthcare spending has grown from 7.2% of GDP in 1965 to over 16% today. It is expected to be much higher as baby boomers start to retire. What's worse is that capitalist models of healthcare make very clear financial tradeoffs between death and money, where a person who can't afford their medication can be simply left to die. It's a dog-eat-dog world, and it's going to get worse as the US slowly loses its economic dominance over the rest of the globe.

3) Pension plans are disappearing: According to the Employee Benefits Research Institute, only 21% of all American workers participate in plans that will give them a fixed income at retirement. What is most shocking is that over 60% of all workers think that they will get a fixed pension when their careers are over. Pension plans are just too expensive in the age of globalization, so less expensive retirement plans are being put into place.

4) Social security is dying: The way Social Security works is that the productivity of the young supports elderly beneficiaries during retirement. In 1950, the worker-to-beneficiary ratio in the United States was 16 to 1. Now it's 3.3 to 1 and going to be 2-to-1 in 40 years. This does not provide enough money and productivity to support you when you retire in, say, 30 or 40 years (in other words, we are not having enough babies). According to the trustees for Social Security, Medicare is expected to be insolvent by 2020 and Social Security is expected to be broke in the year 2041.

5) Most of us aren't saving: Right before our current economic crisis, the US savings rate was actually negative for the first time since the Great Depression. The Commerce Department also explains that the source of savings for many Americans (growth in home values) has depleted itself with the crash of the real estate market. There's nothing like a good economic crisis to get people focused again.

Think the government is going to adjust and save you financially? Not so fast. Our national debt has already surpassed the $11 trillion dollar mark and is expected to surpass $13 Trillion before our wonderful new president is out of office. President Obama is certainly doing all he can to manage this financial crisis. The problem is that short terms in office negate our politicians of any responsibility for the long-term consequences of their actions. National debt tends to go up, but it almost never goes back down. According to the Congressional Budget Office, our national debt is expected to rise to over $20 Trillion by 2015. In case you're wondering, to have $20 trillion in debt with $2.5 trillion in annual revenues is like someone owing $200,000 when they only earn $25,000 per year. Would you feel safe relying on that person to provide your financial security? I didn't think so.

If you don't get your money right today, your golden years will turn your neck green. The economic storm is coming, but there is still time to protect your family. At this point, we should all evacuate the "Land of Irresponsible Spending" and head to higher financial ground. Like the victims of Hurricane Katrina, our government may not be able to help us in our time of need. The problem is that (also like Katrina), the government will never admit when they've become unable to protect us from the storm, so we've got to protect ourselves.