Baby Boomers Face Health & Retirement Crisis (excellent article)

note; I’m publishing this here in part because it is what will push many aging baby boomers into the practice of qigong as the cheapest and most effective form of medical self-care – as it become obvious that the govt and health insurance can’t fix your health. It happened in China with the barefoot doctors in the 1950’s after the Communists realized they couldn’t afford socialized medicine. So they trained everyone to take care of themselves – and it mostly worked.
-michael

Les Miserables of the Future: Baby Boomers
It’s an Unfolding Disaster! It’s Happening NOW! Here’s What You HAVE TO DO!
By Byron King, editor, Outstanding Investments (financial newsletter, $49.yr)

Do you think the current economic times are tough in the U.S.? Well, you ain’t seen nothing yet.

First of all, I’m just glad that you’re a subscriber to Outstanding Investments. It means that you’re far ahead of most other people when it comes to understanding what I’m about to tell you. After you read this article, you might want to forward it to friends and relatives. Because what I’m about to explain is so important that you owe it to share it.

I Pity the Baby Boomers

Let me be blunt. I pity most of the baby boom generation, born between 1946-1964. (And I’m a baby boomer! Go figure!) Most baby boomers better stand by for a miserable old age. Many baby boomers have lived charmed lives in comparison with most other people in the world. But in the coming decades, many baby boomers – and I hope NOT YOU – will find themselves living in abject poverty. They’ll be eating government cheese, if they’re lucky, supplemented occasionally with a can of nutritious cat food. A lot of baby boomers will look back and wish they had never been born.

Sound bad? It might be worse. I’m probably understating the case. What’s coming down the track is a societal train wreck. It’s derailing before our eyes RIGHT NOW. This disaster is rigged to trigger. The problem is HERE and IT’S GOING to happen.

You cannot avoid dealing with this issue. The best you might be able to do is dodge the bullet. And you have very little time to prepare. In this article, first I’ll describe the problem. In fact, I’ll explain it to you in detail. Then I’ll give you some ways to protect yourself.

Revisiting the Baby Boom

You know about the baby boom, right? World War II ended in 1945. Then about 10 million soldiers and sailors mustered out of the U.S. armed forces. Many came home, got married and started families. As the graph below shows, by the mid-1950s, U.S. birth rates were skyrocketing to more than double those of the Depression-era 1930s.

(The graph also shows a rise in births in the 1980s. This is called the “baby boom echo.” It was due to boomers having families of their own, plus wide-open immigration that increased the overall population of the U.S.)

The baby boom created a nation within a nation. According to the U.S. Census Bureau, over 78 million Americans (more than the population of Germany, for example) were born during the 18-year birth boom. Since 1946, that baby boom demographic has been moving through the American economy like a bulldozer through a flower bed. It has affected everything it has touched along the way.

For example, when the baby boomers were young, their parents needed housing, furniture, appliances and automobiles. So there was an economic boom focused on industries providing those needs. As the baby boomers got older, the U.S. went on a crash program to build more elementary schools, then middle schools, then high schools and college facilities. When the baby boomers decided in 1964 that they liked the Beatles, the Beatles became a worldwide phenomenon. When the baby boomers decided in 1968 that they didn’t like the Vietnam War, then they wrecked the presidency of Lyndon Johnson.

In the late 1960s, the baby boomers entered the work force. And the rest is history. The baby boomers have been making an impact on every part of U.S. economic and cultural life ever since.

The Math Catches up With the Baby Boomer Bow Wave

The first baby boomers – born in 1946 – started to turn 62 in 2008. So the train has already started to derail. Right now, some baby boomers are signing up for early retirement under Social Security. In just two years, in 2011, the boomer bow wave will start signing up for Medicare, at age 65.

