Let me be as clear as possible: Mass retirement in America is about to become a distant memory.
Thanks to the ongoing crisis in the world’s financial system, most baby boomers won’t be retiring anytime soon. And many of them will have to work into their 70s and beyond.
A 2011 study from the Transamerica Center for Retirement Studies reveals that more than three in five U.S. workers in their 50s and 60s plan on working past 65. And almost half of them (47%) say they’ll be forced to do so because they’ll need the money or the health benefits.
For many other seniors there may be no retirement. They will be forced to find whatever jobs they can to make ends meet.
This is not fair. It’s not right. And it certainly isn’t the American Dream.
But it is reality.
And the first step in making sure this doesn’t happen to you is to face up to reality…however unpalatable…and take steps NOW to make sure your savings are safe.
The Headwinds Facing America’s Would-Be Retirees
But before I get into that, here’s a quick reminder of some of the headwinds facing America’s would-be retirees:
- Most U.S.-focused stock market funds have delivered investors a big fat zero in terms of returns over the last decade. And the chances of further losses remains high. In fact, what lies ahead looks downright scary when you consider the tattered and battered state of the economy and the unlikelihood of further stimulus spending from Congress.
- The Federal Reserve has decided to evaporate yields on traditionally safe haven investments such as Treasury bonds and money market funds. Interest rates on bank CDs are also at historic lows. This punishes savers and forces them to seek our riskier stock market investments.
- House prices are still in a major slump. This means many boomers are underwater with their mortgages. Others who are more fortunate will still have less home equity to tap than before.
- No matter what the candidates say at their stump speeches in next year’s presidential race, the tax burden on the middle class is almost certain to rise. The U.S. economy is on the brink of a double-dip and debt is still rising. This leaves politicians only one option: hike taxes to pay for the mess.
Hope Is NOT a Strategy
So what can you do?
First, and perhaps most important, is that you do everything you can to embrace the reality of what is going on around you.
Hope is a wonderful thing. And it’s critically important to our mental health as human beings. But too many investors rely on hope as an investment strategy. And this can be a major money-loser in the investment business.
But what about specifics? Are there any moves you can make now to help protect your savings from further waves of general market volatility and selling?
3 Steps to Make NOW to Protect Your Savings
There are three important steps you can take now to help protect your portfolio.
1) Own gold – I know you’ve heard it before. And I know you probably think that gold has been rising for so long it must fall soon. Here’s my advice: Don’t try to be a market timer. Leave that to the professionals.
A good way to invest in gold without worrying about short-term price movements is to buy some every month. Pick an amount – say $500 – and invest that amount every month in a bullion-backed gold ETF such as the ETFS Physical Swiss Gold Shares (NYSE:SGOL).
2) Build a portfolio around “New CASSH” currencies – In the race to the bottom in the world’s currencies markets the currencies issued by New CASSH countries – which stands for New Zealand, Canada, Australia, Singapore, Switzerland and Hong Kong – are the least likely to lose value.
These are the places that stand to benefit most as the financial crisis drags on because they are either traditional safe havens with low debt and a strong financial system and/or they have lots of natural resource wealth (which will rise in value as the value of the dollar falls).
You can own these currencies directly through an EverBank WorldCurrency CD to diversify your savings outside the dollar.
3) Buy emerging market stocks – Emerging market stocks got clobbered in the recent bout of panic selling. But emerging economies have far fewer debt problems than the developed economies…and this will start to give them their own safe haven status, as Europe and America lurch from debt crisis to debt crisis.
And emerging markets are still where the growth is. China, for example, is growing at 9% this year, India at 7% and Brazil at 4%. When investors return to the markets looking for bargains, the emerging nations will likely be their first port of call.
Some emerging markets also offer great value opportunities right now. For instance, commodities-rich Russia is selling on a price-to-earnings ratio (P/E) of 7.1 now, compared to a P/E of 13.4 for the S&P 500. I expect these beaten down emerging markets plays to significantly outperform developed market plays over the coming years.