Retirement Plans in Jeopardy? Want to Increase Your Retirement Income?
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Threats to Your Retirement Income
If you’re one of the Baby Boomer Generation, you’re probably giving serious thought to stopping work - provided that you haven’t already stopped working. And if you have already left work, chances are that you’re evaluating if you’re financially able to remain comfortably retired.
Present financial crisis aggravates the retirement question substantially by increasing the following retirement oriented risks:
1. Life Expectancy Has Increased
Today, life expectancies are longer than their parents. For example, in 1970, a 60-year old Caucasian male would have had a life expectancy of an additional 16.2 years; however, by 2008, his life expectancy had expanded to 20 years.
So how is the senior going be able to afford to pay for those extra 3.8 years? Following are several realistic responses:
> Supplement pre-retirement savings
> Work longer than planned
> Live with with children
> Expect a reduced quality of life
2. Rising Health Care Costs
Adequately funding one’s medical care programs are among the most difficult financial activities, largely because requirements are so person-specific, with requirements differing substantially from one person to another. Long-term care needs are even more difficult to plan for and fund.
Health care expenses have grown at a rate greater than 5% (inflation adjusted) for the past 15 years - a rate that is greater than the increase in family income. Medicare costs will probably rise as well at similar rates.
3. Legislation May Impact Retirement Income & 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 question their long-term viability because of the combined effects of increased life expectancy, size of the retiring population, and increasing health care expenses in general.
Moreover, immediate questions concerning continued health insurance throughout retirement, and at what benefit levels, are rampant in today’s economy - and these questions are given even more fuel by the reorganizations occurring, especially among the auto industry.
There is currently much discussion about a national health care program - but such conversations have been ongoing for decades, with few results to show for those efforts. Although President Obama will be leading a national health initiative this year, many people expect a lot of opposition from Congress.
Most people expect that seniors over age 55 will be exempted from reductions in these entitlement programs, but maintaining complete coverage for them is a two-edged sword - doing so increases the probability of a new tax, which would likely add to retirement tax burdens.
4. Sometimes One’s Retirement Date is Dictated, and not Freely Chosen
Per the 2004 Health and Retirement Survey (HRS), 37% of seniors are forced to retire due to poor health or economic downturns, etc.
5. 401Ks Have Been Decimated
Were your savings (including your 401k) devastated with the stock market meltdown last year? My investments were deeply affected. 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 crash has really damaged their retirement plans.
Humpty Dumpty Was Not a Retirement Expert
Some of the news is 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.
If you’d like to start an online business, but are hesitant because you’re not an internet expert, one superb starting place for picking up all the understanding about internet marketing that you will need to be successful is to join the Online Success for Beginners program.
A study by Butrica, Smith and Steuerle (2006) noted that working just one (1) extra year can augment annual retirement income by 9%, while working just five (5) extra years results in an extra 56% annual retirement income.
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