The 401(k) crisis is getting worse

Tim Egan has been working since he was 14. He’s now 56 and has spent most of his career as a restaurant manager. He has virtually nothing saved for retirement and, until last month, never had a 401(k) account. 

Egan’s story isn’t unusual among the legions of Americans who work part time, switch jobs frequently or earn their livings at small companies, which generated two-thirds of all new jobs last year. Even as people live longer and must save more for old age than prior generations, most can not depend on any help from employers. Almost half of U.S. workers didn’t have a company-sponsored retirement plan in 2013, compared with 39 percent in 1999, according to an analysis of Census Bureau data by the Schwartz Center for Economic Policy Analysis at the New School for Social Research in New York.

DYI Comments:  After more than 40 years observing and talking to people about budgeting and investing to end this savings crises is to have a mandated national investment savings plan.
When the masses are left to their own devices examples such as Tim Egan are all too common.  How many of us know of friends or relatives when it comes to money are a disaster.  You can talk to them as the expression goes "til you are blue in the face" but to no avail.  So many today are completely dependent on Social Security living out their remaining years one step away from object poverty.

DYI's National Savings Plan

Having 10% of one's earnings "piggy backed" into private accounts through the Social Security Department.  From day one of one's employment 10% would automatically deducted from their paycheck.  Self employed would be required as well to make the increased deposits to Social Security.  All deposits would be pretax.

At age 60 if the participant desires and required at age 70 to make withdraws based upon average mortality.  The withdraw would either have monies systematically withdrawn from their account or they could purchase a lifetime annuity insured by the federal government.

Withdraws are based on three life events:
1.  Death...Willed to whoever the participant desires
2.  Disability...Confirmed by 2 physicians
3.  Retirement age 60 and required to begin withdraws age 70.

National Savings Plan Investments 

Four broad investments to cover all long term economic conditions:  25% in each investment category.

1.  Prosperity
25%  Common stocks of 1st world countries excluding natural resource and real estate companies.

2.  Inflation
15% Common stocks of natural resource and real estate companies of all 1st world countries.
  5%  Physical gold
  5%  Physical Silver

3.  Deflation
25%  Long duration bonds of investment grade corporations and long duration bonds of 1st world countries.

4.  Recession
25%  Short duration bills and notes of investment grade corporations and short duration bills and notes of 1st world countries.

The four equal parts would be maintained by buying the under performing asset from the participants who are contributing and selling the over performing asset who are withdrawing.

Costs would be very low due to high volume but ultra low turnover.  Each category depending on the economy will do better than the others but as the account is re-balanced through workers contributing to the under performing asset and retirees withdrawing from the over performing asset the overall account will grow.  A similar investment method called The Permanent Portfolio returns would be very close to DYI's National Savings Plan.

The Permanent Portfolio is constructed as follows:

25%  U.S. stocks

25%  Long duration U.S. government Bonds

25%  Short duration bills and notes of investment grade U.S. corporation and bills and notes of the U.S.  Federal government.

25%  Physical Gold

Below is a chart by Crawling Road showing the performance of the Permanent Portfolio.

 
Over this time period 1971 to 2012 the average annual return was 9.6%.  All of this has transpired with very low volatility with only three years of modest declines [1981 -4.1%  1994 -2.6%  2008 -0.7%].

DYI's National Savings Plan would put an end to heart breaking stories such as report by Boomberg. Simple, low cost, and easy for the general masses to understand.  All other programs would continue to be effect [(Social Security and Medicare) (401k's Roth etc.)] only this would keep our citizens out of poverty during their remaining years of life.

DYI