the retirement cliff

The Retirement Cliff

How Average Are You?

Do you live in the state where you were born?

How many children do you have?

Do you eat peanut butter?

Do you floss?

How about exercise?

Do you recycle?

Any shopping at Walmart?

Are you religious?

Can you name the three stooges?

How about the 3 branches of government?

Do you have a college degree?

Do you take a bath, or a shower?

Do you own equities?


Live in same state (60%)

Have 2 children

Eat 3 lb’s of PB per year

Do NOT floss regularly (90%)

Exercise once a week

Recycle (50%)

Shop At Walmart at least Annually (80%)

Believe God exists (80%)

Larry, Mo, Curly (& Schemp) (89%)

Legislative, Judicial, & Executive (20%)

Does NOT have a college degree (63%)

Take a bath or shower(10.4 minute shower, daily)

Own stocks?( 50/50)


Selected “Average” Statistics

Drinks 55 gallons of soda a year

Does not wash his hands properly after using public restrooms

Throws away more than 100 lbs of food per year

25% of Americans over 18 abstain from alcohol for life

69% of Americans go to the movie theater at least annually

The Average AmericanFederal Reserve Survey of Consumer Finance

2001 2004 2007 2010

Median Family Income $48.9K $49.8K $49.6K $45.8K

College Degree 34.0% 36.6% 35.3% 37.3%

Credit Card Balance 44.4% 46.2% 46.1% 39.4%

Amount of Balance $2.3K $2.5K $3.1K $2.6K

Of Those 45-54:

Own Retirement Account 63.7% 58.2% 65.4% 60.0%

Amount In It $58.8K $63.9K $66.0K $60.0K

Data Source: Federal Reserve, Survey of Consumer Finances

If You Are Above Average Financially, You Will Be

Asked to “Help”… Because Others Need It

Thou

sand

s

Population currently over 65

Who We Will Support in the Future

Year

5,000

1910 1920 1930 1940 1950 1960 1970 1980 1990

4,500

4,000

3,500

3,000

2,500

65-81 yrs old

Why 65?

“Age 65 is generally set as the threshold of old age since it is at this period of life that the rates for sickness and death begin to show a marked increase over those of the earlier years”

-Issac Rubinow, 1916

“It is a commonplace fact that physical ability, mental alertness and cooperativeness tend to fail after a man is 65”

-Federal Government before the Supreme Court, 1936

How to Fund Retirement

The Three Legs of the Retirement Stool-

Social Security

Personal Savings

Pensions

Social Security

Currently running a deficit, will exhaust trust fund by 2033

Will bring in enough tax revenue to pay roughly 75% of liabilities

Then what?

Social Security

• Increase income subject to taxation

• Increase retirement age

• Means test

• Reduce Cost of Living Adjustments (COLAs)

Social Security

• Who gets hit the hardest?

• Those with income to tax or higher levels of assets and earnings

Personal Savings

Percent of Workers by Total Amount of Retirement Savings 2011

Source: Employee Benefit Research Institute, Dent Research

0%

5%

10%

15%

20%

25%

30%

Less than$1,000

$1,000 -$9,999

$10,000 -$24,999

$25,000 -$49,999

$50,000 -$99,999

$100,000 -$249,999

$250,000or more

Percent of Workers and Retirees by Total Amount of Retirement Savings 2011

Source: Employee Benefit Research Institute, Dent Research

0%

5%

10%

15%

20%

25%

30%

Less than$1,000

$1,000 -$9,999

$10,000 -$24,999

$25,000 -$49,999

$50,000 -$99,999

$100,000 -$249,999

$250,000or more

WorkersRetirees

Percent of Workers and Retirees by Total Amount of Retirement Savings 2011

Source: Employee Benefit Research Institute, HS Dent Research

0%

5%

10%

15%

20%

25%

30%

Less than$1,000

$1,000 -$9,999

$10,000 -$24,999

$25,000 -$49,999

$50,000 -$99,999

$100,000 -$249,999

$250,000or more

WorkersRetirees50%+

Public Pensions

State Pension Funding Levels 2012

Source: Pew Center, 2012

Funding for Retiree Health Benefits, 2012


Comparing Pension & OPEB Funding and Liabilities

Funded Unfunded

Retiree Health Benefits$659.6 Billion

$32.4 Billion

$659.6 Billion

State Pensions$3.06 Trillion

$759.7 Billion

$2.31 Trillion


State Pension Reforms 2010


How Budgets Were Balanced

Source: Center on Budget and Policy Priorities 2012

Cuts in Services by Number of States and Category


Tax Increases by Sector and Number of States


How States Closed Budget Gaps by Cutting College Funding

Florida drastically reduced funding of higher education, which means less allocation to colleges. The 2012 tuition increase was 15%.

