Retirement Plans Up in the Air? Forced to Supplement Your Retirement Funds?
Risks Associated with Retirement
If you’re a member of the “Baby Boomers,” you’re probably giving serious thought to stopping work, if you haven’t already retired – and if you are already retired, you’re probably wondering if you’re going to be able to stay retired.
Today’s recessionary economy aggravates the retirement question greatly by increasing the following retirement related risks:
1. Life Expectancy Has Been Extended
People are living longer than their parents. For example, in 1970 a 60 year old white male would have had a life expectancy of an additional 16.2 years; however, by 2008 his life expectancy had stretched to 20 more years of life.
So how is the Baby Boomer going to afford to pay for those bonus 3.8 years? There are only a few likely responses:
> Increase pre-retirement savings
> Work longer
> Live with with children
> Expect a reduced quality of life
2. Spiraling Health Care Costs
Predicting and planning for ways to cover one’s medical care costs are some of the most difficult, mostly because requirements are so person-specific, with requirements varying substantially between spouses. Long-term care needs are even harder to predict and fund.
Medical costs have grown at a rate greater than 5% (inflation adjusted) for the past 15 years – a rate that is higher than the growth in family income. Medicare costs are expected to rise similarly.
3. Government Actions May Impact Retirement Benefits & Supplemental Programs
It has been widely reported that the costs of major social programs (e.g., Social Security, Medicare, and Medicaid) are growing faster than other parts of the economy, and some experts challenge the long-term feasibility of these programs because of the cumulative effects of increased longevity, size of the Boomer population, and rising health care costs in general.
Further, current questions regarding continued health insurance in retirement, and at what benefit levels, are wide-spread in today’s economy – and these questions are further fueled by the reorganizations occurring, especially among the auto industry.
We are still witnessing a lot of discussion concerning a national health care program – but such debates have been active for decades, with few results 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 (although maybe it will be a bit easier now that the Senate will soon be welcoming its 60th Democratic Senator).
Most people think that seniors over age 55 will be exempted from cuts in these entitlement programs, but maintaining full coverage for them is a two-edged sword – doing so increases the likelihood of a new value-added tax, which would ultimately add to retirement tax burdens.
4. Sometimes One’s Retirement Date is Dictated, and not Freely Chosen
According to a 2004 Health and Retirement Survey (HRS), 37% of senior are forced to retire. This can occur due to bad health or economic downturns, 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 has really damaged their retirement plans.
Humpty Dumpty Was Not a Retirement Expert
But there is some good news. Luckily, you can repair a broken “Nest Egg”.
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 augment annual retirement income by 9%, while working just five (5) extra years can generate an extra 56% annual retirement income.
If you’d like to learn how to create a supplemental income, so that you can have a comfortable, financially secure retirement, check out Darren Salkeld’s new IIP MaxPro System and get his FREE Report and FREE Audio describing the age-old secrets of creating wealth.
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