Golden Age: A Thing of the Past?

RetirementBelieve it or not, today’s retirees are experiencing what you might call a Golden Age.  This means that current retirees, at least many of them, are living rather comfortably.  They have enough money to last throughout their retirement, their health care is secure, and they don’t have to worry about working in order to supplement their income.

Unfortunately, many believe that those days are over.  The new batch of retirees are discovering that they might not have it as easy as many of their older counterparts.  Let’s take a look at some of the facts concerning this possible death of the Golden Age of Retirement. (https://www.msnbc.msn.com/id/47063385/ns/business-personal_finance/#.T6fb1dVDNnU?utm_source=facebook&utm_medium=social&utm_broadcast=b36d5902-4b3c-4a11-a419-425dd223acc4)
Fact #1:  Older Baby Boomers will have an easier time than their younger brethren.
Baby Boomers who are enjoying retirement right now are doing exactly that: enjoying it.  Many of these lucky millions are well off thanks to such things as company pensions, sizable inheritances, the equity in their expensive homes, and a number of other luxuries.  Unfortunately, the same is not true for people who are currently approaching retirement, including the younger portion of the Baby Boomer clan.  These new retirees are not in the same financial circumstances that their older peers are.  This is why many are saying that this marks the end of the Golden Age.
 
Fact #2:  Spending has not stopped.
Spending has always been a problem for millions of Americans.  We want what we want, and many of us are likely to buy items that we desire even when we can’t afford it.  This is especially true for a number of Baby Boomers, because many of them were quite comfortable with their finances, and had the money to spend.  They were never afraid to spend their cash, because more was always on the horizon.  Spending money isn’t a crime, of course, but if you choose to do so, then you need to also make sure that money is being put away for your future.  Unfortunately, this doesn’t seem to be happening as much as it should. (https://www.nytimes.com/2011/10/29/business/americans-savings-rate-drops-again-puzzling-experts.html)
 
Fact #3:  The recent financial crisis is partly to blame.
Four and a half years ago, we entered an era dubbed the Great Recession.  Since then, millions of Americans have either lost their jobs, seen their financial portfolio dwindle, or both.  Officially, this Great Recession ended in 2009, but the effects have proven to be long-lasting.  Many people approaching retirement are still reeling from their own financial collapse, whether that may be due to a severe decrease in inheritance, a lack of a company pension, or some other similar reason.  Of course, people need to realize that the financial crisis isn’t the only reason they’re experiencing problems.
Fact #4:  The recent financial crisis isn’t the only issue.
While many people have blamed the financial crisis for their troubles, and rightfully so, a number of individuals approaching retirement have caused their own problems.  The most important of these is also the simplest … they are, flat out, not saving for retirement.  They are procrastinating each and every year, and all this will do is ensure that their retirement doesn’t exactly go as planned.  Some of these individuals may have been hurt by the financial crisis as well, but their actions are not helping things to get better.  No one is going to save for your retirement for you.  It’s all up to you.  Future retirees have a difficult road ahead, and if you don’t take steps to avoid the pitfalls, you may find yourself looking back with regret.
If you would like to get on a path where you can avoid the pitfalls, schedule your free, no-obligation appointment with our experts.

Could 401(k)s Be A Thing of the Past?

401kIf you’re like most investors,, it is very likely that you have a 401k as part of your retirement plan.  In fact, there’s a solid chance that your 401k could be the backbone of your entire financial portfolio.  If this is the case, you definitely aren’t alone. They can supply you with a healthy amount of retirement income, there are tax benefits, and if you obtain one through your employer, you may receive matching contributions.

