The Coming Retirement Crisis

Can we count on Social Security? Did Baby Boomers save enough?  What about Gen X and the Millennials? What is the future of 401(k)s, IRAs, mRAs? Will retirees have sufficient funds for health care and nursing home care? Are there any solutions other than working until you drop?  Find out the answers to these and many more questions in this interesting podcast.  The PowerPoint used can be downloaded here.  Mr. DeMong spoke at the Wednesday October 10, 2018 meeting that was moderated by SSV board member Bob McGrath.

Rich DeMong is the University of Virginia’s Virginia Bankers Association Professor Emeritus after teaching investments and corporate finance at the McIntire School of Commerce for 37 years. He has a PhD from the University of Colorado, an MBA from William & Mary, and a BA in Political Science from California State University at Long Beach. He has authored or coauthored many research papers, books and monographs on investment and finance topics.

In addition to having retired from UVa, Rich retired from the United States Air Force as a colonel. He flew C-130s in Viet Nam and was awarded a Distinguished Flying Cross and many other medals and ribbons.

Rich has a CFA charter and has taught investment, 401(k), and retirement seminars in the U.S., Switzerland, Germany, Japan, Thailand, Kazakhstan, and the U.K.

Rich is the president of the Senior Statesmen of Virginia and is on the board of The Center, Charlottesville Committee on Foreign Relations, Innisfree, and the University of Virginia Physicians.

Program Summary

Rich DeMong led off with the very sobering news that 43 percent of workers will run out of money in retirement representing a shortfall of 4 trillion dollars. The first slide of his data-packed PowerPoint presentation began whimsically showing the famous head shot of Mad Magazine cartoon character Alfred E. Neuman with the caption, “What me worry?” And, as we were to learn during the course of the program, unfortunately that attitude pretty well sums up the journey of many of today’s workers as they advance towards retirement. In fact, there is plenty to worry about.

Rich listed the following topics to be addressed during his presentation: (1) Current situation; (2) Can we count on Social Security? (3) Have Baby Boomers saved enough? (4) What about Gen X and the Millennials? (5) Future of 401(k)s, and IRAs; (6) Will retirees have sufficient funds for health care and nursing home care? and (7) Possible solutions.

Fifty-seven percent of workers feel they are not on track for a successful retirement, and then overlay this with the recognition that we as humans tend to be over confident with regard to our knowledge and abilities. Positive investment outcomes in the past may have been due to luck or good timing and in any event are no assurance of future successes.

Further, most people underestimate what they’ll need for retirement. Typically it is assumed that income needs will drop to 65 to 70 percent of preretirement spending where in reality it often increases because you start doing the things you always wanted to do over time but never got around to doing such as travel and visiting and supporting children and grandchildren.

After citing dire predictions from national media sources, Rich brought the message close to home by quoting a similarly unhappy prediction from The Daily Progress, “By 2030 one in five Americans will be of retirement age and most of these won’t have the financial means to pay for their erstwhile golden years.”

Rich described what our parents experienced with the “joys of retirement” as having a nice pension which enabled them to take cruises, visit grandchildren, get a gold watch, and at age 65 sign up for Social Security and Medicare, and have no mortgage. That contrasts with workers today who face a much different situation. Forty-four percent still have mortgages when they retire; 2.8 million of 60 years olds have a student loan; and more persons 75 and older have more debt today than in 2007. This is just a small sliver of the “troubling news” facing today’s retirees. Other issues relate to health care costs; long-term care; Social Security; 401(k) and 403(b) plans; and IRAs and Roth IRAs. Offering a bit of relief, Rich also explicated some “good news” as well as some solutions for individuals and policy solutions.

Comments are closed.