Introducing The Future Poor
The majority will retire at or below a poverty level of income
Research has shown that people don’t have a great ability to identify with their future self. Imagining who you are going to be in 10 or 20 years is like thinking about an absolute stranger. A by-product of this is that it is hard to save for future you or retired you.
“How do you envision retirement?” I ask.
“Something similar to today?” people reply in a puzzled and unsure tone.
It is challenging to take serious action on behalf of future you when present you is encountering all kinds of present things, especially financially. So, we show financial and savings data. As powerful as it is, it doesn’t seem to move the needle that much.
This presents a bit of a dilemma since The Future Poor is about future you and future me and our future financial situation.
Do you want to be poor in the future?
I am sure your answer is an emphatic, “NO!”
Do you believe you will be living at or below a poverty level of income after your working years?
No, again.
How about a different question?
If you were to stop working today, how would you generate $5,000 a month of passive income?
Maybe you have some ideas. Maybe the government would cover part. Collect unemployment. Use some savings. Cash out an account or two that you have.
How about generating $10,000 a month in passive income?
Where would that amount of money come from?
How long could you do it for?
Before moving forward, I encourage you to take about 10 minutes pondering how you would generating between $5,000-10,000 a month from passive sources today.
(10 minutes later…)
This is retirement income in a nutshell. Passive income from various sources for the rest of your life.
What would you say if I told you that your current sources of passive income for retirement are going to have you living at or below the U.S. poverty level when you retire?
Take a minute to think about that sentence.
Read it again in the first-person.
“I am going to be living at or below the U.S. poverty level when I retire.”
I imagine you mind is already churning out reasons why you think this prediction does not apply to you. Do any of your reasons include -
“I have a good job.”
“I make good money.”
“I contribute to my 401(k).”
“I have money in savings.”
“I fund my ROTH IRA.”
“I own a home.”
“I am not poor.”
Those are solid steps in the right direction but are no guarantee that you will avoid the future reality of living at or below the U.S. poverty level of income when you retire.
So think back to how did you answer the original question of generating between $5,000-10,000 a month in passive income and start the journey.
I need you to come back with me., back to the Future.
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So what is The Future Poor and are you one of them?
The thesis is simple and works like this. 95% of the people in the U.S. are under 50 years old (sub-50) and/or make under $150,000/year (sub-150). The persons in this group will not have enough saved for retirement to generate enough retirement income to get them over the poverty level.
How can this be calculated?
It is a combination of several factors. First, the amount that people already have saved for retirement or other savings. Second, is how much people are saving, how many more years they will save and how that money will grow. Most of all financial planning only goes this far. However, there are two other steps. Step three is to calculate the amount of income you can expect from what you have saved. Finally, what will that amount be worth in future dollars. This takes into account inflation and how a single dollar buys less and less over time.
There can be complicated mathematical computations for looking at this so let me simplify the math into the supporting evidence for the original thesis. Simply put, persons in the Sub-50/Sub-150 don’t have enough saved and do not have enough time and monthly savings to make up the gap between where they are and where they need to be. Ultimately, these persons will have limited income in retirement that will be at or below a poverty level of income.
This is the central theme of The Future Poor so that we can understand how we got here, who is responsible and what we can do about this dilemma.