Ted Bauman Discusses Why Everyone Should Have a Retirement Backup Plan

It is said that the greatest achievement of President Franklin Roosevelt in his implementation of socialist-inspired policies in the wake of the Great Depression was not to bring socialism to American shores but to prevent capitalism from fleeing them. The many New Deal projects, the flagship of which was the unprecedented and highly ambitious creation of Social Security, gave massive credibility to those who said that a form of soft socialism could, in fact, work side-by-side with an otherwise free market.

As the intervening 80 years have attested, even the most ardent detractors of those socialist-inspired policies are now forced to admit that, at least in the unique set of circumstances that prevailed in post-war America, the economically progressive policies that began with Roosevelt’s daring and ambitious actions made the lives of everyday Americans much better.

But that was a different time, and the America of those bygone days was a different place. Today, the United States has seen its once-thriving industrial core hollowed out and sent overseas. The financial sector, which began its precipitous rise throughout the 1970s, now accounts for nearly half of all corporate profits. And this has contributed to some of the highest wealth inequality that has ever been known in the United States, rivaling that which typified the runup to the 1929 stock market crash as well as the heyday of the robber barons in the late 19th century.

As the country’s middle class has shrunk, its corporations have gotten even better at offshoring their profits and dodging taxes. At the same time, an ever-expanding government bureaucracy has resulted in unsustainable record debt. Unlike the historic peace dividend that the victorious United States enjoyed in the wake of World War II, the country’s recent forays into foreign lands have been military and economic disasters. Economist Joseph Stiglitz has estimated that the wars in Afghanistan and Iraq alone may have a final price tag upwards of $5 trillion. And the United States has little to show for these grievous costs of blood and treasure.

The fiscal position of the United States is deteriorating fast. Despite the fact these costly errors have largely gone unnoticed by the average American, that may soon change. All of this may spell doom for America’s entitlement programs. And the end could be far nearer than anyone is prepared to face.

Ted Bauman says everyone must have a Plan B

Ted Bauman ranks among the country’s leading experts on asset protection, personal offshoring and retirement planning for high-net-worth individuals. He is the author of the Bauman Letter, the Plan B Club and Alpha Stock Alert. He has been a leading analyst, writer and financial expert for more than three decades and has won the trust of his many clients, helping people to maximize their returns and, more importantly, protect the assets that represent their decades of toil.

But Ted Bauman sees a major storm brewing across the United States. He says that the country’s main entitlement programs, Social Security and Medicare, are on the cusp of insolvency. Together, these programs amount to $2.25 trillion worth of government spending each year. And they are programs upon which tens of millions of Americans rely for their daily survival.

Yet, the impending storm that threatens to capsize and ultimately wreck these programs is hardly even mentioned in the mainstream press. Ted Bauman fears the potentially lethal confluence of economic circumstances that he sees coming may be enough to cripple these programs’ ability to continue acting as a viable safety net for those who rely on them most.

But all is not lost, especially for younger generations, who still have time to plan and save enough to be completely self-reliant in their golden years. Ted Bauman has plenty of advice for those younger people. Yet, he points out that it is necessary to outline how potentially dire the situation is for America’s mandatory entitlement programs and even the long-term fiscal viability of the country itself.

Faulty Assumptions

Bauman points to the fact that even the Social Security Board of Trustees itself has determined that the program will likely become insolvent in around 2033. At that time, benefits will necessarily be reduced by 25 percent. While such a reduction would not pose end-of-the-world problems for the majority of those receiving Social Security checks, it would certainly strain the finances of many lower-income retirees.

But Ted Bauman is bearish even when it comes to these ominous estimates. He says that there are a number of factors that could potentially sink the program altogether by the year 2050 or sooner. Here, we’ll recap some of the potentially severe problems that could fundamentally hobble the ability of the U.S. government to deliver on its entitlement promises. Keep in mind that these are not certainties. Yet, if even one of these problems reached a worst-case-scenario point, the entire program could be put in existential jeopardy. What this would likely mean is that recipients who believe that they have a source of ironclad income replacement in their golden years could find themselves only receiving pennies on the dollar of what they were promised.

Radically Changing Demographics

Bauman is a firm believer in the old saw that demography is destiny. Bauman points to the fact that for many decades after Social Security was first enacted, the ratio of workers to eligible retirees was around 10-to-1. Today, that figure is just 3-to-1. By the Social Security Administration’s own estimates, that critical ratio is expected to drop to less than 2-to-1 by the year 2030.

However, the Social Security Administration has long been aware of this fairly obvious problem. By itself, the declining ratio of workers to retirees would only necessitate a modest 25 percent reduction in benefits. But a collapsing ratio could endanger the entire program.

Bauman says that the collapse of marriage rates is particularly troubling. He points to the fact that men, in particular, are failing to get married. And Bauman believes that the trends that have pushed the median age of first marriage for men up nearly a decade are likely to continue, if not accelerate. This is extremely important, he says, because married men, on average, earn $15,000 more than those who are not married.

This is a serious problem due to the progressive nature of the Social Security system. Bauman explains that someone making an average yearly salary of $15,000 per year will get far more out of Social Security, on a proportional basis, than someone who makes $50,000 per year. This is based on the heavily progressive formula for Social Security distributions where the person receives 90 percent of the first $900 of average monthly income, just 32 percent of the next $4,500 and just 15 percent of everything up to $128,000.

An army of single men who would have been married and earning $40,000 in 1990 but might only be earning $20,000 in 2030 could, by itself, potentially sink the entire system.

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