Ripples of "The New Normal" hit the big time at the Wall Street Journal

The "New Normal" I am referring to is that most Baby Boomers are going to be retiring on a tiny fraction of their working incomes, mostly derived from a shaky Social Security System. What a prospect!

Blogging away for years now with about 60-100 hits per day on this site, I have often felt that I was pretty much alone in my views about the level of "Middle Class Denial" (let's call it "MCD" and make it a syndrome) regarding pension realities. Baby Boomers are applying for Social Security (SS) at a reported rate of 10,000 per day, many on the first day they are eligible for benefits. I've heard from people old enough to qualify for SS, who have experienced a blow-up in their career that led to greatly reduced income. When they tried to apply for Social Security to supplement their reduced income, they discovered that you can only earn a maximum of $14,400 per year and draw on the benefits they've paid for for years. In my next blog I will review the basic parameters of Social Security, but my point today is about the WSJ article titled "Retiring Boomers Find 401(k) Plans Fall Short" . MCD has hit the mainstream press, so what will most of us do about it?

The article starts by saying "The 401(K) generation is beginning to retire, and it isn't a pretty sight." and goes downhill from there, stating that "the median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement."

Most people do not give a moment of thought to what they really need in terms of assets in a pension to live well in retirement. This article assumes that people need 85% of their working income after they retire. A typical SS benefit is between $1100 and $1600 per month.  I am not a pension actuary (math egghead), but I can do simple calculations. If we use $1600 per month that means $19,200 per year to live on. If that is 85% of your working income, then you were making $21,120 annually when you were working.

Dear readers, please let me know the retirement areas (preferably by the beach somewhere) where I can live on $19,200 per year. If this does not seem practical to you, then let us talk directly about what can be done now and going forward to maximize your pension potential. Remember that I sell nothing no investments of any kind, no pension services of any kind. I am not an investment or tax advisor. I am making a wake up call here and I am soliciting comments from readers about real world problems and solutions.