To say that times are changing is a dramatic understatement. Nearly 100 million able-bodied, working age Americans are currently unemployed. We check out our own groceries at self-service stations in supermarkets. Automated garbage trucks remove our trash and recyclables from their curbside containers. Robots are replacing factory workers throughout the world.
The future we have all dreamed of has arrived much sooner than expected. Unfortunately, the dream has turned into a nightmare for plenty of Americans. This is precisely why there is talk of passing a universal basic income into law within the next decade.
Why Universal Basic Income is Necessary
Human labor is quickly being replaced by automation. Though one can argue that a college degree in a STEM (science, technology, engineering and mathematics) field will provide an individual with a job that pays a living wage, most cannot afford the cost of college.
It’s not just social activists who are calling for a universal basic income. Silicon Valley power players who’ve invested billions in the creation of job-killing automation are also on board with the idea of a guaranteed minimum income.
Though the media does not give universal basic income much press, the idea will soon tip over into the mainstream thanks to job outsourcing, the uptick in automation and a student loan bubble that will soon burst.
How Universal Basic Income Impacts Retirement Planning
Those in favor of universal basic income argue for it to replace all forms of welfare, disability and social security. This is bad news for those who’ve paid more into social security than others. Proponents of universal basic income desire a monthly stipend paid to all adults.
Yet the amount of this monthly check would not differ according to one’s age, years worked or any other variables. If universal basic income eventually supplants social security, those who anticipated fairly sizable social security payouts in proportion to their salary will find themselves shortchanged.
Though it seems as though universal basic income spells bad news for retirees, there is no guarantee that it would fully replace social security right off the bat. The program could be rolled out in stages, starting out as a complement to social security payments and gradually progressing to the point that it becomes a full replacement for social security.
No one is sure if the idea will actually work so it will probably be launched in the form of a small monthly check for $1,000 or so. Few retirees can live comfortably on $1,000 a month. This is precisely why every American should ramp up his personal retirement savings to compensate for the potential of a severely reduced social security payment.
It is quite possible that the social security rug will be completely pulled out from beneath our feet, leaving us with a universal basic income that allows for a life of ramen noodles, beans, rice, water, TV watching and little else.
The Bright Side to Universal Basic Income
If you were to poll economists about the likelihood of universal basic income being passed into law at some point in the next couple of decades, most would respond that such a program will come to fruition sooner than most laymen expect.
Employers throughout the United States have outsourced an abundance of jobs over the past twenty years while simultaneously ramping up automation in an attempt to cut overhead costs. This trend will only continue as time progresses. Even white collar jobs like graphic design, teaching and computer programming will likely be partially replaced by machines.
The bottom line is that nearly every job is susceptible to being replaced by a computer or robot. Universal basic income will soon be necessary to prevent social chaos. In the context of retirement planning, this should not necessarily be construed as a negative.
Imagine a scenario in which you work for 15 years as a web designer, only to have a computer replace your position in the year 2025. By this point in time, the unemployment rate has reached double digits. You apply to hundreds of jobs and can’t even get an interview because so many fellow Americans are seeking employment. You are forced to tap into your retirement savings in order to pay the bills and put food on the table.
Though the hypothetical described above is quite grim, it could easily happen in the near future. This is exactly why many self-proclaimed “futurists” are no longer diverting funds toward their retirement accounts. Their logic is that there is no sense in saving for the future when everyone will receive a government-issued stipend on a weekly, monthly or yearly basis.
This is not to say that you should live in the moment and cease all retirement planning. Extra retirement money that pads a seemingly inevitable universal basic income will certainly boost your quality of life.
However, you should plan for retirement with the assumption that some form of universal basic income will likely be passed into law in the next 10-20 years. Plan accordingly and you’ll obtain the most utility out of your money in the present as well as the future.
Regards,
Ethan Warrick
Editor
Wealth Authority
