Retirement Plans At Risk? Forced to Supplement Your Retirement Income?
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Risks Threatening Current – or Future – Retirees
Assuming you’re a member of the “Baby Boomers,” you’re probably pondering stopping work – if you haven’t already stopped working. Even if you have already left the 9-5 rat race, you may be wondering whether you’re financially able to remain comfortably retired.
Recent financial crisis complicates the retirement question considerably by increasing some significant retirement oriented economic contingencies:
1. Average Life Expectancy Has Increased
Current life expectancies are longer than their parents. For example, in 1970, a 60-year old white male had a life expectancy of an additional 16.2 years; however, by 2008, his life expectancy had expanded to 20 more years of life.
So how is the Boomer going be able to afford to pay for those extra 3.8 years? There are only a few likely answers to that question:
> Add to current nest egg building
> Work longer than desired
> Live with with relatives
> Get by with a reduced lifestyle
2. Rising Health Care Costs
Adequately funding one’s medical care coverage are among the most difficult financial activities, mostly because requirements are so individualistic, with needs differing substantially between spouses. Long-term care needs are even harder to predict and arrange adequate funding.
Health care expenses have grown more than 5% (inflation adjusted) for the past 15 years – a rate that is higher than the growth in family income. Medicare costs will probably rise as well similarly.
3. Legislative Changes May Affect Retirement Benefits & Supplemental Programs
It is well known that the expenses of major social programs (e.g., Social Security, Medicare, and Medicaid) are growing more rapidly than other parts of the economy, and some experts question the long-term feasibility of these programs due to the cumulative effects of increased longevity, size of the retiring population, and increasing health care expenses in general.
Further, immediate questions regarding ongoing health insurance during retirement, and at what benefit levels, are wide-spread in today’s economy – and these questions are further fueled by auto industry, and other, corporate reorganizations.
We are still witnessing much conversation about a national health care program – but such discussions have been active for decades, with few benefits to show for those efforts. Although President Obama will be leading a national health initiative this year, most people expect Congress to present a lot of opposition.
Most people believe that people past age 55 will be exempted from reductions in these entitlement programs, but providing full coverage for them is a two-edged sword – doing so increases the probability of a new tax, which would effectively add to the tax burden for retirees.
4. Sometimes One’s Retirement Date is Dictated, and not Totally Up to the Individual
Per the 2004 Health and Retirement Survey (HRS), 37% are forced to retire. This can occur due to poor health or recessions, etc.
5. 401Ks Have Been Decimated
Did your 401k and other retirement savings take a major hit with the stock market meltdown last year? Mine did. Many people saw their 401k and other stock market accounts take a 50% hit, which has led many comedians to rename them “201k”. For many people, their 401k was the bulk of their retirement savings, so this stock market meltdown seiously damaged their retirement plans.
Humpty Dumpty Was No Financial Planner
But there is some good news. You can fix a broken egg – a broken retirement “Nest Egg,” that is.
You can work an extra year or two, take a part-time job or work from home to supplement your earnings, start your own business, etc.
A study by Butrica, Smith and Steuerle (2006) indicated that working just one (1) extra year can improve annual retirement income by 9%, while working just five (5) extra years results in an additional 56% annual retirement income.
If you’d like to learn how to create a second income, so that you can have a rewarding, financially secure retirement, check out Darren Salkeld’s new MaxPro Marketing System and get his FREE Report and FREE Audio describing the age-old secrets of creating wealth.
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