The Retirement Car Crash
first published in Seeking Alpha | Mar. 23, 2017

Summary

There’s a retirement “car crash” waiting to happen for not only those of modest incomes, but now for even fairly well paid six-figure executives.

It is the consequence of multiple factors – revolutions in medical care, longevity, excessive debt and unabated material expectations.

Yet many, apparently well off, executives remain in denial.

But a life policy structure employing still more debt may strangely be a possible solution.

The so called “retirement gap” (the gap between income and expected expenditure during retirement) for those with modest incomes has been recognized for a long time. It was well documented in, for example, “A Tale of Two Retirements,” a research paper put out recently by the Institute for Policy Studies, a self-identified progressive think tank that researches economic and social issues such as inequality. Authors Sarah Anderson and Scott Klinger explained just how America’s inequality crisis has reached into retirement, with a collective failure of the 401(k) system.

You do not have to be some socialist to see that the report is a worrying indictment, with the report citing troubling facts such as:

Out of current 56- to 61-year-old US workers, 39% anticipate depending entirely on Social Security’s average $1,239 per month and some are forecasting Social Security bankruptcy by c. 2028/29
A sample of the top 100 CEOs have more in retirement assets than 75% of all US Latino families put together.

But now it is increasingly recognized that the retirement gap has spread pretty far up the income chain, probably starting to affect even the so called 1%. Today, many seemingly well-heeled executives (on six-figure or even multiple six-figure salaries) are facing a “retirement gap” also. In particular, whether planned or unplanned, retirement prior to or at age 65 may present many executives with an income gap which involves material scaling back in living standards (even with some pension entitlements being in place). The complexity surrounding stock-based compensation clouds the issue somewhat, as does where you work ($100,000 in, say, Sioux City goes much further than $100,000 in Manhattan), but the problem is becoming increasingly stark.