Hey everyone, ever imagine yourself, you know, like finally retired, sitting on the porch,
sipping lemonade on a swing.
Sounds nice.
Well, today we're doing a deep dive into this video about retirement.
Okay.
And it turns out that it's not all it's cracked up to be, especially for baby boomers.
Oh, really?
Yeah, a lot of those folks, especially the ones born between 1959 and 1964, they're
not exactly financially ready for retirement.
That's interesting because we always hear about how wealthy the boomers are.
Right, like they're all set.
Yeah.
But this video says that's not really true for a lot of them.
So what's the video saying?
Well, it starts out with some pretty shocking statistics, actually.
Oh, like what?
Over half of these peak boomers, they call them, are financially unprepared for retirement.
Wow.
Yeah.
So 43% of those aged 55 to 64, they have absolutely NO retirement savings.
Oh, wow.
And get this, almost a third of those over 65 are living on less than $27,000 a year.
That's tough.
Yeah, that's considered like economically insecure.
So not exactly the carefree retirement we all dream of.
Right.
Makes you think, huh, where do I stand compared to these numbers?
Yeah.
That's a question for all of us to consider no matter how old we are.
For sure.
And to understand why so many boomers are in this situation, we need to look at how the
whole retirement landscape has shifted.
Okay, so what do you mean?
How has it shifted?
Well, we've moved away from those traditional pension plans.
The defined benefit plans.
Exactly.
Those are like a comfy rocking chair, you know?
You can just settle in and relax.
I like that analogy.
They guarantee you a set monthly payment after you retire, and it's often backed up by federal
insurance so you know you're covered.
That's that steady paycheck you can count on even after you're done working.
Exactly.
But nowadays, it's more common to have defined contribution plans.
Oh, like 401Ks.
Yeah, things like that.
It's more like you're on a treadmill, you got to keep running to get where you want
to be.
So you're putting in effort, but the final outcome depends on how well you do.
Right.
With defined contribution plans, your final payout is tied to your investment returns.
So you're basically betting on the market doing well.
Pretty much.
And for a generation that was raised on those guaranteed pensions, this whole market dependent
thing has created a lot of uncertainty.
Yeah.
Yeah, that makes sense.
The whole different ball game.
Definitely.
Now, this video takes us way back to understand how we got here.
Oh.
How far back are we talking?
Like way back before pensions even existed.
Wow, okay.
So like what was retirement like back then?
Well, basically there was no retirement.
People worked until they physically couldn't work anymore.
No leisurely cruises or rounds of golf.
Nope, it was work, work, work until the very end.
When did pensions actually start?
Well, American Express was a pioneer.
Back in 1875, they introduced the first private pension plan.
American Express, that's interesting.
Yeah, it was for their long-term employees age 60 and above.
Huh.
A company known for stability and long-term service.
Makes sense now, right?
Yeah.
They want to take care of their loyal employees.
Yeah, definitely.
And then other companies started catching on.
Yeah, the railroads jumped on board pretty quickly.
The railroads.
Yeah, they saw pensions as a way to attract and keep skilled workers.
Keep those trains running smoothly.
Exactly.
Soon banks, insurers, utilities, you name it.
All those industries where experience and stability are important started offering pensions.
It was like a domino effect.
Pretty much.
But the government got involved and made pension contributions tax deductible for employers.
So that really encouraged companies to adopt pension plans.
It was a huge incentive for sure.
By the late 1920s, pensions were becoming more and more common, especially for white-collar
professionals.
It sounds like it was working out pretty well.
Yeah, it seemed like a win-win, but then the Great Depression hit.
Uh-oh.
It couldn't have been good for those pension plans.
It was a disaster.
A lot of companies hadn't planned for the long-term costs, and as profits went down,
they couldn't keep up with their pension obligations.
That's rough.
So what happened?
Well, the railroads, for example, they were hit especially hard.
Oh, yeah.
They were huge back then.
Their pension expenses had skyrocketed, and they couldn't adjust them like they could
with wages.
So it was a real crisis for them.
It was.
And it actually led to the Railroad Retirement Act of 1935.
What was that?
It was basically a government bailout for railroad pensions.
Wow, so the government had to step in and save the day.
They did.
And around the same time, there was this guy, Dr. Francis Townsend, who was gaining popularity
with this idea for a national retirement program.
National retirement program.
Yeah, he was advocating for monthly payments to seniors funded by a national sales tax.
Huh, that's interesting.
It was a pretty radical idea at the time.
It was.
Oh, yeah.
But it definitely influenced the creation of Social Security in 1935.
Ah, Social Security.
That's been a cornerstone of retirement for so long.
It has.
And then World War II came along and things shifted again.
The government put in place policies like excess profits, taxes, and wage freezes.
How did that affect pensions?
Well, it kind of unintentionally helped pensions grow even more.
By the war's end, a significant chunk of the U.S. workforce had pensions.
Wow, so pensions were really becoming the norm.
They were.
But the story of pensions is full of twists and turns.
So what happened next?
So after the war, things really started changing.
Okay, I have some.
Well, labor unions, they started gaining more power.
Yeah, makes sense.
Workers had made a lot of sacrifices during the war.
Right.
And they wanted to see some benefits.
So they started demanding better pay and working conditions.
Exactly.
And pensions became a really big part of those negotiations.
So there were a lot of strikes and disagreements.
Oh yeah, there were some major clashes between labor and management.
The video even mentions that President Truman threatened to draft striking workers.
Oh wow, things were really heated.
It sounds like it.
But eventually a new way of negotiating came about.
More focused on compromise.
Right.
And unions started pushing for these comprehensive benefits packages?
