When you were growing up, you most likely imagined yourself retiring at 65 and getting a secure monthly income from your pension, health care benefits, and social security. However, in this day and age, that is longer the case at all.
Let’s start with retirement pensions. According to this article from Yahoo Finance, between 1998 and 2010, the proportion of companies offering DB (defined benefits pension) plans fell from 67 percent to 17 percent while DC (defined compensation pension) plans rose from 10 percent to 58 percent. The overlying reason companies did this was to cut their costs and unless you have remarkable fortune investing, the DCs will deliver less income after you retire.
The dropping income does not help with retiring either. According to the September 2011 Census Bureau, an average family’s in the U.S fell 2.3 percent to $49,445 in 2010 and has dropped 7 percent since 2000 after adjusting to inflation. These numbers are the lowest since 1996.
The increase in childcare has also delayed retirement for many. According to the Census Bureau, the share of American families with dual-earning couples soared from 20.4 percent to 42.4 percent. This astonishing increase adds to parental stress and boosts childcare expenses for most families.
People’s insufficient returns from their asset portfolio has also caused many to keep working past the age of 65 – stocks have earned slightly more than 2 percent a year in the last decade – the average annual return of the S&P 500 between 2002 and 2012 has been 1.8 percent. Even long term investments do not look promising. The 10 – year Treasury note, for example, only pays 1.72% and to get a measly 2.8% return, you need to put aside your money for 30 years. In a nutshell, due to lower corporate contributions and a shift in the responsibility from the company to the employee to handle investments, annual returns are, on average, 6% to low.
Inadequate savings is one of the overlying reasons people retire later than they would like. According to the Employee Benefits Institute, 17 percent had more than $250,000 saved up in 2011. What is even more astounding is that 60% of the people surveyed had less than $60,000 saved. In short, many Americans do not have enough money saved up in order to retire at their desired age.
Keep these points in mind and plan for a safe retirement by using our Free Retirement Calculator.
Spend more money to save more money for retirement? According to Rob Warner, author of the book, “
When most people think of the tools used for planning their retirement, they think about 401k’s, pensions and other funds that are typically associated with employed wage earners. But what happens if you or your spouse forgo a paycheck and stay at home? What kind of retirement planning is available to you?
Last week, AARP announced that it is in favor of “modest reductions” in Social Security benefits, which confused many. The powerhouse Senior Lobby group has always been one of the biggest opponents to any cuts to the program, which is why their new stance caught many by surprise. AARP still stands firmly by their position insisting that “Contrary to the misleading characterization in a recent media story, AARP has not changed it’s position on Social Security.”
