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Retirement: It’s Not As Simple As It Used To Be

Retirement: It’s Not As Simple As It Used To Be

Don’t Let College Savings Ruin Your Retirement

Today’s seniors face a lot of challenges. While we’re living long past retirement, our money doesn’t always stretch as far as it should. Health issues further complicate matters. Chronic or catastrophic health conditions affect 92% of people over 60.

The recession was a huge bump in the road for baby boomers approaching retirement. When the economy went south, millions of people lost retirement money they had spent their lives saving. More than $2 trillion in retirement savings, gone, leaving even those retiring seniors who had a solid financial plan wondering how they would survive.

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A 2016 Transamerica Center for Retirement Studies® (TCRS) survey put the state of retirement in alarming perspective. Fifty-one percent of workers are afraid they will outlive their savings. Baby boomers approaching retirement have only $147,000 (estimated median) saved for the coming years.

Imagine a husband and wife retiring at 65 and living to be 85; $147,000 sounds like a lot until you divide it by 20 years, and realize it’s $612.50 per month. Even if you could accurately predict the return on the bulk of your savings, and the stock market skyrocketed as you withdrew the smallest possible amount, you could be in real trouble over the long run. Nearly half of workers are planning to keep working past age 65, and 11.5% don’t plan to retire at all.

How Did We Get Here?

As conceived, 401(k) accounts were intended to be extra savings, a measure to supplement pension plans and Social Security and let employees retire in comfort. But employers jumped on it as a way to cut expenses and replaced their pension plans with self-funded 401(k) plans (paywall). Pension plans were phased out, leaving people entirely responsible for their own retirement savings, aside from the barely subsistence-level pittance doled out by Social Security.

Twenty years ago, much of the workforce could retire in confidence with a steady pension and benefits. Today, the number of workers with a pension plan is closer to 10%.

Sounds pretty grim, doesn’t it? That’s the situation too many seniors face: a potentially long life of abject poverty and chronic health conditions they can’t afford. How can they make ends meet? For seniors who haven’t saved enough, the answer may lie in rethinking their options.

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