Just a Few Nuts a Day Makes All the Difference

Did you know that one in six Americans age 65 and older lives in poverty?

We discovered this while doing research for a new publication we’re working on about how to retire rich.  Quite frankly, we find this figure to be a shocking disgrace.  But what’s more, President Obama’s proposing to Mickey Mouse down the Social Security inflation adjustment.

The crux of the new adjustment is some academic hogwash called “chained-CPI.”  The whole premise of chained-CPI is that when the price of one thing goes up you can offset it by buying more of something else.  For example, when apples go up people can buy oranges, when Coke goes up they can buy Pepsi, and when tuna goes up…there’s always cat food.

No doubt, Obama’s being forced to do this by powers well beyond his control.  You see, the Social Security System was doomed to fail from the get go.  In 1939, John T. Flynn predicted Social Security would be under water by 1970, and insolvent by 1980.

Despite being called a crank by the political elites of the day, Flynn was right.  In fact, without the Greenspan Commission and the Social Security Reform Act of 1983, Flynn’s prediction would have been off by merely three years.

No Retirement Savings to Speak Of

Of course, it should be no surprise that Social Security is broke.  That it lasted as long as it has is the remarkable thing.  Still, somehow, it seems to be catching most people off guard.

Even though everyone’s known Social Security was going bust, most people haven’t done a thing to prepare for it.  Instead they’ve buried their collective heads in the sand like an unassuming ostrich.  Perhaps, they thought if they didn’t worry about it the problem would go away.

But, unfortunately, the retirement savings problem’s piled up like an auto wreck on Interstate 405 through West Los Angeles.  If you can believe it, three out of five families headed by a person age 65 or older have no money in retirement savings accounts.  Can you imagine?

People have worked their whole lives and have no retirement savings to speak of.  What’s more, of the two out of five families with retirement savings, half of them have less than $60,800.  Sadly, Social Security is the principle source of family income for nearly half of older Americans.

When it comes down to it, people have structured their entire lives so that they’re entirely dependent upon a shaky government hand at the precise moment when they’re most vulnerable…when they’re too old to work.  We’re not sure how people let this happen.  But they did nonetheless…

Just a Few Nuts a Day Makes All the Difference

“Sue Ann Flatley, who lives outside Tampa, is an example of what it is like to live almost entirely on Social Security with no savings and no house to sell if need be,” explains the New York Times.  “Ms. Flatley, 72, stayed home when her children were young, but then worked for 30 years before retiring as a certified nursing assistant at age 65.

“Divorced with three children in their 40s, Ms. Flatley receives $890 a month in Social Security.  Her rent, in subsidized housing, is $128 a month.  She has two bills, one from a clothing store credit card, the other from medical expenses from a hip replacement, that she is working to pay down at $50 to $100 a month.  Then there are her regular expenses, like phone, cable, electricity and trash collection bills.”

Obviously, we wish Ms. Flatley the best.  We don’t know all of the situations and circumstances that she’s lived through.  Life’s rarely fair.

Still, with a little foresight, planning, and discipline she wouldn’t have to worry so much about the possibility of Obama’s chained CPI proposal.  The simple fact of the matter is that Ms. Flatley was gainfully employed for 30 years.  If she’d squirrelled away just $6 dollars a day over that 30-year period, and assuming no interest or investment return, she’d have a $65,700 pile of nuts to draw from to supplement her $890 per month Social Security check.

Plus, if you factor in a modest 3-percent return over that period, Ms. Flatley’s pile grows to $104,190.  Assume a 5-percent return and she has a $145,501 heaping pile.  Certainly, life for her would be much different if only she’d saved a little each day…

‘“I have to be really careful with my check,’ she said.  ‘Usually every other month I can go to the grocery store and spend $130 to $150.  I buy a lot of freezer things.  I’ve been a diabetic for five years, and I can’t eat a lot of things.’

“She says that it is the unexpected expenses that are difficult to manage.  In August, she had to pay $72 to get new license plates for her car and $28 to change the address on her driver’s license.  ‘I would have been all right if I didn’t have to buy the tags on my car,’ she said.”

Here at the Economic Prism we disparage license plates and driver’s licenses…the world would be a better place without them.  It’s a shame that payment for such trivial annoyances is enough to completely blow through Ms. Flatley’s monthly budget.  You get the point…this could’ve all been avoided with just a few nuts a day.

Sincerely,

MN Gordon
for Economic Prism

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