The pandemic currently being experienced around the world has certainly disrupted lives socially and economically. Although it seems most people are dealing with it the best they can and experts continually state everything will eventually be better, I am personally concerned about the future of retirement. Future generations and plans for retirement might not only be affected by the downturn seen in the stock market along with the economy most recently but also the impact is likely going to last for some foreseeable time.
Prior to the Coronavirus pandemic, there was already a dark cloud over future generations for retirement funding. The impact is not yet known, but the outlook seems to be one that many experts are not yet talking about. Positivity and a confident assurance are good for getting through the hard time many people are experiencing, but it is important to also start planning now for the future and not waiting until later to see how it all pans out.
Retirement Before the Pandemic
Prior to what the world is currently experiencing with economies shut down and people struggling to make ends meet, a lot of America was already having a challenging time planning for retirement. Employer-provided pensions are almost extinct and 401k’s have been the standard offering for retirement planning in exchange for an employee for the lucky people that have this offered to them. Most of the responsibility for planning retirement has fallen on individuals for some time with companies no longer in favor of defined benefit plans with higher costs and more risk.
Americans have not only had a more difficult time saving for retirement prior to the pandemic, but the state of Social Security funding has also been an ongoing discussion with much debate. The retirement savings system for workers in America has been damaged for a long time and many experts have forecast the reserves for Social Security would be depleted by 2035.
The outlook for retirement in America has always been affected by economic downturns. From the dot-com bubble to the most previous economic impact of the subprime mortgage collapse, it seems that there is always a recovery. Even if the upturn doesn’t completely solve future retirement funding for Americans, the economy does recover.
I am concerned with the current shutdown of the economy and a situation probably never seen in history that a quick recovery may not be as accurate that some experts are stating will occur. Yes, I do believe the stock market itself will bounce back eventually. Businesses that will be able to get through this turbulent period will also prosper again in the future. However, there will be long-lasting changes that may never be able to be corrected in the near future without drastic measures financially, economically and from a social standpoint.
Retirement Savings Used Now May Not Be Recovered
Retirement accounts have always been a resource for emergency funding even though they should only be used as a last resort. 401k loans, early withdrawals, and total cashouts have become more common over the years as more people have struggled with stagnant wages and the increasing costs of living. Housing, higher education, and particularly medical care prices have been rising at an alarming rate for several years now.
The higher costs with more of the responsibility for retirement and medical care expenses being passed onto workers in favor of lower employer expenses has come at a cost. The pandemic in America is currently putting a strain on the retirement savings for people and the government’s relief bill that was passed shows things may not be quite as promising as Capitol Hill is claiming.
With the CARES Act that was passed, it enables people to take early distributions from retirement savings without the usual 10% penalty. For traditional tax-deferred retirement savings, regular taxes will still need to be paid, but the penalty is waived for people that are really in need of money to be able to tap into their retirement savings.
Retirement savings withdrawals prior to retirement can pose a real danger to having adequate money once a person is no longer working. With an already estimated 1 in 5 Americans having no retirement savings at all, according to a Planning and Progress study by Northwestern Mutual, the current economic outlook with the need for some Americans to take early retirement savings only puts overall retirement funding for the US in further jeopardy.
Although almost all financial experts would agree that tapping into retirement savings prior to retiring is never a good idea, the government seems to have opened the door for the opportunity. It certainly is understandable that some people might have to dip into their retirement accounts to get by financially for a while, but what is the government’s plan for ensuring people can retire one day? It used to be Social Security would be the supplement with a person then saving on their own. With funding issues already for Social Security in the future, what do diminished IRA and 401k savings mean for the future?
For many Americans the economic problems today can only likely equal much higher taxes in the future as this seems to often be the go-to solution for several politicians. Take this in combination with a Social Security system that will have a real need to raise the retirement age to collect benefits and there will be an unquestionable issue with older Americans and poverty in the future. The issue will be even much more troublesome than it already is today.