Within the next few years, millions more baby boomers will retire every year. These are people born in the 1940s and 1950s. They’re out there, with names and Social Security numbers. They’ll turn 65, 66, 67 in due course, and they’re going to exit the work force. OK, so a few million might keep on working into their 70s, but probably not the bulk of them. These millions of retirees will start to draw Social Security and Medicare. About 75 million people (not the entire 78 million, because some boomers died early) will stop working, stop paying some taxes, stop paying into retirement programs. They’ll draw benefits from the federal till. It’s going to happen.

An Asteroid? Or Just a Budget-Busting, Economy-Wrecking Problem

The baby boomer retirees will hit the U.S. economy like a giant asteroid. In fact, it’s as if astronomers at Mount Palomar have been tracking this demographic asteroid as it has approached the Earth for the past 65 years. When it hits – and its outer edge is already at the top of the atmosphere, figuratively – it’ll change everything. Nothing will ever be the same in the U.S. or its economy. Because there’s a math problem here that nobody can solve.

In fact, there’s a massive, budget-busting, economy-wrecking problem. Neither Social Security nor Medicare has the funds to pay for all these baby boomers to retire and draw current levels of benefits over the long term. That is, the federal government has made expensive promises to tens of millions of people. But the money isn’t there. Worse, there’s virtually NO WAY that the money will ever be there. IT WON’T HAPPEN!

Pay as You Go Now; Wind up Flat Broke Later

Here’s what happened. The funding process for Social Security and Medicare is what’s called a “pay as you go” scheme. Today, your employer takes out the FICA portion of your paycheck and sends it in to the U.S. Treasury. Tomorrow, the U.S. Treasury turns around and pays those funds out to a current retiree. The government is not saving your FICA payments. If the government takes in more FICA tax than it pays out, the Social Security Trust Fund forks it over to the general revenues of the federal government. Then Congress spends it on things like government operations, stimulus programs, bureaucratic empire building, earmarks, bridges to nowhere and other chicken-fried pork. Any way you look at it, the money is gone. It’s spent.

In return for the excess FICA tax money, the Treasury issues bonds – IOUs, of a sort – to the Social Security Trust Fund for repayment in the future, plus interest. But do you really think that the Treasury will ever be able to pay them back? No way! The bottom line is that NO money is set aside to keep the Social Security and Medicare promises. And there won’t be in the future, either. It’s nothing but a big Ponzi scheme.

A Big Ponzi Scheme? Says Who?

Who says that Social Security is a big Ponzi scheme? Well, in about as many words, the trustees of Social Security say exactly that. The trustees estimate that paying the benefits promised under Social Security over the next 75 years will require all the anticipated tax receipts at current rates plus $5.7 trillion more than the existing payroll tax will provide. (That’s “trillion” with a “T.”) In other words, the federal government has promised $5.7 trillion over and above any taxes it expects to receive, from income that has not been earned. Just that deficit alone is about 40% of the entire GDP of the U.S. economy. It’s as if the whole U.S. economy worked for free for about five months. Can that possibly happen? Doubtful. Can you work for free for five months?

And just so you don’t get complacent over a trifling $5.7 trillion, the unfunded Medicare deficit is about five times larger than the gaping hole for Social Security. The Medicare trustees estimate that providing promised Medicare benefits over the next 75 years will require $29.9 trillion in new tax revenues – or more than twice the current GDP of the U.S. economy. Can the Medicare system raise that kind of money by taxing peoples’ paychecks? Are you kidding? It would require tax rates of 75% or more on everyone.

There’s Not Enough to Go Around

Eventually, half of government general tax revenues (with the customary FICA taxes of future workers) will go to pay Social Security and Medicare benefits to retirees. Most of the rest of government revenues will go to pay interest on the national debt, which is another exploding number within the federal budget. There will be hardly any funds left over. The implications are ominous.

If the federal government pays the promised benefits in full to every future baby boomer retiree, there will not be funds for things like running the federal courts or defending the country. And by the way, these are government functions required under the Constitution, as opposed to Social Security and Medicare, which are not. It will put Congress in the position of having to cut benefits to retirees in order to keep the doors open at the Supreme Court and the Pentagon. Conveniently for Congress, the Supreme Court long ago decided that Social Security payments are merely statutory transfers not based on any unalterable contract. See Flemming v. Nestor, 363 U.S. 603 (1960).