From 2009 – 2012, the tuition increase was 52%.

California has cut higher education by over $1 billion. Cal State increased tuition in 2012 by 18%.

From 2008 through 2012, Cal State increased tuition by 80%.

City Pensions, Funded vs. Un-Funded


Pension Funding: Cities vs. States


And People Are Moving, So Fewer Left to Pay Taxes

Source: United Van Lines, via Unigroup, Inc.

United Van Lines Migration Patterns 2007

Source: United Van Lines, via Unigroup, Inc.


Source: United Van Lines, via Unigroup, Inc., 2011


Top 10 Outbound States2012

State % OutboundNew Jersey 62%

Illinois 60%

West Virginia 58%

New York 57%

New Mexico 57%

Michigan 57%

Connecticut 56%

Maine 55%

Kentucky 55%

Wisconsin 55%


Top 5 Inbound States2012


State % Inbound

???????? 64%

Oregon 61%

Nevada 58%

North Carolina 56%

South Carolina 55%

Top 5 Inbound States2012


State % Inbound

Washington, D.C. 64%

Oregon 61%

Nevada 58%

North Carolina 56%

South Carolina 55%

Many Outbound States are High Cost, High Tax Venues

Don’t Look to Your Kids to Support You – the

Employment Picture is Tough

Drop in Pay for Re-Employed%

of R

e-Em

ploy

ed T

hat L

ost P

ay

Amount of Pay ReductionData Source: “Out of Work and Losing Hope: The Misery and Bleak Expectations of American Workers,” Cliff Zukin, Carl Van Horn, Charley Stone. 9/2011

Drop in Pay for Re-Employed by Age

% o

f Re-

Empl

oyed

Amount of Pay Reduction

Data Source: “Out of Work and Losing Hope: The Misery and Bleak Expectations of American Workers,” Cliff Zukin, Carl Van Horn, Charley Stone. 9/2011

Comparing Jobs Lost to Jobs Gained

Use a matrix of three levels of pay to compare jobs lost to those gained (each a third of 2008 employment) -

Lower wage - $7.69/hr. to $13.83/hr($16,049 to $28,863)

Median wage - $13.84/hr to $21.13/hr($28,884 to $44,098)

Upper wage - $21.14/hr to $54.55/hr($44,119 to $113,845)

Comparing Jobs Lostto Jobs Gained

Lower-wage occupations were 21 percent of recession losses, but 58 percent of recovery growth.

Mid-wage occupations were 60 percent of recession losses, but only 22 percent of recovery growth.

Higher-wage occupations were 19 percent of recession job losses, and 20 percent of recovery growth.


`

`

Employment of RecentCollege Grads

The Face of the Recovery

Job Additions by AgeChange Since June 2009

Jul-0

9

Oct-09

Jan-10

Apr-10Ju

l-10

Oct-10

Jan-11

Apr-11Ju

l-11

Oct-11

Jan-12

Apr-12Ju

l-12

Oct-12

Jan-13

Apr-13Ju

l-13

Oct-13

Jan-14

-3,000-2,000-1,000

01,0002,0003,0004,0005,0006,0007,000

16-19 20-24 25-5455+ Net Jobs Added

In T

hous

ands

Data Source: Bureau of Labor Statistics, 2014

Percent of Part Time Workers1968-2014

1968

1970

1972

1975

1977

1980

1982

1984

1987

1989

1992

1994

1997

1999

2001

2004

2006

2009

2011

2013

15.0%

17.0%

19.0%

21.0%

23.0%

25.0%

27.0%Share of Part Time Workers


Percent of Part Time Workers2008-2014

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

20%

21%

22%

23%

24%

25%

Share of Part Time Workers


Don’t Look For Economic Growth to Pull the Economy Higher

Source: U.S. Census Bureau and U.S. Bureau of Labor and Statistics

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,00019

5019

5519

6019

6519

7019

7519

8019

8519

9019

9520

0020

0520

1020

1520

2020

2520

30

-14-12-10-8-6-4-2024681012141618

20 Year-Oldson a 3-Year Lag

Minus 63 Year-Olds

Inflation

Inflation ForecastA

nnua

l Lab

or F

orce

Gro

wth

Ann

ual I

nfla

tion

(%)

Splitting Up a Shrinking Pie

• As federal, state, and city governments, as well as average retirees, look around for how to fund the massive group entering retirement, eventually they will call upon everyone with assets to pay more.

• They will be calling on YOU.

the retirement cliff

Documents

retirement savings

retirement cliffhow

retirement account63

kdata source

average statisticsdrinks

pension opeb funding

pew center

federal government