Early Baby Boomers (1946-1964) were moving into their teen years when President Kennedy was elected. The Kennedys were young, good looking and reminded people of Snow White and Prince Charming.
Times were good. We were not at war, jobs were plentiful, the suburbs were exploding as home ownership became available for the middle class.
We bought our first home in 1960; $99 down and $99/month. I complained when mortgage rates jumped from 4.125% to 4.250%. It took my payment to $102/month.
Political Dictionary tells us about the “Camelot” vision:
“‘Camelot’ is a reference to President John F. Kennedy’s administration.
Kennedy’s brief, ill-fated presidency has been highly mythologized; some people point to it as a shining example of what the US government should look like. Calling that administration ‘Camelot’ highlights its idealized qualities.
…. ‘Camelot’ evokes utopian ideals and high hopes.
…. Jackie Kennedy…was the first to refer to the JFK administration as Camelot. She gave an interview to Life magazine just days after JFK’s assassination.
‘Don’t let it be forgot, that for one brief, shining moment there was Camelot,’ she said.”
Baby boomers had great opportunities in front of them. Why not Camelot?
Get a good education, a nice job, provide for your family, and retire comfortably with a hardy, guaranteed pension. Add in social security and you could enjoy your golden years without having to worry about money.
What the heck happened?
The Vietnam War did much to divide this country. Baby Boomers wanted no part of going to war. It did much to foster anti-government sentiment and created a political divide.
After Kennedy was assassinated, LBJ ushered in “The Great Society” with massive, underfunded government giveaway programs, including the war.
Richard Nixon followed, taking the US off the gold standard in 1971. Their decisions are now being felt by Baby Boomers – the generation that allowed the political class to implement those programs.
An early Camelot pillar to fall was 401k’s replacing pension plans. Employers saved for their workers, calculating employees’ retirement benefits based on their years of service and final salary. The employer bore the risk of funding, investing, estimating longevity, calculating, and paying the guaranteed benefits.
Corporate America jumped at the chance to unload pension obligations. They grandfathered in their older employees and rolled over money for younger employees into a 401k account.
The responsibility for retirement was passed from employer to worker. They had to save and invest wisely, and there was no “guaranteed benefit” payout. You’re on your own!
Most government employees still have pensions, but the bulk of the private sector must fend for themselves.
Some private sector pensioners were betrayed by their employers. The major airlines declared bankruptcy, turned their pension obligations to the government, managed by the Pension Benefit Guaranty Corporation. The available funding was used to recalculate employee benefits and they were adjusted accordingly. Many retirees who thought their pension was “guaranteed” saw their benefits cut by 40-50%. No Camelot here.
Viola! The Magic Number Appears
Brokerage houses and financial planning firms jumped into the new game. They advertised, “Come see us for a free financial analysis”, touting sophisticated, computer retirement planning programs. They saw the opportunity to earn billions in fees from the public, the vast majority of which had little investment knowledge.
Those who had Microsoft Money or Quicken had this feature as part of their program. The computer asked questions, you filled in the blanks and out popped your “The Magic Number”; the amount of money you needed to meet your retirement goals. For many it was a shock, they started late and had to increase savings and cut spending to “catch up.”
The brokerage firms recommended diversified portfolios, generally suggesting their company’s fee based mutual funds. Today the top five banks control almost half of the industry’s total assets. Camelot for them….
The Moving Targets
The program began with your age and current savings. You estimated how much you would continue to save, what investment returns you expected, how much income you needed when you retired, and the anticipated inflation rate.
You added your estimated investment income with other sources of income like social security. Hopefully you were good to go. If not, you may have to work longer, save more, invest better, or cut back on your standard of living.
There is nothing funny about the saying, “How come there is so much life left at the end of the money?” Make the tough choices while still working and planning, it gives you time to get and stay on track.
The goal of retirement planning is to provide for a comfortable lifestyle, without having to constantly worry about money.
Brokerage firms suggested you would earn 10% on your money, supporting their claims with historical data. They reassured us you could ALWAYS COUNT ON 6% in CDs and bonds. In very small print you would probably find a disclaimer, “past performance does not guarantee future results.”
It was unrealistic to expect 10% returns. Nothing was mentioned about the risks it takes to earn double-digit returns. After retirement will you expect boom times or economic downturns?
When early Baby Boomers turned 65, (2010) real interest rates were negative. The 6%, inflation-beating return you could ALWAYS COUNT ON was gone.
Citing historical data, planners guided you into assuming a 2% inflation rate.
