Think $1 Million Is Enough For Retirement? You're Wrong.

[Editor's Note: The following post is by TDV Editor-in-Chief, Jeff Berwick]

A million dollars…

Wow, seems like a lot of money doesn’t it?

Everybody would love to become a millionaire, retire without a worry and spend the rest of your days on earth having fun….

There’s just one major problem: $1 million dollars is the new middle-class. Do you have it in an IRA? Well, the government might be interested in confiscated it. In a domestic bank account? Well, legislation has been written legalizing a possible future bail-in. Some of the retirement money sitting in your account could be shaven drastically. That’s what has happened in Cyprus. How about a devaluation? That’s what the people of Ukraine are suffering through as I write.

In 1953 the movie “How to Marry a Millionaire” was out in theaters. $1 million back then bought the equivalent of $8.7 million today (based on manipulated government numbers, which means it actually buys much less). $1 million won’t even buy an average apartment in Manhattan today!

Why isn’t $1 million worth that much anymore? Inflation. The Federal Reserve is printing billions of dollars every single month! Ultra low interest rates in bond markets have also contributed. 

Unfortunately for US citizens, they will be the victims of a crisis which is only going to get much, much worse. People don’t have the money to start saving in the first place. They’re too busy keeping up with an extravagant and over-inflated lifestyle, taxes, fines and what have you not. On top of that, the United States has chosen a geo-political strategy that has led the rest of the world want off the US dollar. They don’t want to use it anymore. China is buying lots of gold. Russia is threatening to abandon the dollar altogether. 

When it came to saving, the old-paradigm told the middle class to get into bonds. So imagine your average 65-year-old couple with $1 million in tax-free municipal bonds, which they plan to drawdown at 4 percent per year. In the current economic situation, if they spend that $40,000 a year, adjusted for inflation, it is more than likely they will use their entire bond before they die. If they try to take just 2 percent out, they will have trouble getting by on $20,000, unless they live in a van.

“Thirty years ago, $1 million was a huge amount of money,” says Haitham “Hutch” Ashoo, CEO of Pillar Wealth Management, in Walnut Creek, Calif. “Today, given today’s lifestyles and costs, it isn’t so much money.”

“It translates into $40,000 to $50,000 (annually) in sustainable revenue,” says Joe Heider, regional managing principal for Rehmann Financial Group in Westlake, Ohio. “That is not that much money on an annual basis.”

Even if people try to tighten their belt and only live on essentials, the reality is life today comes with all sorts of new types of expenses – increased medical expenses, taxes, and of course food inflation. 

To make things worse, the days of pensions are long gone as well. The only money most Americans will have is that money they have saved.

“At the end of the day, if you want to have a quality retirement, to do what you want to do, I think you need at least $1 million,” says Michael Wall, president and founder of Wall Financial Group, in Altoona, Pa., and Palm Beach Gardens, Fla.

“A lot of my clients are 50-plus,” he says. “They are still from a world where they have a small pension. Some have real estate. Then there’s Social Security. A lot clients are in a place where they have lived below their means. They can live on a million.

“Not everyone will have $1 million,” he says. “They will not have the ability to have as many choices, to do and go and buy and travel. I definitely would suggest that clients shoot to have at least that much. You are talking about 30 or 40 years of unemployment, called retirement.”

THE BOTTOM LINE

There is some good news in all this. There are more millionaires. More than 9 million people in the US have $1 million or more.

But let’s forget about $1 million for moment. After all, $10,890 is the median financial net worth of an American household today, according to an economics professor at New York University. This is poverty. Most Americans are living in abject poverty. If they are not, they are still borrowing just as before the 2008 banking crisis. 

Governments have no qualms stealing money. As we wrote earlier this year:

The Commission is looking to ask the bloc’s insurance watchdog in the second half of 2014 for advice on how to draft a law “to mobilize more personal pension savings for long-term financing,” the document said. Mobilize seems such a palatable word for such flagrant tyranny.

The EU executive is also looking into introducing an EU savings account, open to individuals whose funds could be pooled and invested in small companies. Inspired by the US MyRA program (which we term “TheirRA”), Europe will look into such collectivized savings instruments, likely as a way to streamline the “mobilization” of depositors funds.  Interesting the US got to this instrument first…

The EU document states the Commission will “take into account possible future increases in the liquidity of a number of securitization products” and will also “review” how EU rules treat covered bonds by the end of this year, thus making it official the EU is not opposed to re-allowing many of the products which led to the 2008 financial crisis. 

Then of course there is MyRa in the US. Obama’s plan to help people save. The gist? You give the US government your money, and at the end of your life, they give it back. I am sure people are running to open up their very own MyRa account. 

ACTION ADVICE

The old way of savings won’t work into the future. In fact, neither will the old ways of working. As Wells Fargo found last year retirement is “a 20th century relic.” As you can see, quite a few people in a recent poll don’t believe they will ever retire:

So why bother with it? Forget retirement. You should be after something more meaningful anyway. Retirement was a concept developed in the twentieth century to keep people working as long as they possibly could in anticipation of the promise they could sit around and do nothing at the end of their life. For me, the concept of retiring is a lot like heaven. Pretty silly. 

I don’t ever plan on retiring. But why would I? I love what I do. I wasn’t scared to take risks and try for something more than my teachers were trying to prepare me for (a lackluster life). I chose what I wanted to do in my life and I did it, and I had a lot of success. I don’t need to retire. I just need to keep being productive and everything else will fall into place. 

That is unless I make dumb decisions like buy government bonds, keep my savings in a western based bank account or invest in the stock market via some liberal arts educated money manager. 

Instead, during this, the most dangerous time in history for human capital, I have to think on my toes. I’ve learned a lot of things throughout the years, and that’s why I started recommending precious metals in 2009. I wasn’t only recommending precious metals, but I was recommending you store those metals abroad. Many experts, like Jim Rogers and Marc Faber, have echoed that sentiment.   That’s why we prepared a globe-spanning report called Getting Your Gold Out Of Dodge, which will help you do just that.  Want to ensure that death is not your personal retirement? Click here.