With pensions as a key component.
Pensions were like the holy grail of those benefits.
So this is where the Treaty of Detroit comes in.
That's right.
It was a landmark agreement in 1950.
Wow.
Auto workers, they managed to secure some pretty significant pension benefits.
Really?
It set a precedent for other industries across the country.
So it was a big win for workers.
It seemed like it at the time.
But the video suggests that maybe it wasn't all sunshine and roses.
Right.
Even back then, some people were starting to worry.
About what?
About whether these generous pensions could actually be sustained in the long run.
Yeah, like promising something you can't deliver.
Exactly.
It's like building a fancy house on a shaky foundation.
You might enjoy it for a while.
But eventually.
It could all come crashing down.
And the video uses a pretty good example to illustrate this point, right?
The story of Stude Baker.
What happened there?
Well, they were a big American car company back in the day.
And they agreed to give their workers a big pension increase.
Sounds good so far.
But then shortly after that, they went bankrupt.
That's a classic example of how those well-intentioned promises can backfire.
So it was a harsh lesson about the hidden costs of those pensions.
For sure.
And then on top of that, the American auto industry was facing another big challenge.
What was that?
Competition from Japan.
Ah, yeah.
The Japanese car companies were starting to make some waves.
They were.
In the 60s and 70s, they really started taking off in the US market.
What were they doing differently?
They were making fuel-efficient, reliable cars.
At affordable prices, I bet.
Exactly.
And American companies, they were struggling to keep up.
Why was that?
Well, part of it was those legacy pension obligations.
They were expensive.
Very expensive.
And they had high labor costs, too.
So they were kind of stuck.
They were trying to compete in this global market with all this baggage.
You like running a race with a weight strap to your ankles?
A good analogy.
And some of the biggest American companies started realizing this.
What'd they do?
Companies like Hewlett Packard, Verizon, IBM, they started freezing their pension plans.
So no more defined benefit plans.
Not for new employees, anywhere.
It was a sign of the times.
It was.
And then you had these new tech companies popping up.
Like who?
Walmart, Amazon, Microsoft.
Ah, yeah, the giants of today.
And they didn't have traditional pension plans at all?
So the whole idea of a guaranteed retirement income was fading away.
It was a new era.
And this is where those peak boomers we talked about earlier really start feeling the impact.
Right.
They entered the workforce just as this shift was happening.
So they missed out on the golden age of pension.
They saw the older generation retiring comfortably with those pensions.
So they had these expectations.
And it's not just a problem for retirees.
No, it affects everyone.
How so?
Well, imagine a large chunk of the population reaching retirement age without enough savings.
That puts a strain on families and the social safety net.
It does.
They've got those people in their 40s and 50s.
Yeah, the sandwich generation.
Yeah, they're stuck supporting both their kids and their aging parents.
Who might not have enough money to live on.
It's a tough situation for everyone involved.
And then there's the economic impact too.
Right.
Retirees tend to spend less on certain things.
Like travel and entertainment.
Which can slow down economic growth.
But they spend more on healthcare.
So it's a complex issue with different effects on different parts of the economy.
So with all this in mind, how much should we be saving for retirement?
That's the million dollar question.
The video mentions those guidelines from T-Row Price.
Yeah, those can be helpful.
But they seem kind of high.
They do.
Let's break them down and see what they're really all about.
Yeah, so those T-Row Price guidelines, they're a decent starting point.
But you got to understand what they're based on.
Okay, so what are they assuming?
Well, one big thing is the rate of return on your investments.
Like how much your money grows each.
Exactly.
They're using 7% in the benchmark.
7%.
Is that realistic?
Well, it's kind of like the average return of the stock market over the long term.
But you know, the market, it's unpredictable.
Yes, some years are good, some years are bad.
You can diversify your investments to reduce the risk, but there's no guarantee you'll
hit that 7% every year.
It's like trying to predict the weather.
Exactly.
You can look at the past, but they're always surprises.
So how do we plan for retirement when there's so much uncertainty?
Well, that's where a financial advisor can be really helpful.
Someone who can guide you through all the options.
Right.
They can help you figure out how much risk you're comfortable with and create a plan
that's tailored to your specific situation.
So it's not a one size fits all kind of thing?
Nope.
Everyone's different.
But the video also stresses the importance of personal responsibility, right?
Oh, absolutely.
We can't just rely on someone else to figure it all out for us.
It's about being proactive.
And informed you got to do your research, understand the different investment options,
and be willing to adapt as things change.
It's almost like we're pioneers in a way.
Blazing our own trail.
The old rules don't really apply anymore.
We got to be resourceful and resilient.
So this deep dive has been pretty eye-opening.
It has.
We've learned a lot about the history of pensions, how things have changed, and the challenges
facing baby boomers.
And not just boomers.
It's a wake up call for all of us.
We can't just assume things will work out on their own.
We have to take charge of our own financial futures.
Knowledge is power.
The more we know, the better decisions we can make.
It's about being empowered.
And making informed choices.
So we can all enjoy those relaxing retirement days without worry.
Well said.
This deep dive has been a journey through the ups and downs of retirement planning.
It has.
From the early days of pensions to the rise of 401k.
We've seen how history, economic forces, and even societal expectations have shaped
the way we think about retirement.
And now it's up to each of us to figure out our own path.
So as you reflect on all this, I want to leave you with a question.
A question to ponder.
What steps can you take starting today to create a secure and fulfilling retirement for yourself,
no matter how old you are or where you are financially?
It's never too late to start planning.
That's right.
Thanks for joining us on this deep dive.
It's been a pleasure.
And remember, keep diving deep into the things that matter.