The Bureau of Labor Statistics changed the method of calculating inflation from the 1980s when 401k’s came on the scene. Shadowstats.com provides us with both sets of data:
Assuming 2% inflation was also unrealistic. Real inflation has averaged double digits. The Boomers’ “magic number” was woefully inadequate. Baby Boomers are earning less investment income (safely) while spending a lot more in retirement than they anticipated. Camelot’s “utopian ideals and high hopes” vanished.
What about Social Security?
Sovereign man reports:
“A few weeks ago, the Board of Trustees for Social Security released its annual report. And, once again, it was a scathing indictment of the program’s solvency.
Primarily, the report points out that, since 2008, the cost of Social Security has been “increasing much more rapidly than [its income] and is projected to continue to do so through about 2040.”
And at that rate, the trustees explain, “Trust Fund reserves become fully depleted in 2034”.
…. And in case you’re wondering, “Who exactly are these Social Security Trustees?” They include none other than the Treasury Secretary of the United States, the US Secretary of Labor, and the US Secretary of Health and Human Services.
These aren’t ‘fringe’ economists spreading misinformation. They are three of the senior-most political officials in the country. And they’ve signed their name to a report stating that Social Security’s primary trust fund is going to run out of money.”
What happens when Social Security runs out of money?
Experts estimate that retirees will take a permanent 25% reduction starting in 2035.
Social security taxes would have to be raised 16.5%, almost triple the current rate to fund current obligations. The politicians continue to ignore the problem.
Boomers have already seen the full retirement date moved back, Medicare premiums skyrocket ahead of inflation, and there is talk of means-testing benefits. I feel all the above will happen to some degree. Social Security as it exists today, is unsustainable!
FDR’s Camelot became nothing more than broken politicians’ promises.
Fantasy to Reality
Jo and I were in a Missouri laundromat, vacationing in our motor home. We hooked up our notebook computer to a pay phone, logged in to our brokerage account and updated our data. Bingo! We surpassed our “magic number.” We cheered, hugged, jumped up and down, and celebrated over dinner.
The “magic number” provided incentive to save – but is not dependable today. It was based on safe, stable investment income, realistic inflation, an orderly market, and the government keeping promises. There is no certainty in any of the variables today, including pensions.
During the decade of easy money, GE borrowed millions at low interest rates, bought back their company stock, declared nice dividends, but did NOTHING to shore up their underfunded pension plan. GE’s debt will eventually have to be refinanced at higher rates and pensioners are rightfully worried.
Protect your nest egg
Baby boomers can’t be risk takers. They must seek out sources of reliable, dependable income. Stay on top of what was peddled as “high yield & safe” by the casino banks.
Wolf Street reports, “Bonds of Bed Bath & Beyond Collapse on Bankruptcy Fears as Suppliers with Unpaid Bills Halt Shipments.” I fear this is one of many to come.
Much like the dividends that Tim Plaehn promotes in The Dividend Hunter, focus on SAFE INCOME. Look for investments that can continue to pay their obligations through hard times. Many of my dividend stocks have dropped, but the income keeps coming in.
Camelot is a fantasy. There is no magic number, “set it and forget it” retirement plan. Accept reality and deal with it!
Monitor your investments, keep your financial education up to date, exercise some discipline and patience, keep your stop losses current and most Baby Boomers will be just fine. Camelot be damned!
For more information, check out my website or follow me on FaceBook.
Until next time…
Dennis
“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken
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“Get a good education, a nice job, provide for your family, and retire comfortably with a hardy, guaranteed pension. Add in social security and you could enjoy your golden years without having to worry about money.”
Add in ‘work hard’ and isn’t this what boomers are still selling the younger generations?
I’m thinking those pension providing jobs are fading into the sunset.
Unless you are a government parasite. And even if your useless pension administrators lost all the funds, the thieving government will steal more to replace what was lost, just like they stole your salary in the first place.
which receives more – those who worked for the government and receive a pension for it, or those who do no work at all and receive welfare?
Personal welfare or corporate welfare?
(grin) either.
though “corporate welfare” is tricky. (fill in the blank) security always requires government support/subsidies. e.g. take processing chip manufacturing – the capitalist ideal would be to outsource all our military computer needs to china or third world nations, but that is inherently contrary to the needs of defending the u.s.
even on-demand welfare is tricky. with a large population of ineducable unemployable sub-iq85’s, is it cheaper to 1) pay them to live in the ghetto or 2) put down their raging antics in YOUR neighborhood?
not always a simple issue.
The actual capitalist ideal is to have a free market where property rights are protected by equally applied laws.
Crony capitalism/mercantilism/fascism is entirely different.
I’m sure you know that.
in a free market, everything is up for sale to the highest bidder, and it all devolves down to “crony capitalism” and all the rest.
certainly you know that.
