The following was written by Mawker and published here. There are some good ideas laid out here and some advice I wish I had taken many years ago.
Retirement is that special time in life when you can finally take that cruise you've always wanted to go on, or pursue that hobby you've put off in lieu of other things. You've worked hard, and now you get to enjoy the fruits of your efforts.
Unfortunately, reality has a way of taking the wind out of your sails. The best laid plans will go awry, and as more data becomes available, the bleaker retirement looks – and not just for Baby Boomers, but for everyone who anticipates a long and fulfilling retirement.
Of course, not everyone expects to retire. I remember talking to one co-worker who insisted that the people of his generation likely won’t retire at all. They’ll just keep plugging away into their seventies, and perhaps longer. He was enthused by the prospect – he loved his work – but the thought may prove less than attractive for others. To them, putting up with the daily grind of work for two decades longer than expected is a step in the wrong direction.
And with job security being what it is these days, the prospect of hunting and interviewing for a job in your “golden years” just isn't an attractive thought at all, particularly given the stigma against older workers.
But the future doesn't have to be bleak.
A boss of mine once said that knowing about a problem is the first step toward confronting it. When it comes to retirement, the reality might scare folks, and it might be nicer for the short-term to bury our heads in the sand and pretend that our savings and Social Security will be enough to carry us through our retirement years. The problem is retirement is all about the long term. Short-term solutions don’t tend to solve long-term problems.
#1. The Prevalence of Poverty
One out of every six elderly Americans lives below the federal poverty line.
#2. Inflation
Inflation can cut the value of your retirement in half. It’s estimated that inflation halves the value of your money on average every 20-odd years. So you can depend on prices doubling in that timeframe. This is important to take into account when figuring out how much your retirement or pension needs to cover once you hit the magic number. Another important factor is your life expectancy post-retirement.
#3. Longer Life Expectancy
Americans live an average of 19 years after hitting 65 years old. This adds up to nearly a quarter of your life, far too long to depend on rely on simply your savings and Social Security. And of course, bear in mind this is only the average number of years people survive past the retirement age. Half the popular lives less, but the other half lives even longer.
#4. Decreasing Worker-to-Retiree Ratio
The current ratio of working citizens (between 15 and 64) and retired citizens is five to one. By the middle of the century, this will plummet to a ratio of three to one. This means fewer workers to support a burgeoning (and longer-lived) generation of retirees.
#5. More Job Competition
When many workers hit 65, retirement simply won’t be feasible. That means they’ll remain in the job market, competing for jobs. Another unfortunate fact that might exacerbate this problem: age discrimination, which is a very real problem among employers. Older workers usually require higher insurance premiums (if the job offers insurance) and usually require higher pay due to their level of experience. For many employers, this may “over qualify” you for the job.
#6. Not Enough Set Aside
Almost half of all American workers have less than $10,000 set aside for retirement.
#7. No Interest in Interest
I once heard an ambitious man say that once you make your first million, you can live off the interest. At the time, I thought he meant the interest generated by a decent savings account. Perhaps he did, but since I was offered that slice of wisdom, I learned that the interest accumulated by a savings account isn’t that impressive. Neither is the interest gathered by many certificates of deposit. Many people who depended on these types of accounts to support them during retirement have had to reassess their future plans. The likelihood is you can depend on prices rising continually rising and savings interest rates dropping.
#8. Bankruptcy
Declarations of bankruptcy among Americans over the retirement age have jumped nearly 180% since the 1990s.
#9. It Takes More to Retire
The recent economic crises have wreaked havoc on baby boomers’ retirement plans, forcing them to save an additional percentage of their pay to counter the damage. This will also contribute to retirement-age workers remaining in the workforce well past the age of 65.
#10. Debt Doesn't Retire
Over half of Americans entering retirement bring with them outstanding debts and no steady income to handle them. This means a further depletion of retirement savings.
Retirement is that special time in life when you can finally take that cruise you've always wanted to go on, or pursue that hobby you've put off in lieu of other things. You've worked hard, and now you get to enjoy the fruits of your efforts.
Unfortunately, reality has a way of taking the wind out of your sails. The best laid plans will go awry, and as more data becomes available, the bleaker retirement looks – and not just for Baby Boomers, but for everyone who anticipates a long and fulfilling retirement.
Of course, not everyone expects to retire. I remember talking to one co-worker who insisted that the people of his generation likely won’t retire at all. They’ll just keep plugging away into their seventies, and perhaps longer. He was enthused by the prospect – he loved his work – but the thought may prove less than attractive for others. To them, putting up with the daily grind of work for two decades longer than expected is a step in the wrong direction.
And with job security being what it is these days, the prospect of hunting and interviewing for a job in your “golden years” just isn't an attractive thought at all, particularly given the stigma against older workers.
But the future doesn't have to be bleak.
A boss of mine once said that knowing about a problem is the first step toward confronting it. When it comes to retirement, the reality might scare folks, and it might be nicer for the short-term to bury our heads in the sand and pretend that our savings and Social Security will be enough to carry us through our retirement years. The problem is retirement is all about the long term. Short-term solutions don’t tend to solve long-term problems.
#1. The Prevalence of Poverty
One out of every six elderly Americans lives below the federal poverty line.
#2. Inflation
Inflation can cut the value of your retirement in half. It’s estimated that inflation halves the value of your money on average every 20-odd years. So you can depend on prices doubling in that timeframe. This is important to take into account when figuring out how much your retirement or pension needs to cover once you hit the magic number. Another important factor is your life expectancy post-retirement.
#3. Longer Life Expectancy
Americans live an average of 19 years after hitting 65 years old. This adds up to nearly a quarter of your life, far too long to depend on rely on simply your savings and Social Security. And of course, bear in mind this is only the average number of years people survive past the retirement age. Half the popular lives less, but the other half lives even longer.
#4. Decreasing Worker-to-Retiree Ratio
The current ratio of working citizens (between 15 and 64) and retired citizens is five to one. By the middle of the century, this will plummet to a ratio of three to one. This means fewer workers to support a burgeoning (and longer-lived) generation of retirees.
#5. More Job Competition
When many workers hit 65, retirement simply won’t be feasible. That means they’ll remain in the job market, competing for jobs. Another unfortunate fact that might exacerbate this problem: age discrimination, which is a very real problem among employers. Older workers usually require higher insurance premiums (if the job offers insurance) and usually require higher pay due to their level of experience. For many employers, this may “over qualify” you for the job.
#6. Not Enough Set Aside
Almost half of all American workers have less than $10,000 set aside for retirement.
#7. No Interest in Interest
I once heard an ambitious man say that once you make your first million, you can live off the interest. At the time, I thought he meant the interest generated by a decent savings account. Perhaps he did, but since I was offered that slice of wisdom, I learned that the interest accumulated by a savings account isn’t that impressive. Neither is the interest gathered by many certificates of deposit. Many people who depended on these types of accounts to support them during retirement have had to reassess their future plans. The likelihood is you can depend on prices rising continually rising and savings interest rates dropping.
#8. Bankruptcy
Declarations of bankruptcy among Americans over the retirement age have jumped nearly 180% since the 1990s.
#9. It Takes More to Retire
The recent economic crises have wreaked havoc on baby boomers’ retirement plans, forcing them to save an additional percentage of their pay to counter the damage. This will also contribute to retirement-age workers remaining in the workforce well past the age of 65.
#10. Debt Doesn't Retire
Over half of Americans entering retirement bring with them outstanding debts and no steady income to handle them. This means a further depletion of retirement savings.
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