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Home » 401K, Retirement Planning

The Retirement Crisis that Could Lead to a Zombie Apocalypse

Last updated by on September 25, 2012

The U.S. Retirement Crisis

There has been increasing chatter lately about a need for reforming 401K’s in lieu of what is undoubtedly going to be a retirement crisis of epic proportions.

Didn’t realize a crisis was looming? Consider this:

Fewer than half of private sector workers are enrolled in a 401K plan and many don’t even have the option to enroll.

– 75% of those nearing retirement (age 50-64), have less than $30,000 in their retirement accounts.

– 35% of unemployed workers pull money from their retirement accounts and many withdraw early for other reasons. Why wouldn’t they? It’s easy to do.

– Nearly half of 401K accounts are cashed out when workers change jobs.

– 401K’s don’t provide any long-term annuity-like payments that guarantee a retiree will continue receiving income until their death, vs. outliving their balance.

– For those who actually do have a 401K, most of them have no clue on how to manage it properly and are likely not outpacing inflation.

Pensions, the primary source of retirement income for baby boomer and earlier generations, with their guaranteed payments, are all but dead for gen X and younger.

Most alarming, is the retirement deficit between what Americans have actually saved for retirement and what they should have saved for retirement is already $6.6 trillion! Fail!

401K’s have Largely Failed

Can a renewed focus on 401K’s be the savior of everyone’s financial future?

Ironically, 401K’s were created decades ago as a tax shelter benefit for high income earning employees. They were never intended to become the primary means of sustaining income and life in later years for the entire country. And if that was the intent, consider the experiment a colossal failure.

On a personal level, I’ve maxed out my 401K each of the last 7 years, enjoying a healthy 401K match the whole time. I’m confident I’ll be well-funded in retirement. If used the right way from a high income, high-saver, 401K’s can be great financial tools to cover the majority of your retirement expenses.

But clearly, the majority of Americans have not bought in to the self-directed nature of 401K’s. And I’m concerned. There are only so many Wal-Mart greeter jobs out there, after all.

And what happens when you have tens/hundreds of millions of seniors, unable to find or keep a job, with little to show for all of their years of hard work?

I’m envisioning nothing short of a zombie apocalypse of seniors roaming the streets in 30 years, looking to eat the brains of young children for precious vitamin-rich life sustenance because their 401K didn’t cover their Medicare gap on prescription meds.

retirement crisis

Fixing the Retirement Deficit

Big problem. How do you fix it?

It’s clear that:

  1. Social Security needs to be fixed and fully funded for generations to come – or there will be even bigger problems.
  2. 401K’s and IRA’s need to stick around with enrollment, contributions, and matches being further encouraged.
  3. #1 and #2 are not enough.

So what else can be done?

There has been talk about a new guaranteed retirement account that would provide a guaranteed annuity-style defined benefit, funded by individuals and employers – to help supplement Social Security.

I, for one, would welcome such a development, if it were structured in such a way to outpace inflation and it were 100% self-sufficient and supported by employees and employers vs. creating any additional government debt burdens.

Would I need it? Probably not. Would it be an added layer of security? Definitely. For many others? It might be a necessity.

Professor Teresa Ghilarducci, an advocate for guaranteed retirement accounts, sums up the need perfectly:

“Not yet convinced that failure is baked into the voluntary, self-directed, commercially run retirement plans system? Consider what would have to happen for it to work for you. First, figure out when you and your spouse will be laid off or be too sick to work. Second, figure out when you will die. Third, understand that you need to save 7 percent of every dollar you earn. (Didn’t start doing that when you were 25 and you are 55 now? Just save 30 percent of every dollar.) Fourth, earn at least 3 percent above inflation on your investments, every year. (Easy. Just find the best funds for the lowest price and have them optimally allocated.) Fifth, do not withdraw any funds when you lose your job, have a health problem, get divorced, buy a house or send a kid to college. Sixth, time your retirement account withdrawals so the last cent is spent the day you die.”

Yeah, sounds pretty ridiculous when you state it that way, Professor G.

Do we just rely on those hundreds of millions of future retirees out there to figure it out on their own? If we do, and they don’t figure it out, we all end up paying for their poverty, one way or another. Or… zombie apocalypse.

Retirement Crisis Discussion:

  • Are you in favor of an annuity-style guaranteed retirement account? Why or why not?
  • Would you want a guaranteed retirement account to be government run?
  • If you are in favor, how would you structure it?
  • If you are not in favor, how do you fix the looming retirement crisis, outside of suggesting everyone work until they die?