No, markets are not in fact “free” if the government is intervening.
There are no market “cronies” except cronies of the government.
Speaking personally, will you sell anything to the highest bidder? If so, that’s your right.
It “devolves” “into something unfree when the government intervenes.
Do you want a “legal” cap on what you can ask for your house, or your used car? That would keep that evil “highest bidder” from getting them.
Please, if you are thinking of it, please spare me any talk about “monopolies”, which exist in fact only when they are granted by governments.
The only free market is the black market.
Trump is a big advocate of “property rights”. Why he even subscribes to eminent domain for private gain.
I meant more along the lines of people and their paper companies over a certain size just getting free money like with covid relief.
“Corporate welfare” is when the government pays to support favored corporations, or grants them monopolies, or writes “regulations” that give them an advantage, or bails them out when they fail, or passes laws to protect them.
Certainly you know that.
“when the government pays to support favored corporations, or grants them monopolies”
the issue is the reason why that is done.
I’m sure you know that.
The issue is the use/abuse of power that is allowed in the hands of the government. Crony capitalism REQUIRES a powerful government.
It is done because corrupt governments want the financial and monetary support of the cronies they create.
It’s interesting my donut shop went belly up. No one from government , or local peeps came to the rescue with a bailout.
The fact that you’re still breathing proves that you are the recipient of God’s welfare.
Put a price on that.
Retired government worker here. Worked with a few slugs that should have been fired but management wouldn’t do what was necessary to do so. The thought that would cross my mind occasionally was at least they show up for work and put in the time, they could be sitting at home watching tv collecting welfare.
“Worked with a few slugs that should have been fired but management wouldn’t do what was necessary to do so.”
(nod) good reason for that.
government work is never for profit, but you need large numbers of (hopefully) trained and capable people standing around waiting for when the necessary work suddenly appears. for example, a navy can’t be whistled up at the drop of a hat, it requires extensive resources to build and maintain it (both the ships and the people) to have it ready when you need it. and the people need job security and pensions to compensate them for their time or they just won’t be there when you need them. and for the most part the whole point of their work is not to generate profit, but to prevent loss.
so that’s the overall culture, and a necessary one. that it can harbor slugs is an unfortunate but inevitable feature of the system.
It’s much cheaper to have them on “welfare”.
Were you unionized? Even FDR saw the inherent problem and ultimate evil of unionizing government employees. They negotiate for wages and benefits with people who don’t have to pay for what they concede to give up.
there’s always “evils”. the issue is which set of evils is more tolerable, and the problem in deciding that is everyone argues from their own limited-view “what’s in it for me?” benefit.
Voluntary unions are fine, and may be necessary, but unionizing government employees is another thing entirely. They get to negotiate benefits and wages with people who don’t have to pay for the increased wages and benefits, and the union cronies are perfectly willing to support the politicians who grant them all the goodies.
Let our government officials and lawmakers pay the increase they allow themselves instead of passing the cost on to others and see how long they allow government unions.
“What’s in it for me” benefits also have costs. At least in a real world of free markets.
Pensions are a trade off. They are funded with money created by your productivity, and it’s much better, in my opinion, to get the money up front and manage it yourself.
“it’s much better, in my opinion, to get the money up front and manage it yourself”
1) that would escalate the immediate hiring cost of any employee to impossible levels, 2) before the employee had put in any time working. you’d like it sure, but no employer anywhere would ever do this.
1) that would escalate the immediate hiring cost of any employee to impossible levels,…”.
What makes you think so?
Could you not also say that providing pensions would escalate the cost to “impossible” levels?
Employers, just like other people, try to buy the services of working people at the lowest cost, while considering the quality of the labor they are buying.
Employers can pay “X” dollars to employees, and whether they pay it all to the employees or put some of it in a pension fund, what they are willing to pay (or can afford to pay) doesn’t change.
Not if they are honest, although “work hard” is always good advice.
Anyway, I started an IRA as soon as they were invented, managed the money I put in it myself, and mostly kept up with (real) inflation. Soon, as I began to make more money (and because I was living frugally) I started buying gold and silver. This was the early 80’s, and it was relatively cheap.
I had a life, so I didn’t spend much time managing my IRA, and I only sold gold once, when the IRS penalized me $30,000 1980’s dollars for tilting at windmills in the Federal Courts.
I never expected S.S. to last until I retired, so I planned to not get it, and now I am, despite the fact that I can live comfortably until I die without it.
Times are different now (obviously) so I advise young people to buy useful and durable tangible things; guns, ammo, storeable food, emergency generators and other essentials. Something that will be recognized as real money, which most of them have never experienced. Mostly they don’t listen to me.
