Retirement-the word used to conjure up images of leisure, travel, golf, new hobbies, or spending time with grandkids. But today, when people think about their retirement, they just worry.
I know something about this anxiety being 54 years old, a pre-retiree and late baby boomer. Many of my close friends, also pre-retirees, are becoming more alarmed each day regarding their own retirement predicament. We are included in this growing crowd across America. The prospect of a “happily ever after” retirement is whirling into a storm of epic proportion.
To survive this storm, the first step is awareness. Many are simply not concentrating on the financial tempest that lies ahead. Consider this from the Boston College Center for Retirement Research & US Senate Committee on Health Education Labor & Pension in a work paper titled, “The Retirement Crisis and a Plan to Solve It,” July 2012. “American workers are $6.6 Trillion dollars short of what they need to retire comfortably. That is enough dollars that, if lined up end to end, they would stretch to the moon and back 1,000 times and still leave enough left over to pay NASA’s budget for the next eight decades.”
After a lifetime of hard work, people deserve the opportunity to live out their golden years with dignity and financial independence. But for many, the dream of a secure retirement is slipping out of reach.
Low investment returns, the financial crisis, the housing bust along with rising health care costs all point toward smaller nest eggs than they’d hoped for. At the same time, we’re living longer. It’s a very real possibility that we may need 30 or more years of retirement income. Couple that with the fact that the burden for retirement planning has shifted away from corporate big brother and traditional defined benefit pension plans to each of us individually.
“To maintain living standards into old age we need roughly 20 times our annual income in financial wealth.” (Huff Post Business: The Looming Retirement Crisis and What To Do About It, July 24, 2012.)
According to a new study from Fidelity Investments, “The typical US worker would face as much as a $2,100 a month shortfall during retirement if current trends continue.” (USA Today, September 8, 2012.)
A recent survey noted, “36 percent of Americans say they don’t contribute anything at all to retirement savings.” (CNBC: More Upper-Income Workers Paycheck to Paycheck, September 16, 2009.)
The traditional pension plan is disappearing. “In 1980, some 39% of private-sector workers had a pension that guaranteed a steady payout during retirement. Today that number stands closer to 15%.” (Employee Benefit Research Institute, Washington D.C.) The same source also reports that 24% of U.S. workers admit that they have postponed their planning for retirement age at least once during the past year.
The Los Angeles Times reported concerning public sector defined benefit pension plans in an article titled “Government Pensions in Cross Hairs”, April 23, 2010 noted, “Pension consultant Girard Miller told California’s Little Hoover Commission that state and local government bodies in California have $325 billion in unfunded pension liabilities, which works out to $22,000 for every single working adult in California.”
Further, according to a report from Stanford University, “California’s three biggest pension funds are $500 billion short of meeting future retiree benefit obligations.” (Bloomberg: California Pensions $500 Billion Short of Liabilities, April 5, 2010.) Can anyone say “Detroit?”
And what about the health of Social Security?
“In 1950, each retiree’s Social Security benefit was paid for by 16 US workers. In 2010, each retiree’s Social Security benefit was paid for by approximately 3.3 US workers. By 2025, it is projected that there will be approximately 2 U.S. workers for each retiree.” (www.GAO.gov: A Message From the Secretary of the Treasury.)
The same GAO.gov message noted, “Soaring interest costs on the U.S. national debt, plus rapidly escalating spending on entitlement programs, including Social Security and Medicare, will absorb approximately 92 cents of every single dollar of federal revenue by the year 2019, and that is before a single dollar is spent on anything else.”
Add to this the pressures of longevity risk, increasing healthcare costs and the risk of contracting a long-term catastrophic illness and Americans can truly face a financial storm of epic proportion. As one would prepare for a traditional storm, there are measures that can be taken to prepare.
Pre-retirees and seniors can increase preparedness by visiting www.TheEstateMD.com for an online virtual 24/7 presentation. The short presentation is titled, “How Big is Your Retirement Shortfall?” Make sure to download the “12 Key Questions Every Retiree Must Answer.” These resources will provide added safety on your journey to financial peace!