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About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 10,000+ others by getting FREE email updates. You can also explore every post I have written, in order.

  • Nicholas says:

    401k’s will eventually be taken over. Mark my words. When China stops buying our debt, and the Federal Reserve can no longer buy up the debt due to risk of hyperinflation, they will be taken over. They will step in and say they are ‘saving’ people from the volatility of having market based retirement plans (pointing to folks who retired in 2007/2008 as victims), and will instead offer “guaranteed” retirement accounts. Essentially, they will force you to buy government debt, so you will get something like 3% a year return. (Which, I would argue, doesn’t even keep up with the true rate of inflation.) That will be the next method in the endless kicking-the-can-down-the-road to the destruction of the dollar and implosion of the financial system.

    I promise you, this is coming.

  • Natalie H says:

    I would be in favor of changing social security to mirror a working retirement system. Australia, perhaps? However, I don’t think we need two systems. I don’t think two systems would help anything.

    It’s important to remember history. Retirement for the average person was only invented about 100 years ago. So I’m not even sure we need a guaranteed full retirement system. Remember pensions weren’t that great either. I know because my husband has one. After working for 7 years it will pay 0.6 percent of age 65 income. It becomes much better as you approach retirement age. But, who wants to be locked into the same company for life, with fear that if you lose or change jobs it will go away? Social security isn’t perfect, but lots of people depend on it and are able to get by. I know some of them. They do live very simple lives by US standards, but they are able to eat and put a roof over their head. SS isn’t perfect, but it generally accomplishes what it is intended to do.

    The problem with the 401k system as the primary retirement system is that it depends on people having good finances and making good choices in their 20s and then not messing it up, even once, for 45 years. I don’t know many people who can do that. If we want to fund a comfortable retirement for everyone, we’d have to change. Is that really what we want to do?

  • jim says:


    Spouse and I are both baby boomers. We don’t know ANYONE who has a pension – not a one. Maybe some of the older boomers have pensions but the mid-50’s boomers certainly don’t. Oh – and yeah, those crashes in 2000 and 2008 depleted our very responsibly-funded 401’s, Roth’s etc. Started all over again – twice – just as we were putting our kids (debt-free) thru college – something WE never had. After working (and working) our way thru college, living well below our means and paying off our grad school loans and then working another 25 plus years (again, living well below our means) we’re screwed come retirement time. Not to worry, younger generations. We plan on just dying in our homes ’cause we can’t afford long term care insurance and we certainly can’t cash flow a retirement home. We don’t intend to be a burden on your generation. Makes me wonder if we should have put our retirement needs ahead of your debt-free higher education.

  • Nathan says:

    While the idea of Social Security is nice for what it was designed for, it is a miserable failure as a retirement program. It was designed to ensure that those who lived an exceptionally long time would not be starving to death in their own homes. It was never designed to pay for millions of Americans’ living comfortable retirements.

    Here’s an unpopular solution: move the age to withdraw from Social Security upwards along with the average life expectancy. Today, that’s just over 78 years.

    This would save the U.S. $750 billion to $1 trillion per year, which could be used to pay down our crippling U.S. debt before it’s too late ($12,000 per second accruing in INTEREST). If we don’t do this, Gen Y, Z, AA, and every single generation until the end of the world will be working well into their 70s funding the lifestyles of their ancestors without any prayer of their own retirement.

    Stop trying to provide luxurious lifestyles for everyone. Social Security should be a safety net, not a comfy ride to the end of the rainbow.

    • Nicholas says:

      Excellent post. I would add that there should be an opt-out program for the younger generation. I’m extremely confident I could get a better rate of return on my money then the government gives me. Since I am an individualist, not a statist, I strongly believe that I have the right to decide how I wish to prepare for retirement.

      • Nicholas says:

        Additionally I forgot to add – Payroll Taxes that feed into ‘your’ Social Security account are by no means ‘your’ money. If you go back and read the FDR administrations defense of the New Deal before the Supreme Court – they made the case that the payroll tax is ‘just another tax’ that the government CHOOSES to fund citizens retirements. The government reserves the right to change how it chooses to spend that money at any given time. This was the winning argument in the supreme court. Having the government managing individuals retirement account is grossly unconstitutional, and FDR knew that would be a losing argument in court.

        A little history lesson!

      • Andrew says:

        “I’m extremely confident I could get a better rate of return on my money then the government gives me.”

