Can
You Afford to Retire?
You
hear it from every segment of the media: The Baby
Boomer generation is quickly becoming the "retirement
generation." While some boomers - defined
as those born between 1946 and 1964 - have already
retired, most are still working and wondering
when (or if) they'll be able to retire.
There
is another segment of the population, those younger
than the "baby boomer" generation, who
live in an entirely different work landscape -
a landscape where job security and working for
a single company for 30 years and retiring with
a pension is a thing of the past.
The
federal government's own social security web site
states that most retirees will need about 70%
of their pre-retirement income to maintain the
same lifestyle. Yet Social Security replaces
on average only 40%. That means you better
have an impressive portfolio of savings and investments
ready to make up the shortfall.
The
Government Accounting Office estimates that an
average-income couple who receives $20,000 annually
from Social Security at age 62 needs investments
of over $500,000 to bring their annual retirement
income up to $46,000.
Do
you have a portfolio of $500,000?
Okay,
so you can probably manage to live on less than
$46,000. But here is some not-so-good news. Stan
Hinden, in the September, 2006, AARP Bulletin
reports that more than half of workers 55 and
over state they've saved less than $50,000 for
retirement. How can that be?
- People
in today's environment have not followed in
their parents' footsteps of staying in one
job forever. Many of us have changed careers
a number of times, sometimes for better pay,
sometimes because we got downsized or outsourced.
Unfortunately, changing jobs frequently means
we've missed out on becoming fully vested
in some of our employers' 401K
plans.
Our payouts or rollovers have been tiny or
nonexistent
- Some
of our lives took turns we never imagined.
We've been overwhelmed by large medical expenses
for ourselves, our children, or our elderly
parents. These kinds of expenses can be real
retirement-wreckers. We may have little more
than a few thousand dollars left.
- Changes
like divorce often mean retirement savings,
even company retirement plans, are split between
spouses. When you say good-bye to a relationship,
you say good-bye to half the money in your
retirement plan, and you have to work hard
and fast to play catch-up.
- We
wanted our kids to have college educations.
We borrowed from our 401Ks to finance ever-escalating
college costs.
- Some
of us had to drop out of the workforce altogether
to care for elderly parents or grandchildren.
- Some
of us are overextended due to poor spending
habits. Struggling to pay off credit cards
leaves little for retirement savings.
- Some
of us have just plain worked hard our whole
lives and budgeted carefully, but have never
had much of anything left over to save.
- There
has been no increase in real wages-that is,
purchasing power-since the mid-70s. Despite
the happy faces on TV, a lot of us are still
struggling just to get by.
Not
too long ago, people worked for one company for
most of their adult lives, faithfully putting
in their time and counting the years until they
could retire and start to enjoy life. The company
pension was one reason people stayed at jobs they
didn't even like. "At least," they thought,
"the company will take care of me when I'm
old. I won't have to worry."
A
recent trend is for major companies to reduce
retirement benefits to workers who believed the
company would be there for them in their retirement
years. Cuts in post-retirement health insurance
benefits are the most unpredictable and the most
worrisome for people who are entering their 60s.
The few people who even qualify for such programs
find that the initial modest premiums and co-pays
for themselves and their spouses have skyrocketed
to the point where they are simply unaffordable.
And by the way, Medicare doesn't cover dental
or vision care. People can buy separate policies
for these, but the coverage is usually meager.
Then
there's the longevity "problem." As
we live longer and longer, our retirement dollars
must stretch further. What if we run out of money?
What if we're old and sick and poor?
As
many companies convert employee pension funds
into "cash balance" plans, retiring
employees are given lump sums - the money you've
accumulated in your pension plan or 401K. At that
point, you're on your own to create a "do-it-yourself"
pension.
You
could take a crash course in investment planning.
You could hope you'll find a trustworthy financial
advisor, but there is no way to be 100% confident
about putting your financial future in the hands
of someone you barely know. Either way, it's difficult
to feel really secure about your financial future
in retirement, and the chances are you can't afford
to lose a bit of your nest egg to bad investments.
Quite
simply, neither today's nor tomorrow's retirees
can afford the luxury of feeling secure.
By
now, you've probably figured out where your retirement
prospects fall among all these possibilities.
You might be wondering if you'll ever be able
to retire, or if you'll have to just keep working
for the rest of your life. Yes, it's challenging.
Yes, it's scary.
But
there IS an answer. Instead
of letting other people determine how you will
spend your "golden years," you can take
charge of your life now.
It
doesn't matter if you must stay home to take
care of a spouse, parent, or child. It doesn't
matter where you live. It doesn't matter
if you're one of the many who has not saved enough
for retirement. Even if your love to travel, you
can establish and build a business using just
the Internet and a telephone. Successful professionals
will teach you how to stop trudging along on the
worry treadmill and start speeding down the road
to success. You will be amazed at how quickly
you can turn your life around!
The
sooner you get started, the sooner you can stop
worrying about an uncertain financial future and
let yourself think about all the wonderful possibilities
of a truly secure retirement. It's your life,
and you should be the one controlling it. Take
the first step today by filling out the form below
for more information.
