August 24, 2013

Vanguard, the mutual fund company founded by Jack Bogle, earlier this month published an interview on longevity with two retirement experts. Titled “Ready to live to 100? Here’s why you should be,” the participants discussed the positive and negative aspects of longevity, the need for a “culture of saving,” and the risks of outliving one’s life savings.

In one interesting exchange, one of the experts notes that many people “assume that Social Security and Medicare will continue as they are, without any benefit cuts or tax increases,” but “this is simply infeasible: Social Security benefits under current law cannot be paid in full, since the government is unlikely to take in the revenue to cover them.”

Social Security is that third leg of the so-called three-legged retirement stool touted in many if not all government retirement seminars. But that leg is broken as the expert above unsentimentally states (and as we all know). The pension leg is increasingly expensive for new FERS “Revised Annuity Employees” (FERS RAE). The name says it all. Regular FERS employees (and military personnel) can assume that our pension contribution rates will rise in the future as well, given all the proposals to do just that in both Congress and the White House.

Will the TSP leg be able to make up for the other two legs?

Related topics: longevity