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Retirees Are Trading Their Golden Years For the Golden Arches

It seems like every time I take my 10 year old to McDonalds lately, I place my order with someone who is probably hanging out with my grandparents. Actually, I guess most ARE grandparents. I started to think that maybe they knew something I didn’t about the best place to work—a free uniform, quarter-pound discounts, an extra order of McNuggets—but then I realized that these retirees were working not because wanted, but because they had to. After all, if you could choose between traveling, golfing and enjoying your golden years or standing behind the cash register at the golden arches… well, the choice would have been made.

Unfortunately, retirees are returning to the workforce as a result of seeing their nest eggs lose 25-50% of their value over the past few years. They were all convinced by the financiers gurus that the best way to retire was to spend 30 years contributing to a plan that would be heavily taxed and prone to losing money for 80% of participants. They listened to the Ramseys’ and Ormans’ screaming lies about unrealistic returns and believed the hype that “there’s no other way!” when it comes to preparing for the day you (hopefully) stop working (for good) and start living your dreams. The result is hundreds of thousands of baby boomers frantically trying to find a way to recover, and even more retirees returning to work; finding that the competition is so tough, the only place they can easily get a job is somewhere that asks “Would you like? fries with that?”

For retirees, it’s too late. The damage is done and they will recover the rest of their lives. For baby boomers, now is the time to take big steps to secure your future. Continuing with the status quo will put you in the same place as today’s retirees. Waiting for the market to recover is NOT a plan, it’s insanity (insanity: doing the same thing and expecting different results). Do the math; if your account lost 50% in last year’s sale (ie your balance went from $100,000 to $50,000), the market has to go up 100% just for you to break even balance The average time it takes the market to go up 100% is 7-10 years!! The average recovery time (a flat market) after a recession is 16 years! Are you starting to see the problem?

Fact: The average mutual fund investor has actually lost one percent per year, adjusted for inflation.

Fact: 80% of all investment advisors and mutual funds do worse than the general market every year.

I’m a counselor so the truth hurts…but that doesn’t make it any less true. I’m sure you’re thinking you’ll be one of the 20% whose account continues to grow, beating the market and building a fortune for your later years. That’s what today’s retirees thought too, convinced of this lie every time they turn on CNBC or talk radio. If you’ve been convinced too, please keep doing what you’ve always done – the world will always need someone to put down another batch of chips for the lunch tip.

Those in their thirties and forties need to start planning for their retirement in different ways. They have to change some of your retirement savings into accounts that don’t fluctuate with the market. Another lie in the media is that the stock market averages 10-12% per year…NONSENSE! The long-term average adjusted for real inflation is 6%, and it comes with all the stress of the constant roller coaster and the knowledge that the year you decide to retire could be another year, the market goes down and you lose 1/2 of your money

The other problem that retirees face is ever higher taxes. Convinced that their 401(k)s were the best place for their retirement savings, they built up as much pre-tax savings as they could. They were told (as you are today) that it is better to put off taxes until retirement because you will earn less and be in a lower tax bracket. There are TWO problems with this line of thinking:

1. No one is in a lower tax bracket now than they were 20-30 years ago because taxes have gone up and continue to go up. We are expecting more tax increases in the coming years, a necessity to pay for increased government spending and bailouts. Seniors who were in a net 15% tax bracket 20 years ago no longer have the tax breaks they had when they were younger (kids at home, mortgage interest, etc.) and today pay 25-30% tax ).

2. Who wants to plan to be in a lower tax bracket when they retire? Think about it, that means you plan to have less money than you do now. Think you have too much right now? If not, why would you plan to have less in the future?

There’s never been a better time to sit down with an advisor who focuses on tax-free, risk-free planning and evaluate the path you’re on to determine where you’ll be when it’s finally time to retire. A Chinese proverb says, “No matter how far down the road you find you’re going in the wrong direction… TURN AROUND! Continuing will only get you further away from your desired destination.”

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