Counterparties: Living longer with less
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Americans with $1 million in savings may be in for a dispiriting surprise — they still havenâ€™t saved nearly enough. The problem, reports the NYTâ€™s Jeff Somer, is that bond yields have fallen and life expectancies have risen.
A Â 65-year old couple with a $1 million nest egg of tax-free municipal bonds that withdraws 4% per year, Somer says, has a 72% chance of running through their retirement savings before they die. The even larger problem is that the millionaire 65-year old couple is far from typical. The median household retirement account balance for Americans aged 55-64 is just $120,000.
â€śThe bottom line,â€ť Somer quotes NYU professor Edward Wolff saying, â€śis that people at nearly all levels of the income distribution have undersavedâ€ť. The result, according to Wolff, is that Social Security will be the primary income source for most retirees, even for retirees who are relatively well off.
Mutual fund managersâ€™ solution to the problem is mandatory savings. BlackRockâ€™s Larry Fink is one of the most visible champions of mandatory investment plans like Australiaâ€™s, which have the benefits of removing the market-timing itch and the problem of employers who have no retirement plan at all. Under the Australian model, employers must contribute 9% of pay (rising to 12% in 2020) for their workers. This, Dan Kadlec writes, â€śincreasingly is being held up as a model for the USâ€ť.
But all defined-contribution schemes are reliant on the market going up. And no such plan, Tadas Viskanta writes, can treat the market like an â€śATM machine from which one can extract guaranteed returnsâ€ť. — Ben Walsh
On to todayâ€™s links:
Big Brother Inc.
There’s never been a more important leak in American history than Edward Snowden’s – Daniel Ellsberg
â€śThe national security apparatus has been more and more privatized and turned over to contractorsâ€ť – NYT
A look at the VC firm that helps the NSA find startup investments -Â TechCrunch
And, of course, there are many more links at Counterparties.