That being said, 401k plans could be in trouble.  And we’re here to tell you exactly how…
Federal Government’s Massive Budget Deficit
Unless you’ve been living on the moon, you’ve surely been painfully aware of the deficit our country is facing.  The federal government is trying to decide how exactly to bring down that iever-growing amount, and 401k plans could become a target.  More precisely, proposals have recently been made that would target the tax benefits enjoyed by the contributions you make into your 401k.  The effect would especially be felt by individuals with a higher income.  The basic thinking is that the contributions you’ve been making into your 401k cannot be taxed right away, and that is something that has raised the eyebrows of a variety of lawmakers.
Flat Tax Credit Proposal
Last September, an idea was given to the U.S. Senate Finance Committee to help improve the country’s deficit.  It was suggested that the pre-tax and tax-deductible contributions be replaced by a flat tax credit of 18%.  This would go for both companies and their workers who contribute into these accounts and take advantage of their tax benefits.  While this would raise $458 billion over the next decade for the government, individuals would be forced to pay taxes on any money contributed into their 401k accounts.  Losing this benefit could be devastating, at least to those with a sizable amount of income.
Lower Income Would Benefit, Higher Income Would Suffer…
How you feel about this proposed change might very well have a lot to do with whether you are considered to be in the lower income or higher income bracket.  Basically, this change would add an increased incentive for those in the former category, while those in the latter category would be negatively affected.  Why?  Because a 15% tax bracket would be the line dividing the two groups.  If you are below this bracket, you would receive a greater benefit with this proposed “new” system.  If you’re above the 15%, however, your benefit would decrease from how it exists in the current plan.
… Or Maybe the Higher Income Individuals Wouldn’t Suffer, After All
Despite the decrease that this proposed system would cause to pre-tax benefits, there is a good chance that most, if not all, higher income individuals wouldn’t be affected.  This is because they would simply alter their financial portfolios to take this into consideration.  In all likelihood, they would simply move the funds normally utilized for a 401k and other newly taxable accounts into a retirement account where contributions are not taxed.  Shifting funds might be a bit of an inconvenience, but it’s something most higher income individuals would be fine with.  Especially since many of them have a financial adviser that handles all of these issues for them.  Plus, the lower income investors could really use an incentive, seeing as how a recent survey by EBRI found that barely a third of individuals earning less than a $35,000 yearly salary are currently saving for retirement.

The Family Banker

Millions of Americans are finding themselves in a bit of a quandary.  Years ago, they began designing a retirement plan in order to secure their future.  They chose strong retirement accounts, socked away a sizable sum of money, and didn’t overspend.  But even so, their retirement portfolio isn’t what they thought it would be.The Family Banker

Of course, there could be a number of reasons for this.  But for many, the reason is very simple: children.  Of course, the problem isn’t the fact that people had rasied children. No, this issue involves children that are well into adulthood.  The truth is, many Americans are finding themselves taking care of their kids far past the point they envisioned, and their retirement is being harmed because of it.
Recent Survey Shows Disturbing Trends
 
The recent Money Across Generations II survey, conducted by Ameriprise, aimed to discover where investor’s money was going, and what they found was both encouraging and disheartening.  The encouraging part is pretty simple to understand.  People love their families.  They want to take care of them no matter what.  After all, how many of us have given money to an adult relative in need, or gone above and beyond what would be considered common courtesy for the simple fact that we are related to them?
Unfortunately, this assistance can go too far.  More than half of those who took part in the study admitted that they had allowed their adult children to move back in with them and live rent-free.  Think about that for a moment: half.  While some think this will never happen to them, the truth is a number of people are one financial crisis away from granting their adult children the same opportunity.
The problem with this, of course, is the fact that many parents are damaging their own finances for the sake of their adult children.  Many parents are not stopping at simply a place to stay.  They are paying off their adult kids’ credit card debt and student loans, and some are even providing money for meals, car payments, medical bills, and various other needs.  While assisting loved ones sounds commendable, retirees should be aware that sacrificing their own retirement is a dangerous game to play.
The Numbers are Depressing and Getting Worse
The truth is, those approaching retirement have enough to worry about without bringing the needs of their adult children into the mix.  When the first Money Across Generations survey was conducted in 2007, it found that 44% of baby boomers were putting money away for their retirement.  But the new survey demonstrated that only 24% were currently doing the same.  This drop is alarming, to say the least.  In addition, 24% also said that they were simply attempting to maintain what savings they have.  The needs of your adult children notwithstanding, these numbers are reflective of a society that doesn’t appreciate the negative effects they will feel from their actions.
Saying no to family can be a difficult thing.  In addition to adult children who need assistance, many people approaching retirement also have an elderly parent to care for.  According to the survey, almost 70% indicated that they planned to put money toward their retirement rather than pay off a child’s credit card.  But more than 50% stated that they would choose to assist a parent with long-term care over their own savings.  Plus, nearly 90% said they didn’t regret their decisions and would do it all over again, if needed.

The Expectations and Realities of Retirement

Thinking About RetirementThe difference between what we believe will happen and what actually happens can be quite astonishing.  This goes for nearly every facet of life, including retirement.  Before you retire, there are certain expectations that you might have concerning your quality of life, finances, health, etc.  Once you get there, however, you may find that your expectations do not exactly align with reality.

The Harvard School of Public Health, in association with the Robert Wood Johnson Foundation and NPR, set out to measure the differences between the expectations and realities of retirement.  What they found, which is summarized in this video, might surprise you.

