- You think your chances of collecting Social Security are bad? Look overseas…
- Our income specialist has a talk with his teenage son… and there’s a profitable lesson in it for you
- Where’d all the penny stocks go? And does it even matter?
- The only “relevant” inflation gauge for the mainstream is on the rise
- Conspiracy-minded readers write: Did Gary Webb really kill himself? And what about an item on bin Laden’s bookshelf we omitted?
Well, there you go: Only one in five working-age Americans thinks they’ll collect Social Security benefits at their current levels by the time they retire.
Another 31% figure they’ll get reduced benefits. And 41% expect to get squat.
The Pew Research Center is out with a new study comparing the attitudes of Americans, Germans and Italians. It’s a study in contrasts, because in Germany and Italy, more than a fifth of the population is already 65 or older. The United States won’t reach that milestone for another 35 years.
Thus are Germans and Italians even gloomier about their prospects of collecting old-age benefits once they retire. While 20% of working-age Americans think they’ll get full benefits, that number shrinks to 11% in Germany and 7% in Italy.
“There’s no way my oldest son will be able to collect benefits from Social Security when he’s old enough to retire,” declares our income specialist Zach Scheidt.
Zach’s 15-year-old is getting his first job this summer — a job that requires filling out a W-4 form and having income withheld, that is. “When his first paycheck arrives,” Zach tells us, “we’ll go out to lunch and look it over.”
The first thing Zach will point out is the 7.65% of his son’s pay that’s withheld for Social Security. The next thing he’ll point out is the 7.65% “employer portion” that doesn’t show up on the pay stub.
And then he’ll point out the ugly reality: “According to the trustees in charge of the Social Security Trust Fund, the fund will run out of cash in 2033. That’s less than 20 years from now, well before David will be anywhere close to retiring.”
The withholding will be permanent.
“Even retirees collecting Social Security now are getting a bad deal,” Zach continues.
“According to the Social Security website, the average retired couple (with both individuals receiving Social Security benefits) will be paid $2,176 per month this year. And that’s after a 1.7% increase to account for higher costs of living.
“I don’t know about you, but a $2,176 monthly paycheck isn’t enough for me to do the things I want to do when I retire.”
And the trajectory’s only getting worse, according to the Urban Institute.
We spotlighted these numbers last year in The Daily Reckoning, and they bear repeating. The average person who turned 65 in 1980 paid an average $96,000 into the Social Security system over his working life… and collected $203,000 in benefits.
But someone turning 65 in 2030 — that’s you if you turn 50 this year — will pay an average $398,000 into the system… and get back only $336,000.
Back to Zach and his son: “So as David and I look over his first paycheck, I’ll advise him not to expect anything back from his ‘investment’ in Social Security. I’ll tell him instead to focus on setting some of his money aside, putting it to work generating income for him down the road.”
“The U.S. Social Security program has been on my mind lately,” explains Zach, “largely because of the research I’ve been doing on Canada’s Pension Plan.
“As you may know, Canada’s Pension Plan (CPP) is the Canadian equivalent of our U.S. Social Security program. Only the CPP is run completely differently than ours.
“See, Social Security takes money from workers and ‘invests’ it in Treasury securities. Since Treasury securities are essentially government IOUs, that means the government is simply borrowing our Social Security money.”
Not to mention how Treasury yields are near historic lows — heh.
“But the Canada Pension Plan has an entirely different approach,” says Zach. “In the 1990s, Canada hired a team of investors to take the money in the Pension Plan and invest it in growing assets around the world. Canada expects to actually grow its reserves year after year by using the power of a free market.”
Perhaps you’ve seen this chart before, but Zach urged us to include it in today’s episode of The 5. It shows the projected value of the Canada Pension Plan over the next 25 years.
“The good news,” says Zach, “is that you can harness some of the same returns the Canada Pension Plan gets by ‘piggybacking’ the system.
“Piggybacking on this plan is a great way to boost your Social Security benefits. It’s almost like having a side job to supplement your income.
“If you’re already collecting Social Security benefits or expect to receive them in the near future, or if you doubt you’ll ever receive a Social Security benefit check, this program can work for you.”
With three simple steps, Zach is walking readers just like you through the process… and helping them secure their retirement with monthly payouts as high as $4,700 a month.
Zach knows of a fellow from Illinois who at age 72 is collecting up to $2,230 a month. “He told me that this is his ‘primary means of financial security’… and there is no way he could have retired without it.”
But the longer you wait, the more payouts you forfeit. It pays to get started now. Here’s where to act.
Traders are knocking off early for the long weekend: The major stock indexes are showing little movement on low volume. As we write, the S&P 500 has pulled back a point from yesterday’s record close of 2,130.
Gold sits near where it did 24 hours ago at $1,207. Which demonstrates resilience — the dollar index is up strongly this morning, back above 96 for the first time since late last month.
Crude, meanwhile, is back below $60.
Whatever happened to penny stocks? That’s the question on the mind of our Jonas Elmerraji. As well it should be, since he’s the editor of Penny Stock Fortunes.
“Half a dozen years ago,” he says, “there were 73 stocks under $10 in the S&P 500 index. Today, there are only three!” Even in the small-stock Russell 2000, only 20% of the names trade for $10 or less.
