Someday Rich by Timothy Noonan

With Social Security in flames and interest rates at 100-year lows, it must be awfully difficult to be a Retirement Planner. While this book from 2012 hints at the calamity, it never actually realizes the implications of what it's saying.

At a minimum, we should expect Planners to present clients with odds-weighted outcomes for Social Security, and odds-weighted investment regimes. Neither of these are particularly difficult to do. For Social Security, we basically have three outcomes: taxes go up for young people, and retirees get their promised payouts; the age of retirement gets pushed back N years; or payments to retirees are reduced. Estimates of Social Security exhaustion range from 2041 to 2052, i.e. likely to occur within a 30- or 40-year-old's lifetime.

With investment regimes, are we going to see growth similar to what we saw in the last 50 years, or what we saw a century ago with lower gains to capital? Relying on the last 75 years of investment returns data (8% for the S&P 500, and 6% for bonds) does not seem prudent given the extraordinary interest-rates we see around the world today.

The problem with incorporating both of these uncertainties into a retirement plan is that it takes money right out of a Planner's wallet.

The basic economics of a Retirement Planner's practice depend upon its clients, and there are only three kinds of prospective clients: 1) people who have lots of assets and any sane plan will work, 2) people with some assets and cannot afford to mis-plan, and 3) people who have no hope of retirement. People in Group 2 are the typical clients of ethical Planners.

Because of Social Insecurity and abysmal rates, more savings are required, which reduces the number of people in Group 2. While Planners will gain some higher-net-worth clients, they will lose much more lesser-net-worth clients due to the classic power-law distribution of wealth. Fewer clients = less revenue.

There is some help in that it seems that the general public has internalized an apparent increase in uncertainty, as people now expect to retire later.

So what's a Retirement Planner to do?