Archives for July 2012

It may sound impressive, but a $100,000 salary isn't all it's cracked up to be. What would have cost you $100,000 in 1976 would cost you a whopping $380,000 today.

And that's just adjusting for inflation…

In fact, to get the same benefit from a "six-figure salary" that you would've earned in yesteryear, you'd need to make about $250,000 today.

Welcome to the magic world of 2012. It's a place where taxes go up, prices soar and the middle class gets pushed closer and closer to the brink.

The same thing is true for retirees.

Thanks to the Federal Reserve's zero interest rate policy, a $2 million nest egg isn't what it used to be, either.

For instance, did you know that Moody's recently changed its pension fund return assumptions to 5.5% because of today's low interest rates?

At those levels, a $2 million nest egg would "only" throw off a $110K income stream, which is pretty marginal, especially when you allow for inflation and spiraling medical costs.

What's more, it's not obvious to me how exactly you can guarantee that 5.5%.

As for the 8% returns you were promised all of your adult life on your pension funds, those are long gone, too. In the low-growth economy facing us now, those types of returns are going to be impossible for big funds to achieve.

Take CalPERS, for instance. It's the California Public Employees' Retirement System pension fund-the biggest public fund in the U.S.

CalPERS only recorded a 1% return this year, a long way indeed from the 7.5% return their actuaries were assuming.

But don't worry, there's a way investors can earn better returns and create income streams that can help to put them comfortably above that benchmark six-figure salary-even during periods of low growth.

One of these investments actually yields 8.6% and is heavily undervalued at the moment. More on that later.