The Failure of Retirement
By Staff News & Analysis - May 17, 2013

Gen X Has New Reason to Resent Boomers as Retirement Looks Bleak … Generation X, the unlucky cohort of Americans who became young adults during the boom years of the 1990s only to suffer a midlife bust, is facing bleak retirement prospects, according to a study. The Pew Charitable Trusts said the typical Gen X couple, born between 1966 and 1975, only has enough savings to replace half of its pre-retirement earnings. Married Americans born during the first part of the baby boom, from 1946 to 1955, can expect to retire with about 82 percent of their income. The younger boomers, born between 1956 and 1964, can expect to quit work and make about 59 percent of pre-retirement earnings. – Bloomberg

Dominant Social Theme: The generations will have to do better … and fight for their own. The heck with other generations.

Free-Market Analysis: In the dominant social theme, above, we've tried to illustrate the animosity that often accompanies the analysis of the "generations" in the US and abroad.

Generations are fairly amorphous things, but because the schematic is repeated over and over again in the mainstream media, people tend to believe them. And resentment is often whipped up because of them.

The idea that one has more in common with one's peers locally or a thousand miles away than with, say, one's family, colleagues, etc., is a fairly ludicrous one – but thanks to the power of suggestion and repetition, people tend to believe it.

And it sets up a definitive tension between age groups, which is probably just the point. The idea of our leaders seems wearily always one of "divide and conquer." The more resentful people are, the more malleable they become. Nothing unites like a common enemy, and nothing facilitates human manipulation like rhetorical aspersions that can then logically result.

What in this case is making people resentful – as part of a larger apparent strategy – is that the West's retirement system has fallen apart. In Europe it is most noticeable among the Southern PIGS, where government-led schemes to provide pensions and welfare have decomposed under the pressure of failing economies and Brussels-led austerity.

In the United States, company pensions have given way to "directed contributions" that in turn gave way to empty air when the stock market dropped by half in 2008-2009. While no doubt some portfolios have recovered, many others were probably reconfigured once the financial crisis hit – ensuring that people first received the body blow of a huge equity haircut and then sat out the subsequent recovery.

It is asking most people to do the impossible when one demands that they refrain from acting after seeing their precious nests eggs halved in a matter of weeks or months. Human nature demands that people remove themselves from pain; it's a natural reaction.

Also, people don't understand the nature of equity investing in the 21st century. It is very much responsive to monetary stimulation courtesy of central banking.

Logically speaking, people are being asked – at least in the US – to hold their assets in the fire while the value drops by as much as half and then trust people like Ben Bernanke and other "wise men" to generate enough monetary stimulation to raise markets back to where they were.

Of course, in doing so, currency is degraded and the larger valuation of the stock market is deflated. Between taxes and price inflation, the real value of stocks, even after a "recovery," is a good deal less than what came before.

This is not the way retirement used to work.

Before central banking and wholesale government manipulation of society, people were more agrarian-based and trades were passed down from father to son. Unemployment would not likely have been an issue because people had to work to live.

Subsistence agriculture, of course, was a mainstay of such a world. Perhaps it sounds grim, but it was probably better than living on welfare and the generosity of one's parents, as so many youngsters in the US and Europe do today.

The modern wage-slave paradigm is a fairly new development and as it has already fallen apart it is probably unsustainable. The future is one of gated corporate cities in which people will be totally dependent on the multinational company for every part of their existence, from food, to shelter, to transportation to the salary itself – and the penalty for losing one's job will be the despoliation of an entire life.

These cities are apparently already being erected in countries such as India and Brazil (and no doubt China) – the BRICS, of course – where so much that is intended for the West is initially configured.

Ironically, we are not supposed to contemplate anything but the evolution of this dysfunctional system. The idea that whole societies managed to live and work together without undue poverty from childhood to old age now escapes us. The modern state defiantly separates parents from children and is now working busily at separating mothers from fathers. The nuclear family is thus atomized.

Today's retirement consists of a forced engagement with a euphemistically-named "retirement home," after which many may face increasingly ubiquitous "death panels." Parents, deprived of generational, extended families, turn to the state for aid – and the state in return places such pressure on this fragile unit that divorce is inevitable. And thus, the atomization occurs.

The system simply doesn't work, and it is getting worse, not better. Here's more from the Bloomberg article:

Younger boomers and Gen X'ers "face a real possibility of downward mobility in their golden years," said Diana Elliott, a manager for the Washington-based research organization.

Financial planners recommend that retiring Americans be able to replace 70 to 100 percent of pre-retirement income through wealth and savings. The recession from December 2007 to June 2009, which erased $16.4 trillion in wealth, made that goal more difficult for tens of millions of Americans.

The typical Gen X'ers lost the most, with 45 percent of pre-recession net worth of $75,077 vanishing from 2007 to 2010, the Pew study said. Depression-era babies born from 1926 to 1935 saw their median $207,965 nest egg virtually unchanged. War babies, born from 1936 to 1945, suffered a typical cut of 20 percent to a pre-recession net worth of $265,797.

The Pew study, based on the Federal Reserve System's annual Survey of Consumer Finances, found early boomers lost 28 percent of their median stash of $241,333, and their younger siblings dropped 25 percent of a typical $147,671 net worth.

The numbers in the Bloomberg article go on and on – but the results are clear. Various "generations" lost a lot and European "generations" are in the same boat.

We are encouraged by stories like this to think generationally, though this would be profoundly foreign to our forefathers that thought in terms of families and communities. This is, in fact, the modern dilemma, that our societies have been smashed by central banking, distorted by fiat money and depressed by the inevitable busts that come after the boom.

All is not bleak, however. Once one understands the manipulation, one can begin to determine one's own destiny. Invest within the parameters of the business cycle – including equity, if that is one's choice. Recreate an intergenerational family and do your best to recreate a sense of local community, as well, with family and friends.

Build up the local bonds that will sustain you in tough times. Create agrarian resources, as well. Seek to be self-sustaining and independent within the context of locality and family.

Think in terms of relationships, not generations. Just because someone is your age doesn't make him or her your kin. The person may have little in common with you and there is little likely that ties him or her to you.

Look around. The system as it is, is meant to create dependence. Retirement looks "bleak" – according to Bloomberg …

After Thoughts

Does it have to be that way?

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