Retirement Plans Get a Little Help from Virus Fiasco

Retirement Plans

Among the over $2 trillion in the new Cares Act is a couple of provisions to help people with their retirement accounts during the virus panic. These changes deserve to stay.

The coronavirus scare has had many people scrambling to make ends meet due to a loss of income from the widespread shutdown that the country and other countries are experiencing, in an effort to help curb the tide of infections that continue to sweep over us.

COVID-19 is very much a disease of our older population, as are all infectious diseases. You don’t have to be older to get infected by this, but given that the average age of people who die from it is 81, those of advanced age are definitely the ones that need to be concerned with this.

There are a lot of younger people, those under 50, that are equally or even more frightened by this, even though the chances of someone under 50 dying of this is virtually nil. This scare never was fact-based though in any way, so we should not expect a trivial matter like no real risk at all to themselves to weigh in on things.

Folks over 80, and especially those who are well over this age, do need to be very wary. The death rate in this age category is 20%, and a 1 in 5 chance of dying is very significant indeed, and a lot more concerning than none that younger folks are faced with. Just about everyone is in great fear of their lives anyway, and it is simply amazing how the myths surrounding COVID-19 continue to persist, and this is just the tip of the iceberg as far as the myths go with this.

The biggest myth by far is how this virus is supposed to infect billions and become a tragedy of epic proportions. We knew very early on that this wasn’t going to happen, with a high degree of certainty, from the fabulous way that China was able to contain the spread early on.

Not surprisingly, physical distancing is very effective at controlling this virus, even though there are some powerful enough to not be anywhere near this easy to manage, like the viruses in the outbreak horror movies that people tend to like to watch so much. Perhaps if the Spanish flu made a comeback, we would be facing a real crisis here, a virus that spreads so easily that distancing doesn’t stand a chance to prevent a pandemic with a very high death toll, in the tens of millions.

This one has turned out to be very tame in that regard, and China got out of this only 2 deaths per million. This is an extremely low number among things you can die from, completely inconsistent with prognostications of doom. While we knew that it would be too much to expect the same level of containment in other countries, the numbers we have seen elsewhere haven’t been at all consistent with any threat that should even be noteworthy, let alone horrific.

This story all starts with our fascination with viral outbreaks, and the fact that we have paid so much heed to completely meaningless outbreaks such as SARS speaks loudly to just how much we crave sensationalizing these things. COVID-19 has had a much bigger impact than SARS did, having already killed 40 times more people, and we’re still a long way from counting all the bodies that are going to pile up from this one.

If SARS, with its less than 800 deaths worldwide when it was all said and done, commanded so much attention, it stands to reason that this virus will be sensationalized at least 40 times more, and a lot more than that in fact when we account for all the absurd projections from dim-witted epidemiologists, who are supposed to be scientists but specialize in fool’s science. These are the folks that are really to blame for all this, although we have plenty of blood on our own hands from our just believing them.

If we really had people’s health in mind, we would have gone to great pains to not want to exaggerate the risks involved in this, but we have done the exact opposite. The real risks have never been difficult to project, with no prior knowledge or training even required, but this has become easier and easier to do as the data continues to come in.

It isn’t even clear where these people get their fantastic numbers from, like 100 million people being infected by this in the U.S. alone, but at least as far back as the early days of China’s experience, it should have been obvious that these numbers have been patently ridiculous all along.

We can even be confident that even if no preventative measures were ever taken, this would still not amount to no more than a fairly mild outbreak, when we look at the growth of infections in areas that have not done much to curtail this. However, this is a moot point because so many of us are practicing distancing now, not all of us of course but overall.

This was always only going to represent only a small fraction of the deaths we normally see from influenza, something we don’t really take any measures against aside from people getting a vaccine which has not been shown to even work, although they do sell a lot of vaccines and make lots of money. The flu is an actual pandemic, even though we ignore it, but COVID-19 is not, at least if we use the term properly.

This Has All Been a Bad Science Fiction Outbreak Horror Show

The level of fear that has been built up from this hoax based upon fraudulent science has certainly taken its toll, and ironically, has empowered the virus, as stress is very well known as an immunosuppressor, a powerful one actually. If you are unfortunate enough to become infected from this novel coronavirus, the chances of your recovering go down by your being so frightened, and this is especially a concern with the elderly folks who are already so compromised.

As we reach old age and beyond, our bodies don’t work as well as they used to, and this is especially the case with our immune system function. A healthy immune system, or at least one moderately healthy, will wrestle things like influenza or COVID-19 to the ground, and while the ordeal is never a pleasant one for those who do get infected enough to have symptoms, the infection is quickly controlled and is killed off by our body’s defenses.

Elderly people often cannot fight off these viruses, and even will die from ones as relatively tame as the common cold, which can develop into pneumonia. 50,000 people die each year on average in the U.S. from this alone. 25,000 to 60,000 Americans die of the flu each year, and it’s those whose bodies are too weak to fight this off, almost always elderly folks, that succumb to it.