        It’s nice you feel that way but it doesn’t mean it’s true. Think about why it is called “Social” Security…it’s to protect society from large amounts of unlucky/irresponsible individuals.

        • Nicholas says:

          No, it’s not that I ‘feel’ that way. I can back it up. I invested everything I had in gold/silver well over a decade ago. The returns I’ve been getting are unbelievable. Have fun with your monopoly money.

          • Nicholas says:

            Anyone who gets as low of a rate of return in the stock market as they get in their social security benefits shouldn’t be in the market in the first place. If you study free market economics, and simply pay attention to the decisions of policy-makers and the Federal Reserve – then there is NO reason anyone who be getting a low return. It has nothing to do with luck, and everything to do with knowledge.

            All this QE is going to make most of the country poor as hell – especially the elderly. I’ll be getting off like a bandit though, because I don’t keep my wealth in funny-money.

          • Andrew says:

            In your excitement to feel superior you missed my point which is that not everyone is going to do the right thing and invest properly.

          • Nicholas says:

            Again, this has nothing to do with “feelings” and all about facts. Of course people won’t invest properly. Why should I have take fund their retirement?

          • Nathan says:

            Agree with Nicholas.

            The biggest argument for Social Security is that people won’t do things right in the first place, so the Government needs to step in and make good decisions for them. That’s not what made our country great. What made it great is that people took responsibility for themselves and were proud to be able to make a living on their own and provide for their families.

            The more you hold people’s hand, the more they expect to have their hands held. Why do people not invest (not necessarily in the stock market) or save for the future? Because they think they don’t have to. They think the Government will provide for them. When the Government stops doing that, people will start paying attention and providing for themselves. If they don’t, why should taxpayers bail them out for their own poor decisions?

            It’s sad to see people not have enough money to pay their bills, but it’s even sadder to see people that have worked hard for everything they own not be able to pay their bills because they have to pay someone else’s.

          • G.E. Miller says:

            The reality is that 90% of the population does not know how to effectively save for retirement. Kudos to the 10% that do, but should we assume that the other 90% all want or expect handouts? (not that Social Security is hand-outs – you pay in to it and get back with gains).

          • Nick says:

            Social Security was an unsustainable handout program from the very get-go. The first person to collect Social Security was Ida May Fuller. She contributed $24.75 into Social Security. By the time she passed away, at age 100, she collected $22,888.92.

            That means the Federal Government had to take a heck of a lot of money from other people. How is that not a handout? This is just one of many, many examples.

          • G.E. Miller says:

            You can cherry pick examples – and sure, why not start with the first person to receive Social Security to show how un-just it all is… but Social Security has lasted almost 80 years already, and with a few minor tweaks to account for drugs and medical procedures artificially extending lives, it could be self-funded indefinitely. It’s done exactly what it was intended to do – provide a safety net for elderly and disabled. It’s been estimated to keep 40% percent of all Americans age 65 or older out of poverty. Who’s left picking up the tab in its absence? Loved ones, taxpayers, or do we send everyone out in the streets to be left for dead? You don’t live on an island, Nick. None of us do.

            I am personally saving at obscene levels – 85% of my income. I probably won’t need Social Security. But I also understand that shit happens. Hard working people fall on hard times. I’m glad it’s there, even if there are occasional abuses (and I’m sure there are). It does far greater good than bad for this society that we are all a part of.

          • Nick says:

            Self-funded indefinitely? Hardly. Do you have any idea how much funding for Social Security comes out of the General Fund to cover the massive overhead? Social Security disability insurance becomes insolvent in 4 years. This is a fact. This whole notion that if SS disappeared that all the sudden, millions would be left dying on the street is just a falsity. Do you think that’s what it was like before SS? No. Churches, charities, and the like filled in the gap. Churches provided medical coverage, free of charge before Medicare. You underestimate the compassion of people in this country. The notion that people won’t be compassionate and help others on their own, so we have to bully certain groups, put a gun to their head, so that they can “help” others (this is debatable whether it actually helps) is immoral self-righteous lazy bullying.

          • Nick says:

            I guess we’re going to have to agree to disagree, because clearly we will never convince each other. I believe it does far, far more harm then good. The money from the General Fund we use to fund the overhead for social security is rarely paid for in full, usually put on the national credit card so that we can bankrupt our children and our childrens children. Either that, or we simply have the Federal Reserve print the difference, which devalues the dollar for all, leads to price inflation, and those struggling get hit anyway.