So what gives? “For starters,” says Jonas, “we’ve been in a multiyear bull market. And inflation has made a $2 stock in 1975 about the same as a $9 stock in 2014.”
More to the point, “only your position size and gain percentage determine your profits on an investment,” he says, “not the share price of the stock. If you start off with $1,000 to invest, it doesn’t matter if you own 1,000 shares of a $1 stock or 50 shares of a $20 stock. Either way, it’s a $1,000 investment. And either way, a 50% gain in that investment pays you the same $500 profit.
“Good investors don’t measure how cheap a stock is by its share price,” he concludes. Instead, we measure cheapness, or value, based on the value of assets that share price gets you.
“If your $1 stock gives you claim to 50 cents in company assets, it’s a lot more expensive than a $20 stock that gives you claim to $30 in company assets.”
Inflation ain’t what it used to be either — or so we conclude from this morning’s consumer price index issued by the Bureau of Labor Statistics.
Remember when mainstream wonks told us the headline inflation rate doesn’t matter and it’s the “core” rate we should watch? Food and energy prices are “volatile,” they said, so the core rate is a more reliable gauge.
Of course, that was when the core rate was substantially lower than the headline rate. Time and again here in The 5, we mocked “inflation for people who don’t eat and drive.”
This morning’s CPI figure shows a 0.1% increase during April… and a year-over-year decline of 0.2%. Not surprising with gasoline prices nearly a buck lower than they were a year ago.
But the core rate? That rose 0.3% last month. And check out the internals. Again, this is just during April…
- Medical costs up 0.7%
- Education costs up 0.5%
- Shelter costs up 0.3% (for the third time in four months)
- Furniture costs up 1.3%
- Used cars up 0.6%.
And the year-over-year increase in the core rate works out to 1.8%. It’s been rising steadily all year. Heck, it’s near the Fed’s 2% sweet spot! There’s even chatter on the Street this morning about the Fed raising rates in September again, instead of December.
The real-world inflation rate as measured by John Williams at ShadowStats is 7.4%. Much higher than the official number, of course, but also the lowest since late 2009.
“Skepticism is good, but beware of buying into conspiracy theories,” reads the first of several emails after our conspiracy issue yesterday.
“I can buy much of Seymour Hersh’s story, but remember all of his story came from a Pakistani intel chief with some agenda of his own. But the preplanning with the Pakistanis and then the double cross by Obama with a quickly made-up cover story reads very true for me as a retired military officer with many contacts here in D.C.
“But rehashing an idiotic conspiracy theory on the Pan Am crash is too much. As a pilot myself, we don’t like to think our aircraft can blow up on their own, but there are many instances of fuel tanks exploding, including an Air Force DC-10 on a ramp.
“Boeing actually promoted the shoot-down theory to deflect attention away for their fuel tank design issue. I know the U.S. Air Force officer with the FAA that validated all military activity in the northeast the day of the accident. I know the lead FBI special agent who investigated it as well. I also know a number of airline pilots who are famous for buying into conspiracy theories. You have to have something to talk about for several hours on the flight deck.
“Just because you can’t explain (or don’t know) every element of something doesn’t mean there is a conspiracy there.”
“Just a small question from a closet conspiracy theorist,” says another note. “Did Gary Webb really kill himself?
“Thanks for The 5! I really enjoy your breadth of coverage and open-mindedness in nearly all matters.”
The 5: We defer to Webb’s friend Robert Parry, the reporter who scored many of the biggest Iran-Contra scoops in the 1980s. He says Webb killed himself, and that’s good enough for us.
“I was disappointed that you did not take the opportunity to mention another book that was on bin Laden’s bookshelf: Rogue State. I read this after bin Laden said in 2006 that every American citizen should read it if they wanted to understand why he did what he did.
“Written by a former U.S. State Department employee, it details some of the many dirty tricks committed by the U.S. government on foreign powers — even our ‘friends.’
“There was widespread media attention at the time, but I have not met a single person since then that has even heard of the book, much less read it. Sad.”
The 5: Here, we’re familiar with Blum’s work, although we concede we have not read any of his books.
It was Blum who pointed out a few years ago that Barack Obama’s autobiography describes a job he took after graduating from Columbia but didn’t identify the company by name.
Turns out a New York Times story from 2007 identifies the firm as Business International Corp.
Missing from that story, however, was the Times’ own reporting from 1977 identifying Business International Corp. as having been a CIA front company during the 1950s. A prestigious British intelligence journal has reported it was still active in the ’80s, monkeying with elections in Fiji and Australia.
Blum acknowledges none of this proves anything… but avers “it’s valid to wonder if the inscrutable Mr. Obama is concealing something about his own association with this world.”
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. Don’t forget about our own venture into the unraveling of mysterious events — our JFK expose, available here.
P.P.S. We’re back tomorrow with our Saturday wrap-up edition, 5 Things You Need to Know — in case you missed an episode or two of The 5 this week and want to catch up in the easiest way possible.
U.S. markets are closed Monday for Memorial Day. The weekday edition of The 5 returns on Tuesday.
