A pension deficit disorder
I’ve written about this before: America’s ticking time bomb is its estimated $450 billion underfunded pension schemes. Many Baby Boomers are going to get horrific surprises when the pensions they’re relying on don’t materialise. Finally, the greed of the companies they’ve created will come home to roost.
This is a massive generational issue just brewing. Its going to explode in our lifetime.
There’s no new information in this post. But I had to write it because of the tagline CNBC have just given it. Don’t you love the title of this post?
Technorati tags: pension, management, business, crisis
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Seriously smart title!!
So how does all of this affect OUR pensions?
A good reason not to be on company pensions! Roll them over to your own 401k. Speaking of investments, how many in the younger generations are saving? Answer: In my experience? Next to nothing. I haven’t yet seen one who knows what the “rule of 72″ is. This doesn’t bode well for us all.
What’s the rule of 72?
It’s a rule of thumb. For simplicity’s sake, I’ll use couple of easy examples anyone can do in their head:
* 10% return on investment…
72 divided by 10 = 7.2
This means you double your money in 7.2 years, assuming a constant 10% return on your investment
* 7.2% return on investment…
72 divided by 7.2 = 10
At an assumed constant 7.2% return on investment, your money will double in 10 years.
Of course, no one is going to have a constant return on their money, which is why this is a rule of thumb. But it does demonstrate how your money can grow with compounded interest.