(This is updated from a previous blog on www.killingsacredcows.)
When I was a “traditional” financial adviser, I would rattle off some assumed 2000 Bureau of Labor Statistics that came out with a longitudinal report that studied where 25 yr olds in 1960 were in 2000. It showed:
29% of 65 year olds were deceased,
66% totally dependent on others or still working,
4% financially independent, and
1% wealthy (By the way, I have never seen any government source confirm these numbers, but I have seen many financial institutions quote it).
The Tragic Truth
The REALITY is much worse! According to the National Centre for Health Statistics, a 25-year old only has a 16% chance of death before age 65, not 29%. Of the surviving, the 2000 Bureau of Labor Statistics:
24.4% of 65-69 year olds were still working,
66% of them depend on Social Security to provide at least 50% of their income (22% are totally dependent).
This means that of the original group, only about 8% are either 50% or less dependent on Social Security or financially independent…at the time of the study. I would bet the majority of this 8% were supported or eventually supported by Social Security to a certain extent.
Furthermore, the median household income for those 65 and older was only $33,802 in 2002. In addition, the 2000 U.S. Census said that this aging population had a net worth of $108,885. However, $85,516 was home equity leaving a measly $23,369 for savings and retirement. If you read my blog on hidden 401(k) fees, you would also notice that the average balance in a 401(k) for 65 year olds (in 2007) was only $60,000. Could you live like that for one year? Two years? How about 25 more years?
Hadn’t more than 8% of Americans implemented some sort of retirement products during their life, like 401(k) and IRA’s, some through financial advisers? Weren’t many of these “Prime lifers” born in 1935 strict savers because of the influence of the Great Depression? What happened?
The Cause
There are many factors contributing to this. For instance, most financial planners will quote some “average” return in the markets that someone can supposedly count on for the long haul. However, the “actual” return often is different. See my blog “The Retirement Titanic” to get more specifics. For example, I illustrate how a positive ACTUAL rate of return of 12% could become a negative return in reality!
The Solution
Get further educated on leveraging the assets you have. One cannot expect to get different results by believing the same things about investing as everyone else. Education is critical to changing your paradigm and taking different steps to create freedom and gain control of your life. Learn more on our blogs and listen to our podcasts to increase your ability to become financially free.
