Six Retirement Trends
Six Retirement Trends
Today, most Americans are still in a state of uncertainty regarding the economy. Depending upon which side of the aisle you listen to, you’ll either hear “the economy is getting better” with references made towards low interest rates and increased consumer confidence or you’ll hear “nothing has improved” and indicators such as unacceptably high unemployment and an increased deficit.
Regardless of your political views, now more than ever it has become clear that both partisan platforms leave us with potential congressional gridlock and short term uncertainty. While trends may look up on some issues and down on others, it is critical for our long-term retirement planning to remain focused on what we know to be true, and not on the conjecture and promises that blaze the campaign trails.
With this in mind, here are six major trends that must be factored in to any retirement plan:
1. Investment returns are staying low. Investment planning in the past, including withdrawal rates during the distribution of retirement funds, was typically based on annual growth rates of 4-5%. With interest rates not likely to rise for some time, accumulation returns of 1-2% are more realistic and with this decrease in gains, today’s retirement plan is nowhere near “your father’s retirement plan.”
2. Public pension systems are in trouble. If you work for state or local government agencies, your pension will face growing pressures. You can expect to see changes and reductions which will not bode well for employees in many states. This could mean fewer health benefits, lower pension payouts, or both.
3. Governments have no money. No one wants to see tax increases, but the reality is that many government programs such as Medicare and Social Security may not survive without them. No matter how you slice it, this means fewer dollars in your pocket as the government must take a bigger slice of your pie.
4. You will live longer and longer. Perhaps the biggest fear is that you outlive your money. With life expectancies increasing and investment returns decreasing, we find ourselves in a predicament that our grandparents and parents never faced. This fact has made annuities more popular among the senior population.
5. You will need to work longer. Because of poor planning and recent economic downturn, Americans will find themselves working at least part-time well into their 60‘s and often into their 70‘s. Delaying retirement will likely be a common facet of retirement planning.
6. Your home is no longer an ATM. While home values may be increasing gradually, the days of being able to easily leverage your home’s equity for that extra needed cash are gone. Millions of American’s continue to be under water with their mortgages and those looking to sell face a smaller pool of eligible buyers. Unless you own your home outright, it wouldn’t be advisable to factor it into your retirement planning.
Questions? Feel free to contact our office at 888-605-8363