Being old, I advise my old friends to have as much fun as they can while they can, which is good advice for old people, although I remind them that it won’t be any fun if they are cold and hungry and worrying about barbarians.
*Voila. For EC.
A poster here was boasting about their pension now being managed by government. “Success” on that “depends” on many factors like maybe a government going bankrupt. Side note, all the people that continue to dig for government pays me this, government pays me that aka government handouts, keep it up “patriots”, the type of “patriots” that have voted Trump BTW.
I had a pension. It was replaced by what sounded like a good deal, rather than the 50% match on 401k contributions ( I refrain from saying “investment” this time) , the company would match 100%. On man, what a deal, the stock market took a big dive, around ’07-08 as I recall so the pension would still have been the best deal. The qualifications for keeping one’s pension was one had to have been under the employment of the company 1996 or before. I came on the scene around 2001 and managed five years in the pension but then the revamp in the rules. The company graciously sent me a check for the “value” of the pension. Better than nothing and nothing is what people will be looking at going forward. pensions anyway and the roll of the dice known as 401k.
BTW ….NATIONAL 401K DAY tomorrow. Yippee. DUPED
Then they subordinated all retirement health plans under Medicare and fully shifted retirement onto the backs of the workers and the ever-growing debt monster.
“nothing is what people will be looking at going forward”
oh there will always be a pension/welfare/other payment. but what it will be able to buy is questionable.
As I pass through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market-Place.
Peering through reverent fingers I watch them flourish and fall.
And the Gods of the Copybook Headings, I notice, outlast them all.
We were living in trees when they met us. They showed us each in turn.
That water would certainly wet us, as Fire would certainly burn:
But we found them lacking in Uplift, Vision, and Breadth of Mind,
So we left them to teach the Gorillas while we followed the March of Mankind.
We moved as the Spirit listed. They never altered their pace,
Being neither clud nor wind-borne like the Gods of the Market-Place;
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its ice field, or the lights had gone out in Rome.
With the Hopes that our World is built on they were utterly out of touch.
They denied that the Moon was Stilton; they denied she was even Dutch.
They denied that Wishes were Horses; they denied that a Pig had Wings.
So we worshiped the Gods of the Market Who promised these beautiful things.
When the Cambrian measures were forming, They promiced perpetual peace.
They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,
And the Gods of the Copybook Headings said: ‘Stick to the Devil you know.’
On the first Feminian Sandstones we were promised the Fuller Life
(Which started by loving our neighbor and ended by loving his wife)
Till our women had no more children and the men lost reason and faith,
And the Gods of the Copybook Headings said: ‘The Wages of Sin is Death/’
In the Carboniferous Epoch we were promised abundance for all,
By robbing selective Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: ‘If you don’t work you die.’
The the Gods of the Market tumbled, and their smooth-tongued wizards withdrew,
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four—
And the Gods of the Copybook Headings limped up to explain it once more
As it will be in the future, it was at the birth of Man—
There are only four things certain since Social Progress began:—
That the Dog returns to his Vomit and the Sow returns to her mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire;
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!
“What The Heck Happened To Camelot?”
the federal reserve. “all your money are belong to us.”
Camelot ended in Dallas Texas 11/23/63 when LBJ took office and decided to spend Trillion$ and Trillion$ of our tax $ buying black votes for democrats.
Anyone remember LBJ’s most famous quote?
Was it the one where LBJ is holding the beagle dog up by his ears and said “Fauci, get your skinny ass over here and get to work on this here dog.”
http://archive.boston.com/news/politics/gallery/063007presidentialpooches?pg=5
This one.
and he succeeded.
The strategy is still succeeding.
No, it’s beginning to fail, and will fail entirely very soon- and we’re a long ways short of 200 years.
That’s the money quote alright!
Camelot was a fantasy.
camelot was concocted by jackie & the writer theodore white a short time after kennedy’s assassination —
good article,dennis–
Great job screwing the future
Every $ that is paid out of the SS “Trust Fund” is a $ that Uncle Stasi will have to “borrow” from the Fed because the “trust fund” is nothing more that a bunch of IOU’s from Uncle Stasi to himself. The debt pyramid is has just about run its course.
What happened to Camelot? The very worst of human nature, an evil handed down from one civilization to the next for thousands of years.
Headlines today read, U.S. stocks rise for 3rd straight day as investors price in rate rises and a fall in the dollar.
Yippee ki-yay.
What The Heck Happened To Camelot?
Walt would proffer the answer, but won’t because he’s neither a racist or an anti semite.