War on Retirees

Let's say a retiree has been blessed, disciplined, and prudent enough to save $1 million for their retirement.  In a savings account earning 0.1%, the retiree's annual income is $1,000.  So the solution is to put it in the safety of bonds, right?  Wrong.  If yields rise, bond prices drop.  So the bond holder not only doesn't make much, he/she will actually lose some of the principal.  Besides, at nearly zero percent, rates can only go up.

How about stocks?  It's been soaring to record highs, right?  Well, what if they flatten, or God forbid, equities drop?  10%?  60% (like the S&P500 did from 2007-2009), or 80% (like the NASDAQ did from 2000-2003)?  What then?  And oh, by the way, if interest rates rise materially, bond prices will drop, but equities will plummet.  The Fed knows this.  That's why they pin down yields on the short end of the curve.   But the bond vigilantes will eventually demand higher yields at the long end, because frankly, the US Treasury is insolvent and will NEVER be able to pay off its obligations.

Wells Fargo Says 80 May Be the New 65 for Retirees

This is how you solve the Social Security Ponzi scheme.  You don't pay out any benefits until after the person dies.  Which means of course, you don't have to pay them at all.


http://www.bloomberg.com/news/2011-11-16/wells-fargo-survey-says-80-may-be-the-new-65-for-retirement-age.html

The Disaster for Retirees

http://expectedreturnsblog.com/the-disaster-for-retirees/