Sunday, January 22, 2012

Article: Recovery at risk as Americans raid savings

 In the past, I’ve posted multiple articles related to America’s debt crisis. I’m one of those who’s convinced that America national debt is a ticking time bomb that could go off at any time.

But equally significant is that America is facing a looming crisis. It’s not talked about at much, but is equally significant. Most Americans are not financially prepared for retirement; they simply don’t have enough saved up to retire comfortably, and most don’t even have a realistic idea of how much they’ll need to retire with dignity.

Furthermore, pensions themselves cant necessarily be counted on. Sure, federal pensions seem pretty secure, since even if the worst of crises the government can always print money it needs to meet its pension obligations to its federal retirees. But what about municipal pensions? That’s another issue. State and local governments cant print money, so if they go bankrupt they’ll have no way to pay their retirees if they go broke. Those pension checks that city workers expect to live on in their golden years might simply not be there, period. Now if the idea of states, cities, and municipalities going bankrupt seems far-fetched, I would encourage the reader to check out articles such as this and this.

This of course, is something not given nearly the kind of coverage in the mainstream media that it deserves. And that, frankly, is another of those issues that irks me about our mainstream media. They would rather spend time reporting on Kim Kardashian, Dancing With The Stars, American Idol, etc, that deal with some of the really important issues that should be a serious concern to the American people.

Anyway, as I go on my own personal quest this year to become totally debt free (I normally don’t make New Years resolutions, but this year I did… and this is one I intend to keep), I’ve found myself reading more and more about just how unprepared most of us are when it comes to having the kind of money we’ll need to live a lifestyle comparable to what we’re live now when we work full-time. The numbers can be almost a little scary sometimes, and I hope to put up some more articles in the not-too-distant future, just highlighting how serious and daunting the situation actually is.

Anyway, without further ado, and before I ramble on too much more, I’ll just get to the article that caught my eye and inspired this particular post "Recovery at risk as Americans raid savings".

Excerpt here:

NEW YORK | Thu Jan 19, 2012 12:46pm EST
(Reuters) - More than four years after the United States fell into recession, many Americans have resorted to raiding their savings to get them through the stop-start economic recovery.

In an ominous sign for America's economic growth prospects, workers are paring back contributions to college funds and growing numbers are borrowing from their retirement accounts.

Some policymakers worry that a recent spike in credit card usage could mean that people, many of whom are struggling on incomes that have lagged inflation, are taking out new debt just to meet the costs of day-to-day living.

American households "have been spending recently in a way that did not seem in line with income growth. So somehow they've been doing that through perhaps additional credit card usage," Chicago Federal Reserve President Charles Evans said on Friday.

"If they saw future income and employment increasing strongly then that would be reasonable. But I don't see that. So I've been puzzled by this," he said.

After a few years of relative frugality, the amount of money that Americans are saving has fallen back to its lowest level since December 2007 when the recession began. The personal saving rate dipped in November to 3.5 percent, down from 5.1 percent a year earlier, according to the U.S. Commerce Department.

Jeff Fielkow, an executive vice president at a recycling company in Milwaukee, Wisconsin, contributed less to retirement savings and significantly cut back on dining in restaurants and taking vacations in order to keep college savings on track for his two children. "We would love to save more," he said, "but we're doing the best we can."

Full article here

The simple fact is, America has changed. This is the new reality, the New America. It seems like it's just starting to dawn on most Americans that we're probably not going back to the days of old. Social Security is not secure, pensions are not secure. Waiting for the government to take care of us when we retire is just plain crazy. Most of us are behind where we should be in terms of retirement funding. But even worse, very few Americans who are behind actually realize how far behind they are (See sample retirement calculator here).
That really needs to change, and I believe it will... eventually. But meanwhile, dont wait on the mainstream media to spend much time sounding the alarm on this issue. 

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