            At some point, the house of cards will fall. The amazing thing is that most won’t understand why. The only reason we can get away with massive money printing and low interest rates as a country is because we are the world reserve currency. Once there is a run on US Treasuries, none of this will be sustainable. Hear me when I say that 2008 is going to look like the good times in comparison to what’s around the corner.

          • sam says:

            Better have at least 1 million in those metals which arent doing so well now. Last I knew, you cant eat gold or buy gas with gold.

          • sam says:

            New retirement plan coming out soon. One pistol with 2 bullets. Easy.

    • Gail says:

      Well, I think you are not very realistic in thinking people can work until they are 78 years old. The human body and mind just aren’t made to function at a high level for that long, except for a few rare people. Not everyone is or was able to save money from an early age.

      • Nathan says:

        I’m not saying people should work until 78. I’m saying the Government should not start paying you until you’re 78. In a sense, Social Security would shift from functioning as a retirement plan into “old age insurance” where one can plan to pay for their own financial security until age 78. Any time beyond that, they can expect to receive some financial help from the Social Security system.

        Obviously, this would happen over time. Perhaps increase the Social Security age by 1 year every 2 years. Even a slow change is better than nothing. Social Security cannot possibly withstand the current structure and will collapse entirely unless we shift responsibility to save for retirement to the individual. I’m not saying 100%, but it needs to start moving in that direction.

        I agree that a lot of people are unable to save when they are young. There are a lot of circumstances that prevent this. Some are legitimate (college debt, early parenthood, inability to find a job), but I would argue that most people have trouble separating “wants” and “needs” (i.e.: if you’re reading this article from an iPhone – you have enough money to start saving for retirement). However at fault someone is, even if they didn’t start saving until age 40, they could easily save up enough to live on between 65 and 78.

        Sure, you’re not going to be travelling the world and eating fancy every night, but that’s probably why they call it “Social Security” rather than “Social Luxury”.

    • jim says:

      Although I am one of the ones who would pay dearly for your proposed plan I FULLY support it. I am sick to death of this gov’t handing out one gov’t funded (i.e. welfare) program after another. I’d gladly sacrifice my life styly to ensure the well being of future generations.

      But – before we do that – how about we get all the frickin illegals and all the b.s. fraud out of the already existing welfare programs? If we did that, I’m willing to bet that we wouldn’t have to cut SS.

      • Nathan says:


        It’s good to see some people willing to sacrifice for the overall best interests of society. The problem with implementing change is that any politician that stands up there and says, “I’m going to reform Social Security” is going to be crucified – let alone be elected into public office.

        The problem starts with each one of us. Are we really willing to give up our wants for the benefit of someone else? Sadly, I’m afraid America as a whole speaks to a resounding “No!”

  • Ashley says:

    America needs to move to a system more in line with what Australia has, employers are forced to pay ~9% into their employees superannuation account (401k). That way even those who are not going to be able to be self funded retirees have a decent amount in savings.

    This alleviates pressure on the public system. The government also offers matching policies up to $1,500 per $1,000 put in depending on your income level and age. Meaning there is a huge incentive to co-contribute into your 401k still.

  • Eddie says:

    What the end of this article nails- and most opposed to a such guaranteed account seem to miss- is that we’ve not reached the point as a society where we’ll just stick rocks in grandpa’s pockets and roll him into the river if he’s broke. Whether through a lack of personal responsibility, bad luck, or a broken system, the fact remains a huge percentage of the population will not be ready for retirement when it comes, and the country as a whole will have to pay for it. Expect it, accept it.

  • Jason says:

    When social security was signed into law in 1935, the average life expectancy for a man was 58 years old and 61 for a woman ( It was never designed to pay out to the masses who now live to be 75 and 80 respectively ( I save as much money as I possibly can because I can be certain one person will take care of me. ME. Your mortgage shouldn’t be your biggest expense. Retirement should be.

    This country doesn’t have the political will or stamina to fix the problem the baby boom generation left behind them (much larger issues than SS). Determining future income needs presents an obvious challenge. Cell phone, internet bills, the massive increase in car, housing, energy prices and health care in the last 20 years all show us that you will need more than you think. What will we see come in the next 20 years? Robots taking care of us in old age? How much will that cost? In Japan, that is an expected reality that isn’t too far away.

