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Coming Soon: A Retirement Crisis

Adam Rust's picture

Posted December 1, 2010

Many Americans are never going to retire.

On Tuesday, I laid out an argument for why most Americans cannot afford a payday loan. The main thrust of that blog focused on the "median" American household, which has about $100,000 in assets.  But what about the majority of Americans are not median, and in particular, those individuals who fall onto the low side of the bell curve?

The low-income median is much lower. According to the 2007 Survey of Consumer Finances (pdf), the lowest quartile of American households had a median of $1,200 in net worth.  That is the good news. The median is much

You Can't Afford a Payday Loan

Adam Rust's picture

Posted November 29, 2010

It is a big problem that Americans are not saving enough, and it ought to be important when people gauge the logic of making unsecured credit available at any price.  

There is an argument out there that has been propogated by advocates of payday lending, buy-here pay-here car lenders, and other high cost credit products. Here is one example, from an interent payday loan broker:

Some of us live from paycheck to paycheck, and when an emergency happens in between, we’re really messed up because we’re broke. It is at these times that a quick payday loan is like a miracle. What if you chip a tooth or suddenly need two new tires? If with insurance, you still need to pay the dentist something, and there’s no tire company that is just going to give you free tires.

 You need money, and you need it quick. Payday advance lenders can have money in your bank account in a few hours at the most. It is so easy to qualify. All you need is a computer with Internet access. There is no faxing here. You sign everything electronically, and the money is yours. There is no need to cash a check because the money is directly deposited into your account. It’s practically like a Christmas present....Take it all in stride even if your money is short. Don’t get all crazy; just relax. A quick payday loan can fix everything.

Except that a payday loan doesn't fix anything.

Our economy isn't what it used to be. Even when there are plenty of jobs, many people are just barely getting by. There are too many jobs that only pay $9 per hour. On the cost of living side, the news is even worse. Health care costs continue to go up for everyone. Many families are burdened by the high cost of college tuition. Even though incomes have stagnated, prices for big purchases have not. It costs $25,000 to buy a no-frills midsize American sedan.

The other day, a financial planner laid it out for me. He put it this way:  a successful retirement is one where you don't have to put yourself at the mercy of the generosity of the government. I couldn't disagree with his logic, even if his judgment of "success" was a bit dour. I often think of a successful retirement in terms of a long period of of

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