Risks to Your Retirement Income
If you’re among the Baby Boomer Generation, you’re probably pondering retirement – if you haven’t already started your retirement. And if you have already left work, chances are that you’re evaluating whether you’re financially able to continue to be retired.
Today’s economic crisis compounds the retirement question substantially by compounding the following retirement oriented risks:
1. Life Expectancy Has Grown
Today, life expectancies are longer than their parents. For example, in 1970, a 60-year old Caucasian male had a life expectancy of an additional 16.2 years; but, by 2008, his life expectancy had climbed to twenty more years of life.
So how is the Baby Boomer going be able to afford retirement during those additional 3.8 years? There are only a few realistic answers to that question:
> Expedite pre-retirement savings
> Continue to work longer
> Move in with children
> Get by with a reduced standard of living
2. Escalating Health Care Costs
Adequately funding one’s medical care programs are some of the most difficult financial activities, largely because requirements are so individualistic, with needs differing substantially from one person to another. Long-term care needs are even harder to plan for and fund.
Medical costs have grown more than 5% (inflation adjusted) for the past 15 years – a rate that is higher than the increase in family income. Medicare costs are expected to rise at a comparable rate.
3. Government Actions May Impact Retirement Benefits & Supplemental Programs
It is well known that the expenses associated with the major social programs (e.g., Social Security, Medicare, and Medicaid) are growing more rapidly than other sectors of the economy, and some experts question their long-term viability due to the combined effects of increased longevity, size of the retiring population, and rising health care expenses in general.
Further, current questions concerning continued health insurance during retirement, and at what benefit levels, are rampant in today’s depressed economy – and these questions are further fueled by the reorganizations occurring, especially among the auto industry.
We are still witnessing much discussion concerning a national health care system – but such conversations have been active for decades, with few results to show for those efforts. Although President Obama will be leading such efforts this year, many people expect Congress to present a lot of opposition.
Many think that seniors over age 55 will be exempted from cuts in these social programs, but providing full coverage for them is a two-edged sword – doing so increases the likelihood of a new value-added tax, which would likely add to retirement tax burdens.
4. Sometimes One’s Retirement Date is Dictated, and not Totally Up to the Individual
Per the 2004 Health and Retirement Survey (HRS), 37% of seniors are forced to retire. This can occur due to bad health or recessions, etc.
5. 401Ks Have Been Decimated
Did your retirement savings (including your 401k) take a major hit with the stock market meltdown in 2008? 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 substantially damaged their retirement plans.
Humpty Dumpty Had It Wrong
But there is some good news. You can fix a broken egg – a broken retirement “Nest Egg,” that is.
You can work longer, semi-retire and take a part-time job, work from home, start your own business, etc.
A report by Butrica, Smith and Steuerle (2006) indicated that working just one (1) extra year can boost annual retirement income by 9%, while working just five (5) extra years results in an extra 56% annual retirement income.
If you’d like to find out how to create a second income, so that you can have a comfortable, 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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