QUALITY OF LIFE

The first thing that the survey looked at was a person’s overall lifestyle.  Basically, it was a measurement that was just as it sounds: how a person who is planning to retire feels that their overall life will be, and then how it actually ends up for those who are already retired.  For those who are planning to retire, only 14% believed that their overall quality of life would be worse once they reached retirement.  However, of those surveyed who were already retired, 25% stated that their overall quality of life was worse than before.

HEALTH

It is a fact of life that as we get older, our bodies begin to break down faster than ever.  We are more susceptible to illness and injury.  Despite these facts, only 13% of people who took part in the survey and were planning to retire believed that their health would worsen in their later years.  The reality according to those who had already retired, however, was that a whopping 39% had worse health issues than before they retired.  This is not a very hopeful scenario.

FINANCES

Making sure that you maintain your finances throughout your retirement can be a harrowing ordeal, one that many people have difficulty achieving.  It’s often difficult to keep the money coming in, unless you’re working at least part-time in your later years.  Even so, a rather shocking 22% of those who were not yet retired expected their finances to decrease.  In reality, 35% of participants who were already retired claimed that their financial outlook went down after retirement.

EXERCISE

This part of the survey was possibly the most shocking.  Out of the participants who were still waiting for retirement, a miniscule 1% expected a detriment to their ability to exercise.  But on the other side of the retirement line, 34% stated that their exercise capabilities lessened.  That difference is incredible, to say the least.

TRAVEL

Millions of Americans love to travel.  Whether it’s taking a road trip across the country or flying halfway across the globe to an exotic location, many of us simply love to get out and explore the world that’s surrounding us.  Perhaps that’s why only 11% of those surveyed who were planning to retire predict that their travel would lessen.  But for the ones surveyed who were already retired, 34% reported that they were not able to travel as much as they had before retirement.

CONCLUSION

As you can see, there is often a huge difference between our expectations regarding retirement, and the reality of that retirement.  We tend to think that everything will remain the same, even as we get older.  But it’s important to recognize the difference between blind expectations and reality, so that we can prepare for life’s little inconveniences. With measured goals and a clear plan, retirement can happen “on purpose”, rather than by luck.

Working Late, Choice or Not?

Working LateAlthough it takes a lot of hard work and dedication to get there, millions of Americans are looking forward to their retirement.  They dream of the days when they can sit back, relax, play golf, and simply enjoy the rest of their years away from the rat race of the working world.

For an increasing number of retirees, however, retirement is only a state of mind.  Many continue to work past their retirement age, and some will work for as long as they live.  Why is this trend increasing?  For some, it’s health reasons.  For others, the reasons are financial.  Regardless of the why, the fact remains that there are a lot of retirees out there still grinding away.
Numbers Don’t Lie
By most accounts, the recession that hit nearly five years ago caused many Americans to have difficulty finding work.  Many older citizens decided to retire early, and some of those were out of reluctance rather than choice.  But something odd has occurred, something that seems to go against the facts.  While some retirees retired early, many of them made the choice to continue working longer than even they may have expected.
In fact, the numbers are quite astounding.  At last count, 7.2 million workers who were 65 years of age or older were continuing to work.  That is twice as many as just 15 years ago.  Since the recession started, the overall count of workers has decreased by 4.4 million.  But for the 65 and older crowd, the number has jumped by 1.4 million during that same time period.  That is an amazing 25% increase.
Working for Health Reasons
Medical technology has become rather advanced over the past few decades.  Many ailments that were once considered a death sentence, including several types of cancer, are now more treatable than ever.  And as people get older, they often feel better than their previous counterparts.  Growing older doesn’t necessarily mean feeling run-down all the time and being unable to function.  Sure, you’ll see some degradation.  There’s no way around that.  But you can also remain more active than you might have imagined twenty years ago.
Because of this newfound health, many retirees are deciding to work through at least part of their retirement.  What’s even better is that working actually improves both physical and mental health.  In fact, according to a survey conducted by the Society of Actuaries, a whopping 55% of the elderly are working in order to remain active (physical improvement), and to feel as if they are a part of something (mental improvement).
Working for Financial Reasons
Another big reason why many retirees are continuing to work is due to financial reasons.  While some enjoy having extra money to spend, many of them feel as if they have no choice.  The sad truth is that baby boomers are receiving less in Social Security payments due to the raising of the full retirement age.  Plus, it is becoming increasingly common for retirees to not have a pension, which used to be a staple of nearly every retirement plan.  This means that many are relying on Social Security as their ongoing income, which simply isn’t enough.
Another reason may be due to the stock market plunge that is still on many retirees’ minds.  While they may have recovered from that ordeal, they fear that it might happen again.  Due to this fear, some retirees are delaying retirement “just in case.”  And they may continue working until they feel that the market is completely safe.