He may be a murderous bastard with no conscience, but if Frank Underwood were a real-life candidate for the presidency, I would vote for him.
Frank is not a real person, of course. He’s the crooked politician Kevin Spacey portrays in the Netflix series House of Cards who claws his way into the White House by manipulating the press and ruthlessly crushing anyone that might get in his way. But sadly, with one line, he delivered more honesty than I have seen from any president, senator or House representative, from either party, in my lifetime:
“We’ve been crippled by Social Security. By Medicare. Medicaid. Welfare. And entitlements. And that is the root of the problem. Entitlements. Let me be clear: You are entitled to nothing.”
Social Security and Medicare are not “rights” in any sort of legal sense. Congress decides on the payout, and Congress can change it — or eliminate it — at any time. You really are not “entitled” to anything, and certainly not guaranteed.
But that’s not the message we get from our leaders. They’ll tell us whatever they need to get re-elected.
And while it’s not fun to hear, it’s important to keep it in mind when planning for retirement. Always move forward with the assumption that your benefits in retirement will be lower than currently promised … possibly much lower.
So here are some specific recommendations on how to approach your planning:
- Focus on income rather that the “magic number.” Most financial planning centers around amassing a nest egg of a certain size, but this is completely backwards as it doesn’t take market yields into account. A million-dollar bond portfolio that would have paid $40,000 ten years ago would only pay about $22,000 today.
- Consider investments you might not have considered before, like preferred stock and closed-end bond funds. With the stock market priced to deliver lousy returns over the next decade — and yielding a pitiful 1.8% in dividends — these investments can deliver solid income if bought at a good price.
- While I’ve never been a fan of variable annuities due to their high fees and maddening complexity, an immediate annuity, like a pension, can be a great way to receive a steady stream of income.
- Use market volatility to your advantage. There are sectors of the stock market that fluctuate so wildly that you have the opportunity to make tremendous gains in a very short amount of time. Of course, the risks here are obvious, which is why you should piggy-back off someone who knows what they’re doing.
Don’t assume you’ll have jerry-rigged government programs to fall back on. Assume you’re entitled to nothing, and set about planning accordingly.