The Problems with Early Retirement Savings Withdrawals
I understand a lot of people in America that are fortunate enough to have some type of retirement savings will have no choice during this pandemic and economic crisis but to take an early distribution. The problem is this will be less money that is in a retirement account with the opportunity to grow when the market does recover. Thus, the result can be substantially less value at the time of retirement.
Financial experts and politicians know that retirement savings should only be used as a last resort for accessing money. For countless Americans now out of work the situation could not be more catastrophic with an unknown future.
How Are Future Retirement Generations Going to Survive?
Is giving people access to the money saved for retirement the best solution? It might be a good answer for the present time with no other choices available. Yet, there needs to be a long-term plan for people that will be reaching retirement age in the coming decades and it doesn’t seem as though anyone wants to look at the lasting effects of what is currently occurring in the world.
I am concerned higher taxes will be the answer in the future for the problems of today with early retirement savings withdrawals. However, this should not be the only solution. There have been ongoing issues in the United States for years that have contributed to people having the need for early retirement savings withdrawals. The current pandemic has only further increased the necessity.
There needs to be a solution put in place so people will have money saved for retirement. The fix is not just one of economics, but I also believe the long-term solution should be a change in society and values. History tends to repeat itself. Some of it is good and other duplications may not be as desirable. But there were times when the value of life and livelihood were more important than profits and balance sheets.
What Is the Solution for Ensuring Retirement in America?
There are going to be long-lasting changes once the pandemic ends. Corporations, small businesses that survive and representatives on Capitol Hill need to start paying attention to what is good for America and not just continually chasing the lowest price with the highest profit.
It’s time to get back to a time when communities truly looked out for each other and simple things, such as just knowing your neighbors, were important. America tends to come together when periods are challenging only for times of crisis to be quickly forgotten with business going back to usual. This time business, as usual, is likely never going to look the same and it shouldn’t.
I know some people might not want to hear this, but to save America and future generations to ensure retirement is a possibility the United States needs to take care of itself first. This doesn’t mean the US can’t be compassionate with the problems of other places around the world. However, the focus for the unforeseeable future needs to be taking care of Americans.
Even prior to the Coronavirus pandemic there should never have been the level of homeless people in the US that exists. The costs and living expenses should never have outpaced the earnings of most middle Americans. The components that have led to a lower-middle-class in the United States and the chase for the lowest prices have been greed, selfishness and political priorities not aligned with the people that elected the politicians.
Corporate Compensation and Big Business Should Be Taxed
People should be compensated for their work. However, there is no reason for company CEO’s and big executives to now earn 300 times an average person that works for them. Although their actual salaries are many times not that high, their total compensation is often rewarded with ridiculously large stock options and bonuses.
The problem with overinflated high-end executive pay is this money is not invested back into a company for the benefit of its employees. Also, the stock options are likely going to increase the demands for short term profits and stock buyback at the expense of middle-income workers. Many of the people that make a company successful.
With equity buybacks to quickly raise stock prices so executives can cash in on options with a good price, things like research and development do not get funded. In addition, this is less money to go into more employee compensation and benefits.
I understand America is a capitalist society. Most people would agree that politicians should stay out of companies. Yet, there does need to be some intervention at this point. It could be arguable that unions might have killed off some businesses, but there is no one left looking out for the everyday workers. Politicians are voted into office for the people and they need to start working for the public.
Companies are made up of several people from the bottom level to the top. There needs to be a better level of sharing in profitability and it shouldn’t be people earning 300 times an average employee’s pay. If companies want to pay CEO’s and high executives with inflated compensation and bonus programs, they should be taxed on them accordingly.
It doesn’t take a genius to figure out that many businesses should be paying their employees more and they can also afford to do it. This is the only way to ensure proper retirement funding and medical care.
Profits, Greed and Cheap have taken over the corporate world and it needs to change. Although Capitol Hill isn’t always the answer to intervene in business, there might need to be some interference at this point. At the least large companies need to be paying their fair share in taxes. Furthermore, they need to hire American workers and stop outsourcing in favor of cheaper labor. Politicians really are the only people that can put legislation in place to ensure a better future with these things.