Or Congress could just compel the Federal Reserve to create currency out of thin air and buy bonds from the Treasury. That’s a recipe for inflation and the eventual destruction of the U.S. dollar.

However you play it, the whole pay-as-you-go idea has handicapped the nation. The federal government will have to cut back on retirement benefits to baby boomers. Or the government will massively scale back everything else it does, while raising taxes through the roof and, in all likelihood, inflating the currency supply for a few years of quick fix and dollar debasement. One thing is for sure: There’s not enough money to go around.

The Baby Boomers Will Be Broke

Thus, there’s a Grand Canyon-sized gap between what most baby boomers think is going to happen in their retirement years and the funds that will be there. Millions of baby boomers won’t get paid, or won’t get paid as much as they hope, or will get paid in debased dollars. Be forewarned. There’s no easy way around it.

Many baby boomers will just be plain broke. Their hopes and expectations will be dashed. Promises are going to get broken. The baby boomers are not going to receive the retirement security that they’ve been raised and conditioned to expect. Meanwhile, the taxpayers that are still working in the U.S. economy of the future will find their tax rates going up and the functions of the federal government cut back. They’ll pay more to receive less.

What Should You Expect?

The need to pay Social Security and Medicare benefits to future retirees – especially the large numbers of baby boomers who will soon hit the retirement rolls – will rip gaping holes in the federal budget.

You should plan your future as if you will receive fewer, if any, federal benefits. Because you’re NOT going to get what you expect from the federal government. Instead, you should expect benefit cuts and some sort of needs test for Social Security. Expect to pay higher taxes on whatever you do get every month. Expect that the value of the dollars you receive will tumble over time. Expect lower levels of Medicare coverage, with higher co-pays and contributions. The government will be rationing scarcity, so expect to wait in long lines for whatever you want.

Here’s the real bottom line. Expect to live with a system in which the people in charge of the government bureaucracy will show up to work every day hoping that you just die, and die soon. They will want you dead and off their books.

What Should You DO NOW?

So what should you do NOW? I could write a book on the subject. But the short answer is that you need to avoid debt. You should plan not to retire as early as you thought. You should expect you’ll have to keep working and earning an income for as long as you can stay in the game. And you should be saving, saving, saving.

Save money like your life depends on it, because in a few years, it will. You should have money in savings accounts. You should have money in certificates of deposit. You should have some money in coffee cans, down in the cellar (except that’s not the safest way to save, of course – but you get the point).

You should have 5-10% of your portfolio – or more, if it helps you sleep at night – in physical metals like gold and silver, stored in a good safe or safe-deposit box. As the value of the U.S. dollar declines, you’ll want a way to protect your purchasing power and preserve your wealth over time. Precious metals have done exactly this for centuries.

You should also have a solid investment position in some of the best precious metals miners in the world. Those include OI portfolio stocks like AngloGold Ashanti (AU: NYSE), Agnico-Eagle Mines (AEM: NYSE), Goldcorp (GG: NYSE), Kinross Gold Corp (KGC: NYSE), or Yamana Gold (AUY: NYSE).

Remember that we are already in the beginning phases of the demographic asteroid impact that will be caused by the retiring baby boomers. But most of the public are just not aware of what’s about to happen. Shamefully, most of the political and media class – if they are aware – aren’t discussing it. Yet the funding shortfall issue is so critical that it forms part of the senior curriculum at the Army, Navy and Air Force war colleges.

If you’ve read this far, then you’re already way ahead of all but a few others out there. And it means that right now you can gain a few precious steps on everyone else while you prepare for what’s about to occur.

Keep working and earning. Get out of debt. Save, save, save. Buy gold and silver. Build a solid mining portfolio. And don’t feel guilty about protecting yourself and your family. Because as things unfold, the rest of the world is just going to have to sort it all out.