Along with the distressing articles about the disappearance
of the middle class, the number of articles, tips and information about
retirement is growing. The USA Today printed 7 mistakes people make in retirement last October and again this
April. (It is a different article, but
substantially the same tips.) The real
question, though, is whether people who are now in their thirties will ever be
able to retire. Some of that depends on
wealth, but a great deal also depends on behavior.
In the past people understood that retirement financing was "like
a three-legged stool.” They could rely
on a pension, Social Security and personal savings. Today, not only are people living longer, but
the first leg, pension, is disappearing, being replaced at many companies by a 401(k) and other forms of personal investments.
Many large companies are avoiding the liability of a pension commitment
by phasing it out for new workers or completely eliminating it. Even union guarantees are being challenged
and renegotiated retroactively as in the Detroit bankruptcy and on-going
debates in Chicago, among other places.
What’s more a survey this March shows: “About 36% of workers have less than $1,000
in savings and investments that could be used for retirement, not counting
their primary residence or defined benefits plans such as traditional pensions,
and 60% of workers have less than $25,000 (less than a year of expenses for
most people)." The icing on the cake is
that Social Security funding has not been solved despite concerns dating back
30 years. No politician wants to take
the chance when AARP and others vociferously attack consideration of even the
slightest adjustment.
Longer life throws two monkey wrenches into the
works. The first is simply that savings
must last longer. The second is that
associated with longer life is the potential for more medical bills. Current estimates are that “the average
65-year-old couple could actually expect to spend more than $220,000 in
Medicare premiums and out-of-pocket medical expenses during retirement.” That’s on top of regular expenses. The majority of Americans are either
overweight or obese and those who are not physically fit are in for an even
ruder awakening. “Fidelity estimates
that poor health can increase the amount of retirement income this person will
need by about $15,200 per year.”
The bottom line is that most people don’t know how much to
save and, even if they did, don’t have the will to save it. According to this expert, even a million
dollars might not be enough. Despite plentiful
tips, many Americans don’t know how to save, spending all they earn, and sometimes more. Some advice intended for retirees applies to
everyone: they should make a budget and
stick to it or “avoid impulse buying and make sure they have other ways to
socialize besides shopping.” Just as shopping
should not be the new job for retirees, it must not be a hobby for younger
folks.
Many make mistakes while they are young and will never
recover: not appreciating or planning
for the size of college debt, having unwanted children or children with a
deadbeat spouse, buying too much house with a minimal down payment and not
paying off the mortgage before retirement, abusing credit, and generally
wasting money by not distinguishing between needs and wants. We could learn a lesson from those highly paid professional football players on that score. “Just
two years after their athletic careers end, 78% of former NFL players are
bankrupt or nearly there.”
Will retirement become a thing of the past? Will we revert to the America of the 1800s
when only the very rich retired and the rest worked as long as they were
capable and then were totally at the mercy of family or charitable
programs? With the current behavior in
the five key dimensions, it doesn’t look promising, and there is less and less possibility of passing the responsibility on to the government.
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