Washington realistically created the mess and now it’s time for them to start cleaning it up.
Stop Buying Cheap Stuff
Previously I have written articles and had podcasts on the reliability of America on cheap imported goods. There needs to be an end to this. Corporate America has been training US consumers to buy cheap inferior throw away things for a long time. The result has been more money spent on recurring expenses for replacements. Moreover, this has led to most of the manufacturing jobs that were good-paying positions for Americans to now be extinct. The loss of these jobs has not only been devastating to the economy but also put the national security of America at risk.
You really want to know how to reduce unemployment in America and keep Americans working? Here is a previous podcast that was released on the subject Apple Podcasts: How to Reduce Unemployment in America and Keep Americans Working.
Just think of all the manufacturing America had at one time. We made a lot of things. Now, most of the consumer items we buy are from overseas and mainly China. What do you think happens if there is a conflict with a country that makes the things we need? Are they going to still supply them? The answer is no.
World War II saw numerous factories making tanks and ships for the war effort. The infrastructure in American manufacturing today is horrible, to say the least when compared to previous generations. This puts America at risk.
It can be challenging to buy only American, but it can be done. If you want to make a change, stop buying cheaply made goods and specifically the inferior things that come from China. Stop shopping at one of the biggest American discount stores and demand quality.
Take the time to see where things are made and make purchase decisions that will benefit America. There are a lot of good resources you can use online, such as Madeinamerica.co. This is only one of the several websites on the internet dedicated to products made in the US.
Some politicians and news organizations have started to pay more attention recently to the issues of buying things from China, but this hasn’t been only a recent issue. The problems have been compounding for several years. Here is a Senator from Florida calling for resistance to purchasing things from China just the other day.
Stop buying from China. You may have to pay a little more, but you will likely get a product of higher quality that will last longer. You will also be ensuring American jobs are saved. This sends a message to companies that employ Americans that people are willing to pay for quality.
Demand changes from the big box retailers and online mega stores that pay employees slave wages with little benefits that they make a change to take care of the people that make their business successful.
Overall Values Need to Change Both in Business and at Home
There was a time when people knew who all their neighbors were. A period when communities would continually come together. Today, it seems like it takes a national crisis for people to start looking at what is important. It many times takes a national concern for people to express their care and companies to perk up showing they are morally just.
The issues it seems is far too often when there is a national crisis companies show compassion strictly for good public relations and ordinary everyday people do it for attention or to make themselves feel better.
The intentions are often good, but the kindhearted actions appear to almost always disappear shortly after a national catastrophe ends.
This time things need to change after the immediate threat of the Coronavirus pandemic ends. Both businesses and just the American people, in general, need to keep thinking about the future and well-being of America. Changes need to be made.
The American Worker Needs to be Valued
There was a time when business owners took pride in providing a livelihood for their employees. With the extinction of American manufacturing and many small businesses being crushed by mega discount retailers the world changed and profits were put above people.
People need to start coming first again and particularly American people. If companies you want to buy things from continue to import cheap goods and outsource work for cheaper labor in favor of inflated executive earnings with shareholder profits there needs to be a clear message sent. The message needs to be sent financially by refusing to buy the things they sell.
Americans need to take a stand against their dreams and hopes of being diminished by Washington and Wall Street. America needs to tell the people that do not value its workforce enough is enough. Although a small percentage of Americans have most of its wealth, numbers in people can make a difference.
A large store that stops getting business due to its practices of terrible wages and benefits will have to pay attention. When more people turn out to vote on important political matters it will make a difference. Americans that call on Washington in numbers to hold politicians and Wall Street accountable for their actions will create change.
If some of the wealth in America does not start being fairly distributed for everyone’s hard work, dedication and commitment, then the future is not looking too good. It’s time for Americans to ensure they have a future and one that includes retirement years.