America’s Retirement Crisis: The Pressing Need to Address Social Security's Financial Woes - EP233

Mar 26, 2024

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Michael Johnston, CFA of WealthChannel and show host Gene Tunny dissect the pressing issues facing the US Social Security system. Amid predictions of future insolvency, they discuss the demographic trends, financial realities, and policy adjustments needed to safeguard retirement incomes for future generations.

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About this episode’s guest: Michael Johnston, CFA

Michael Johnston, CFA is a financial industry veteran with a passion for improving outcomes for retail investors.

Following stints in corporate finance and investment banking, Michael founded ETF Database (ETFdb) and grew it into the largest independent media property covering exchange-traded funds (ETFs). Under Michael’s leadership, the company achieved a commanding position within the ETF industry and played a key role in the “low cost revolution” that saw hundreds of billions of dollars flow from expensive mutual funds to low cost ETFs.

ETFdb is now a part of TSX Group, a publicly-traded financial services company that operates the Toronto Stock Exchange.

Michael co-founded WealthChannel with a mission of helping investors achieve financial independence by radically simplifying retirement planning and investing. Michael is responsible for WealthChannel’s content and education initiatives, including its flagship WealthChannel Academy.

Michael graduated from the University of Notre Dame with a degree in finance, and now resides in Oregon with his wife and son. He is active in his community as a member of the Board of Directors of the Lane Regional Air Protection Agency (LRAPA) and a volunteer at Hosea Youth Services.

What’s covered in EP233

[00:02:59] Sustainability of Social Security.
[00:03:52] Retirement crisis in America.
[00:09:43] Americans living longer.
[00:13:25] Social Security trust fund depletion.
[00:17:38] Social Security sustainability.
[00:18:59] Social Security Funding Solutions.
[00:24:36] Frankenstein policy solutions.
[00:27:50] Immigration and Social Security.
[00:30:46] Retirement age and social security.
[00:35:54] Retirement savings statistics.
[00:38:19] Retirement and financial literacy.
[00:41:26] Retirement savings options in the States.
[00:45:02] Social Security explained.
[00:50:26] Social Security and retirement accounts.

Takeaways

Social Security Sustainability: The Social Security program in the US faces sustainability challenges due to changing demographics and financial dynamics.
Retirement Crisis: There is a retirement crisis in the US, with nearly half of Americans having no retirement savings and relying heavily on Social Security for income in retirement.
Potential Solutions: Various solutions were discussed, including raising the retirement age, adjusting cost-of-living adjustments, and increasing contributions to shore up the system.
Individual Retirement Accounts: The US offers tax-effective retirement savings options like 401(k)s and Roth IRAs, but many Americans are not effectively using these tools.
Comparison with Other Countries: The discussion highlighted differences in retirement systems between the US and countries like Australia, where superannuation accounts play a significant role in retirement planning.

Links relevant to the conversation

Michael Johnston’s bio: https://wealthchannel.com/about/michael-johnston/
Wealth Channel Academy, Michael Johnston's initiative to demystify retirement planning: https://wealthchannel.com
Lumo Coffee, sponsor of the episode offering antioxidant-rich coffee: https://lumocoffee.com
Social Security Administration: https://www.ssa.gov/
Millions of Americans nearing retirement age with no savings - CBS News: https://www.cbsnews.com/news/millions-of-americans-nearing-retirement-age-no-savings/
EP87 – Saving & investing for retirement: 401(k)s, IRAs, mutual funds, ETFs, etc: https://economicsexplored.com/2021/05/15/ep87-saving-investing-for-retirement-401ks-iras-mutual-funds-etfs-etc/

Lumo Coffee promotion

Lumo Coffee Discount: Visit Lumo Coffee (lumocoffee.com) and use code EXPLORED20 for a 20% discount until April 30, 2024.

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au.

Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.