    Some realistic things we should be considering:
    1. Your 401k better last to 80. 90 might be more realistic.
    2. Raise the SS age to 78 as Nathan said to avoid paying out to the masses
    3. Do everything you personally can to stay healthy
    4. Assume expenses will rise not fall

    I am 31. I expect to live much past 80. I think with the introduction of genetics into medicine will provide the next leap in increasing life expectancy as well as increasing the age we can productively work until. It makes 78 for a 31 year old an unrealistic SS payout age (too low) because people will be working until they are 70+ because they want to maintain a lifestyle they were unable to save for in their 20s, 30s and beyond.

    75% of 50-64 year olds have less than $30,000 saved? That is disturbing. I wonder how many of those people spend more than $30,000 per year?

  • Sonja says:

    Excellent post, just the topic we need to see with more frequency in mainstream media to give more perspective (and urgency) to the fiscal policy debates. When I first saw those stats in a NYT article, I was shocked.

    So many good points above but another thought I wanted to add is that by 2030 it is predicted that over 1/2 of Americans will be obese which will greatly add to the cost of medical care. We need a society that approaches healthy lifestyle as a personal and cultural necessity much like the Japanese did. I love what Michelle Obama started (regardless of politics, she is helping advance this idea).

    Another thought is that culturally, we’ve always prided ourselves on independence and going it alone which makes us somewhat of an anomoly globally speaking. The trend we will have to embrace is multi-generational housing. We’ve got that now with 1/3 of 20-30 living at home, but it is a favor that will have to be returned in future years and a trend that isn’t going away.

  • Erin says:

    Though I know at the rate I’m saving I will end up depending on social security, at the time it was implemented social security was only supposed to be for the oldest members of our society. People weren’t expected to live long enough to collect, and that is something that we need to correct. The retirement age should be raised and though I know I’m only hurting myself by saying so, it’s true. It is up to the individual to decide when they will retire and what quality of life they will expect, not up to the government. Social Security was envisioned as a tax not an entitlement, every person wasn’t meant to receive the benefits.

    • Andrew says:

      This is for everyone else who says we should raise the retirement age as well.

      James K. Galbraith

      The most dangerous conventional wisdom in the world today is the idea that with an older population, people must work longer and retire with less.

      This idea is being used to rationalize cuts in old-age benefits in numerous advanced countries — most recently in France, and soon in the United States. The cuts are disguised as increases in the minimum retirement age or as increases in the age at which full pensions will be paid.

      Such cuts have a perversely powerful logic: “We” are living longer. There are fewer workers to support each elderly person. Therefore “we” should work longer.

      But in the first place, “we” are not living longer. Wealthier elderly are; the non-wealthy not so much. Raising the retirement age cuts benefits for those who can’t wait to retire and who often won’t live long. Meanwhile, richer people with soft jobs work on: For them, it’s an easy call.

      Second, many workers retire because they can’t find jobs. They’re unemployed — or expect to become so. Extending the retirement age for them just means a longer job search, a futile waste of time and effort.

      Third, we don’t need the workers. Productivity gains and cheap imports mean that we can and do enjoy far more farm and factory goods than our forebears, with much less effort. Only a small fraction of today’s workers make things. Our problem is finding worthwhile work for people to do, not finding workers to produce the goods we consume.

      In the United States, the financial crisis has left the country with 11 million fewer jobs than Americans need now. No matter how aggressive the policy, we are not going to find 11 million new jobs soon. So common sense suggests we should make some decisions about who should have the first crack: older people, who have already worked three or four decades at hard jobs? Or younger people, many just out of school, with fresh skills and ambitions?

      The answer is obvious. Older people who would like to retire and would do so if they could afford it should get some help. The right step is to reduce, not increase, the full-benefits retirement age. As a rough cut, why not enact a three-year window during which the age for receiving full Social Security benefits would drop to 62 — providing a voluntary, one-time, grab-it-now bonus for leaving work? Let them go home! With a secure pension and medical care, they will be happier. Young people who need work will be happier. And there will also be more jobs. With pension security, older people will consume services until the end of their lives. They will become, each and every one, an employer.

      A proposal like this could transform a miserable jobs picture into a tolerable one, at a single stroke.

  • Chad Parks says:

    Hey G.E.
    Just came across your post here. Well written, thanks for it.

    I am producing a documentary which addresses this very issue, it is called:
    Broken Eggs Film: The Looming Retirement Crisis in America

    We even interviewed Professor G for the film.

    Check out our site, become an advocate, record a video for us, and spread the word!

    You and I should talk, would love to share notes and ideas with you.

    Chad Parks
    Executive Producer
    Broken Eggs Film


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