It should be obvious that we should do more to protect elderly people from infectious diseases in general, which doesn’t mean isolating them from others and even their own families, but to at least practice a little more caution than we do. This is especially important during flu season in addition to when viruses such as the one we have now pop up.

Vaccination is not saving them, because it at best allows our immune systems to fight it off a little better, not but by a significant amount. Often, we inoculate people against a different strain than appears, where they just get a dose of ethyl mercury and other toxins and that’s all they have to show for the experience. This is why the flu vaccine has not been shown to save a meaningful number of lives and why so many die regardless. Older people are too weak with or without it and need more protection than this. We should be doing more.

Social distancing, which is now being referred to as physical distancing, can help a lot, and it sure has with this current virus. If we don’t realize that these efforts take time to manifest though, we are prone to greatly overestimating the actual risk, thinking that this may indeed explode the way that is being so widely promoted, as we shut down more and more and still see the numbers continue to escalate.

Understanding how these things actually happen requires that we think about this a bit, and the place to start is to realize how distancing affects the number of cases reported each day. When China started to do this, we did see the numbers go up for a couple of weeks at first, and then they started coming down and ended up dwindling away to virtually nothing.

Given how explosive the outbreak was in Wuhan in particular at one time, keeping their numbers so low was not only a feat, it would not have been possible if this virus spread anywhere near as much as people think it does.

The key to this containment has been the close contact that is required to transmit it, and this is what has made distancing so effective. The magic number here is 14, the number of days that it takes to start to see a decrease in cases from preventative action.

If we start a program of distancing, the people that we test and find positive infections are going to consist of mostly those who have been infected prior to the positive action. These numbers aren’t new infections, they are newly discovered infections. As time passes though, as those who have been previously infected either get tested positive or get cured on their own, we start to get a better picture of what the infection rate since the action actually is, although there is and must be a lag involved.

The way that we should have approached this is to tell people to be patient and if we keep doing the right thing, we will see the numbers go down, as it will take a while for this progress to even show up. We saw that in Asian countries where this first emerged, such as China, South Korea, and Japan, but since the goal has obviously been not to inform but to scare as much as possible, the truth hasn’t fit with the program and it still does not.

As bad as things have been in countries like Italy, Spain, and Germany, all they needed was a couple of weeks for their efforts to work to stem the tide. If we measure the point where infections rose above 1000 per day to the apex, all three of these countries peaked in 13 or 14 days.

The U.S, is now nearing that magic number, and this is not numerology, it is from the fact that it takes this long to see a difference. On day 12 since surpassing the 1000 cases a day mark, the United States finally had less infections than the day before, as did the world, and while we may not have reached the peak quite yet, there is every reason to believe that it will happen very soon.

On the other side of the ledger, the side that is still out of their minds, NY governor Cuomo is still banging on doors seeking help for the pandemic that is to come, in his mind at least. He claims to need 40,000 ICU beds, and only has 3.000 now, so is 37,000 short. That would require that the cases in NY state rise to at least 5 million if all these cases happened at the same time, and more likely 10 million since people in ICU beds tend to die pretty quickly generally.

The cases in NY have even stabilized now, but hasn’t quenched his imagination it seems. There is no doubt that his actions in at least promoting distancing in his state will save them, but he lacks both the patience and understanding to give it a chance.

The social distancing has been an unqualified good idea, and this would have been plenty to keep the number of deaths far below even a mild flu season, without all the economic self-mutilation that we saw fit to do as a result of our collective misunderstanding of the facts.

Cuomo’s panic was a product of his continuing to double the numbers every three days to the point where most of the state became infected, while at the same time completely ignoring the effect of distancing and the experiences of other areas. He isn’t alone though and there are many quacks pretending to be scientists out there who have made the same brainless mistakes and are still cautioning us all of our pending doom.

We have inflicted severe damage upon our economy, visited a great many of us with serious financial hardships, as well as caused psychological pain and damage to our people generally, all due to this misunderstanding. We are seeing areas get by quite well on distancing alone, and while there are certain things that we may wish to shut down the economy with, where the great pain this causes is less than the greater pain that a monumental crisis would, we have lost all sense of proportion with this one, as the facts will soon make even clearer once this all winds down soon.

We should have at least had the presence of mind, long ago in fact, to realize that this isn’t something that would continue to explode exponentially for very long, but we failed and now we will be left with the huge bill and the residual fright.

We should be celebrating how things are turning around now, whether we expected it or not, and we should have, instead of continuing to cower like so many are still doing. The horror show still is being broadcast day and night on the fake news though, which is in itself far more frightening than any coronavirus.

