(do you really think others should not be allowed to enjoy chocolate or a nice cup of coffee in the morning?), but simple laws of supply and demand tell us that if global demand is climbing past a certain point, then supply is constrained and prices will rise. This is particularly true of the more complex proteins like beef. It takes a lot of feed to produce just one pound of beef versus the relatively smaller amounts required to produce one pound of fish.
Another easy factor to observe is that we are simply living longer lives.
If you don't see that when you are out and about in your daily lives – well we've got some data to share with you. According to a report from the Stanford Center on Longevity (SCL), in 1950 a 65-year-old man could expect to live to age 78, or an additional 13 years. By 2010, a man age 65 could expect to live to age 82, or 17 years longer. A woman age 65 in 1950 could expect to live another 15 years, to age 80, but by 2010 her life expectancy was 84.
The same report shows that the average length of retirement in 1950 was 8 years for men, increasing to 19 years by 2010. This is due to the combination of earlier retirement ages and longer life expectancies. (There are no comparable figures for women, since women didn't enter the paid workforce in substantial numbers until the 1970s.)
Another SCL report shows that the percentage of older employees in the workforce is back on the upswing. In 1950, 45 percent of men age 65 and older were still working. This percentage declined to about 15 percent by 1990, but increased slowly to about 22 percent by 2010. (It's worth noting that this figure encompasses all men over age 65, including men in their 80s and 90s. The percentages of men working in their late 60s and early 70s are much higher.)
Another important difference between then and now is that in 1950, retirement hadn't yet been glamorized by the media as the “golden years,” an extended period of travel and recreation. Most retirees didn't retire to pursue their hobbies and interests – rather, they stopped working because they were unable to continue. After retirement, they lived simply and modestly in the communities where they had worked and lived all their lives. And it bears repeating, the average length of retirement today is far longer than it was several years ago. The rise in the standards of living has been a blessing, of course, but it also has been accompanied by a rise in expectations – expectations that require a lot more funds to fulfill than in years past.
According to the Administration on Aging (yes, there is such an institution, and it can be found at www.aoa.gov), by the end of 2009 (that latest year for which data are available), persons 65 years or older numbered 39.6 million, roughly 13 percent of the U.S. population, or one in every eight Americans. By 2030, the AOA estimates there will be about 72.1 million older persons, more than twice the number in 2000. Keep in mind, the current domestic population according to the U.S. Census is 319 million people and some simple math tells us that as the number of retirees more than doubles from the current 48 million, we will be facing a retirement crisis.
Living longer lives is not a new concept. When we trace back to 1900, we find the percentage of Americans 65+ has more than tripled (from 4.1 percent in 1900 to 12.9 percent by 2009). In looking at the data, it becomes clear that it's not just more people who are 65+, but the population cohort itself is living longer. In 2008, the 65–74 age group (20.8 million) was 9.5 times larger than in 1900, while the 75–84 group (13.1 million) was 17 times larger and the 85+ group (5.6 million) was 46 times larger. This really put the data into perspective for us: A child born in 2007 could expect to live 77.9 years, about 30 years longer than a child born in 1900.
As a result of increasing longevity and the decline in the average number of children people are having, the domestic population is skewing older. That pace began to accelerate even further in 2011, when the Baby Boomer generation (those born between January 1, 1946, and December 31, 1964) started turning 65. Beginning January 1, 2011, every single day more than 10,000 Baby Boomers will reach the age of 65. That is going to keep happening every single day for the next 19 years and will add roughly 70 million to the 65+ category.
But what if you're a few decades or more away from entering your Golden Years and are a member of Generation X?
If you were born between the early 1960s and the early 1980s, then you're probably between the ages of 33 and 53 years old. Even more likely, between 2007 and 2010, you saw a drop in your wealth coming out of the Great Recession. Perhaps you lost your job for a while or thought you were going to…maybe you were one of the lucky ones who didn't have those concerns, but if you did, it meant falling behind in your savings and investing efforts. Unlike those at or near the door of retirement, Gen-Xers as well as Millennials (if you were born between the early 1980s and early 2000s) have time on their side when it comes to saving and investing for their retirement and other life goals.
Despite the time factor that affords the power of compound investing, more Millennials have opted to choose cash as their favorite long-term investment than any other age group, according to a new Bankrate.com. Per that report, 39 percent of Millennials surveyed said cash was their preferred way to invest money they don't need for at least 10 years – that was three times the number who picked the stock market.
The eschewing of the stock market by Millennials is likely to prove a costly mistake and raises the question as to where and how you are building your nest egg. If you are a diligent saver and have been putting money in the bank, the returns you are getting given the low interest rate environment won't help you much. Simply saving in a bank account is not going to get you where you need to be for an eventual retirement. Over the last few years, the Federal Reserve's easy money polices and artificially low interest rates have left you earning next to nothing in your savings accounts or with CDs. The Fed has begun raising interest rates again, but even if we get back to average interest rates on savings accounts and CDs, they will barely put a dent in the amount you'll need over the course of your life.
The Rules Have Changed
Consider that if you put away $250 per month over a period of 30 years in a savings account, you will probably end up with something around $145,000. If you could only sock that much away each month for a period of 20 years, you would have more like $82,000. As you can imagine, if you only had 10 years of saving like that, you would have even far less.
How would you feel upon realizing that you didn't prepare sufficiently – and by that we mean save and invest properly and you had to alter your lifestyle when you finally retire? Think that's far-fetched? A survey conducted by The American Association of Retired People (AARP) found that 60 percent of New Yorkers over the age of 50 said they were likely to go somewhere else in retirement. The same survey found 40 percent worried about paying rent or mortgages, 56 percent were extremely or very worried about paying property taxes, 51 percent worried about utility bills and most were looking for improvements in healthcare, housing, transportation, and jobs for older residents.
The bottom line is you need to grow your savings in order to meet the money needs you will have. In our view, one of the best if not the best way to achieve this is through investing in the stock market, but we need to warn you that the rules of investing have changed.
Although 2013 was a banner year for the stock market with the S&P 500 up more than 32 percent and 2014 saw the index rise another 11.4 percent, a longer view shows that the 15-year total return as of October 31, 2015, for the S&P 500 was less than 3 percent (see Figure 1.2).
Figure 1.2 S&P 500 trailing total returns as of October 31, 2015
Source: Morningstar
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