The 'three-legged stool of retirement' is a term dating back more than sixty years, and is used to describe the most typical sources of retirement income. Those sources are Social Security, employer sponsored pensions, and personal savings.
Times have changed and none of these legs have the kind of strength needed to support the retirement needs of a nation. All three are facing serious financial shortfalls that will devastate the retirement plans of a significant percentage of the population.
Perhaps the time has come for the old stool to get a new leg...
Read the full story below.
For years we have been hearing of a crumbling pension system that is a ticking time bomb for governments, taxpayers, and the people who are counting on it. The mess isn't being dealt with by the current government, and instead simply being passed on to future generations, which makes one wonder - with slowing economic growth, low interest rates, and poor investment returns, will there be anything left at all for our children and grandchildren?
Social Security is said to be the backbone of retirement for most Americans. The S.S. payroll taxes collected from you and your employer are funding current retirees, with any excess collected going into the Social Security Trust Fund to cover future shortfalls. This means you are not really saving for your own retirement when you pay these taxes, you are paying for someone else's. In order for the government to get their hands on these funds they issue 'special securities', and in doing so, they have managed to 'borrow' $3 trillion from this fund to pay for other obligations. Call it what you will, this government debt (owed to itself) amounts to nothing more than a weak promise to repay sometime in the future. The chance of this promise being kept is especially doubtful to those that are young and have a long wait for retirement. According to Treasury Secretary Jacob Lew of the Social Security Administration, by 2034 the Social Security Trust Fund will be out of money.
The second leg of the retirement stool belongs to the public / employer pensions, which many consider to be the most worrisome. Nationwide public pensions have an unfunded shortfall of $4.7 trillion (State Budget Solutions Research). The situation is so dire, states such as California are now facing retirement debt equalling almost 75% of its total debt. Current retirees are accepting unsustainable, lucrative, defined benefit pension income at the expense of taxpayers and future generations. Many of these plans are on the verge of collapse, and counting on them, as is, for long term benefits is very risky.
The third leg of the wobbly stool is personal savings. One third of adults in the United States have no retirement savings at all, and according to Bankrate.com, the figure is even worse for people age 18 to 29 (millennials) with 69% having nothing saved. This is very troublesome as it is this age group who is expected to feel the biggest impact from both the lack of employer pensions as well as Social Security shortfalls. Since the 401(k) is voluntary, it is included in with personal savings. It has done very little to ease the impending retirement crisis, with the average amount saved a meager $18,433 (CNBC - March, 2015). The program is underutilized and a lack of financial literacy results in the majority of people making the wrong investment choices.
Savvy investors are turning to bitcoin and other cryptocurrencies as it is becoming almost impossible to find investments that yield the type of returns necessary to turn this retirement crisis around. Bitcoin has been garnishing headlines lately as the world's best performing currency and investment recommendations are starting to appear even from previous sceptics.
Cryptocurrency retirement products are also starting to become available, an example being the BitcoinIRA which allows investors to hold actual bitcoins in an IRA. Chief Strategist at BitcoinIRA is Edmund C. Moy, former Director of the United States Mint. Moy states:
"In these increasingly uncertain economic times, digital currencies like bitcoin will continue to grow in appeal and value. BitcoinIRA offers a way for people to protect themselves against a volatile and unpredictable market."
Jack Tatar, author of "Safe 4 Retirement: The Four Keys to a Safe Retirement", wrote an article recently advocating bitcoin as a part of his retirement plan:
"What I've come to realize through this investment journey is that we live in a time of rapid changes and as investors, we need to pay attention to those disrupting developments out there to identify potential investment options. Many people are likening the opportunities around blockchain and cryptocurrencies like bitcoin, to where the internet was many years ago. Only history will bear that out. But if investors only stay tied to the status quo investment options that we've been lulled into for years, and ignore the new technologies and disruptors out there, you'll miss some huge investment opportunities." - "Bitcoins are the best investment in my retirement"
With disappearing pensions, poor savings rates, and the unknowns of Social Security and other government programs, bitcoin and other cryptocurrency investment savings plans may be the pedestal the future of retirement rests on.