Dr. Fauci is still crowing as loudly as ever, now telling us that the death toll in the U.S. alone will be between 100,000 and 200,000. The so-called scientists behind nuking the truth this much should at the very least be defrocked permanently. A high school student with half a brain could do much better.

This would require us to grow the number of deaths almost a hundred-fold at a time where we’re about to turn the corner and see the numbers decline. We hope he hangs around for the truth and bows his head in shame, and perhaps even have a new word created in his name, faucism, with the definition of extreme exaggeration not modified in any way by sensibility.

Retirement Accounts Are at Least Getting a Little Break Now

A lot of people have had to tap into their savings to get through this, including withdrawing from their retirement savings. This is a real shame, because most people are going to fail miserably at seeking a comfortable retirement, and we’ve made things even less comfortable by putting them out of work for a time.

As part of the Cares Act, which is what they are calling this new multi-trillion’ dollar bailout, the government has found it in their heart to temporarily eliminate the 10% tax penalty that people get slapped with for early withdrawals out of their retirement accounts. Why we should ever do this remains unresolved though, and it should be enough that people pay the full amount of taxes due at withdrawal, amounts that would be due if not for the existence of the retirement plan.

While this might have been set up to discourage people from cashing in their retirement money early, given that the idea with these plans is to pay less tax, if they withdraw it without need, this will have them paying at least as much or even more tax on it. If they do have a need, for instance finding themselves out of work, the last thing we should be doing is punishing people for this unfortunateness, and taking advantage of these savings during permanent retirement or during more temporary ones that usually are not our choice both amount to seeking to fulfill a real financial need that never should be punished.

Whenever we lose our jobs, this always brings with it a certain degree of financial pain, even if we manage to dip into our savings to level out our income while out of work. That money could have been spent on something better, like our retirement for instance.

At a minimum, if we keep this penalty, which we will, we need to permanently exclude those who are out of work. We should wish to help these people, or at the very least, not punish them with the indignity of paying a 10% withdrawal penalty on top of spending their retirement money, out of necessity, on something else that they surely did not wish to spend it on, surviving financially in a time of crisis.

The government is also giving people a break from required minimum withdrawals, although people of this age tend to be already retired and aren’t really affected in the same way that a lot of formerly working folks are. This is another half-baked idea that needs to go, and is merely a lazy and misguided way to restrain how much tax savings from retirement plans being bequeathed.

If that is the real issue, we should be tackling it on that level, placing more restrictions on how these tax savings can be passed on. It actually makes perfect sense to prevent this entirely, as retirement tax breaks are meant for retired folks, not for descendants.

All we would need to do is to tax these accounts at someone’s prevailing tax rate at their death, or look to spread this out over time, for instance if they had taken out a given amount per year from retirement until death. We should never be forcing people to spend or to forego a portion of their tax savings just because they are of a certain age, because this is not in harmony with any sensible purpose.

Retirement accounts are set up to provide for us in retirement, and we should at least be left to decide how we are going to spend and manage this, not have the government force us to forego a portion of these benefits each year, benefits that were the very reason why we contributed to these accounts in the first place.

A lot of older Americans have been exposed to big losses with their portfolios at the worst time, even though they may get it back fairly soon. Some bear markets don’t go away as fast as this one will though, and while it’s fine to have a lot of exposure to stocks even in retirement, if you didn’t pull the plug on this one, you are taking on far too much risk at this time of your life.

What is lost on just about everyone is the fact that this wasn’t just not a bad thing, it should have been a good thing, even a great thing, for those in stocks who had enough concern about their financial welfare that they actually did allow the coronavirus to at least scare them out of their positions.

Imagine selling once the real power of this virus on the stock markets surfaced, when we were very early in the collapse, and holding this money until the smoke cleared. You could have made an easy 20% very quickly, which for people in or close to retirement, could have made a huge difference in their fates.

There are only two ways to have more money in retirement, which are to put more money in these accounts and to look to make what we have saved grow more. People generally fail the first part to some degree, but even more fail the second part, and both are required.

We need to take this whole dreadful experience and look to learn as much as we can from it, which hopefully will include not paying so much heed to Chicken Little on drugs. While we continue to be appalled at how this situation continues to be handled by both the media and those in authority, we are now counting the days until we finally get a grip on things enough to at least stop the economic devastation his has caused at both the individual and macro level.

The real pandemic that we continue to face is the pandemic of giving up control of our lives to others, whether that be in taking unexamined advice about our welfare or our financial well-being. Socrates said an unexamined life is not worth living. An examined life is almost extinct now due to the sheer power of the media and how gullible we have become. We can and need to do much better.

We at least have the break from the penalty and required withdrawals with retirement plans. People also need to take a hard look at how they are managing their retirement generally, which is sorely in need of examination as well.

Robert

Editor, MarketReview.com

Robert really stands out in the way that he is able to clarify things through the application of simple economic principles which he also makes easy to understand.