RETIREES ARE DOOMED: Bloomberg on Inflation and They Give Investment Advice

If they are serious, retirement in America is doomed…

Here is some analysis we which we thought was Monday Humor, though we are sure they are rather serious.

 Bloomberg asks: How Far Does $1 Million Go in Retirement?

They will tell us, but realize what a million bucks used to do: We must start off by assuming an “ultra-safe” $1,000,000 in the bank, earning 5% interest, a person could comfortably live off of $50,000 without even tapping into the principle, so the answer would be – forever. But thanks to the Fed and their efforts to kick the can on the US debt and deficits, in addition to scooping up all the wealth for themselves and their banking buddies as they can, we find ourselves in an environment where interest rates are still barely above 1%.

Regardless, here’s how long that money will last. Keep in mind the example above which was just spending earned interest income. Bloomberg’s example assumes the person is spending the principle, which makes you wonder as well. Here’s how long a million bucks will last:

 

 

So, according to the chart above $1,000,000 will last less than 12 years if you live in the state of Hawaii. Oh yeah, that is per person, not per household, and worse still:

These are conservative figures. They don’t factor in any entertainment or travel, which would make for a pretty grim retirement. Nor do they take into account how inflation might cut into purchasing power as we age. Inflation can take a bigger bite for seniors, because medical costs, which may account for a bigger chunk of expenses, have an inflation rate significantly higher than that for the broad economy.  Health-care costs for retirees will rise at an average annual rate of 5.5 percent over the next decade, according to HealthView Services, which makes retirement health-care cost projection software.

So just so we’re clear, if you live in Hawaii, and you plan to retire, you can not travel or do any entertaining things, and if prices of goods and services rise, you must re-calculate your burn rate.

We wish this were Monday Humor but somehow they are attempting to sugarcoat a very dire situation. This is going to divulge into outright pension and retirement crisis.

They would be remiss, however, if they didn’t offer investing advice, so that perhaps you may become somewhat more prepared to blow through that money in about a decade. Here’s their 7 tips, and again, we wish it were Monday Humor but we think they are serious:

1. Save early, and automatically

2. Expect financial emergencies

3. Set an asset allocation, and diversify

4. Keep fees low

5. Use an adviser who is a fiduciary

6. Spend less than you earn

7. Maximize employee benefits

We can sum it all up like this: Bloomberg wants you to save 10-20 percent of your paycheck, in some form of financial institution, have a paltry $400 in cash for “emergencies”, diversify your assets (50% stocks, 50% bonds), go with a “low-fee” investment company, seek investment advice only from a mainstream fiduciary adviser, spend less than you earn (so you can put 1% in a 401K), and maximize your employee benefit in their retirement plan offerings.

Oh yeah, not sure if you notice what they have no desire to mention?

It was glaring like the total solar eclipse…

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