The modern idea of retirement planning is less about financial independence and more about acclimating clients to the idea of social welfare programs. While some advisers continue to pay lip service to the ideas of financial independence and success, other advisers are awakening to the dim reality of their profession. The fact of the matter is that people are forced into relying on the government for income in their old age. According to the Social Security Administration:
- Social Security benefits represent about 41% of the income of the elderly.
- Among elderly Social Security beneficiaries, 54% of married couples and 73% of unmarried persons receive 50% or more of their income from Social Security.
- Among elderly Social Security beneficiaries, 22% of married couples, and about 43% of unmarried persons, rely on Social Security for 90% or more of their income.
According to the Employee Benefit Research Institute, the average retirement savings of people between the ages of 65–75 is $56,212. Younger generations don't fare any better. Here's how average savings breaks down for different age groups:
- Between the ages of 55–64: $69,127
- Between the ages of 45–54: $43,797
- Between the ages of 35–44: $22,460 and;
- Under the age of 35: $6,306
This money, combined with Social Security benefits, has to pay not only for living expenses but for medical expenses as well. In a recent study, the U.S. Department of Health and Human Services found that people who reach the age of 65 have a 40 percent chance of entering a nursing home. Out of that 40 percent, about 10 percent will stay there for five years or more. If your clients need long-term care, they will have to pay for these costs out of pocket or through a long-term care insurance policy.
The illusion of social programs as a successful retirement planning strategy
It's important to understand the history behind this. In 1883, Chancellor Otto Von Bismarck introduced the concept of retirement to the German people. His idea was to pay a pension to all non-working German people over the age of 65. Of course, most people didn't live to age 65 at that time in Germany. This meant that Bismark could expand his social program to fund a growing welfare state — something he wanted to do anyway. By inventing the modern concept of retirement, Bismark set the stage for a grand illusion.
The modern concept of retirement is an actualization of the welfare state mentality. Originally called a "social insurance program," Social Security was to provide a safety net for an individual in his old age. In fact, the official Progressive Party platform stated:
This country belongs to the people who inhabit it. Its resources, its business, its institutions and its laws should be utilized, maintained or altered in whatever manner will best promote the general interest.
Progressives of the 1900s did not believe in individual rights. They believed in "social justice." They believed that:
It is time to set the public welfare in the first place.
