Xigaware

Risks to Your Retirement Income

If you’re a member of the “Baby Boomers,” you’re probably thinking a lot about retiring – provided that you haven’t already retired.  Even if you have previously retired, chances are that you’re considering when you’re financially able to remain comfortably retired.

Recent recessionary economy compounds the situation even more by increasing the following retirement related economic variables:

1. Life Expectancy Is Longer

Today, life expectancies are longer than their parents’ generation. For example, in 1970, a 60-year old white male would have had a life expectancy of only 16.2 years; but, by 2008, his life expectancy had climbed to 20 years.

So how is the Boomer going to afford retirement during those extra 3.8 years? There are only a few likely solutions:

> Increase pre-retirement nest egg building

> Work beyond early retirement

> Move in with children or other family members

> Expect a reduced quality of life

2. Health Care Costs Keep Rising

Adequately funding one’s medical care costs are some of the most difficult financial activities, mostly because medical costs are so person-specific, with requirements varying substantially from one person to another. Long-term care needs are even harder to plan for and fund.

Medical expenses have grown at a rate greater than 5% (inflation adjusted) for the past 15 years – a rate that is higher than the growth in family income. Medicare costs are expected to rise similarly.

3. Legislative Changes May Limit Retirement Income & Supplemental Programs

It has been widely reported that the costs of major entitlement programs (e.g., Social Security, Medicare, and Medicaid) are growing more rapidly than other parts of the economy, and some economists challenge their long-term viability because of the cumulative effects of increased longevity, size of the Boomer population, and rising health care expenses in general.

Further, immediate questions concerning continued health insurance during retirement, and at what benefit levels, are wide-spread in today’s economy – and these questions are given even more fuel by the reorganizations occurring, especially among the auto industry.

There is currently much conversation concerning a national health care program – but such debates have been active for decades, with few benefits to show for those efforts. Although President Obama will be leading such efforts this year, many people expect Congress to present a lot of opposition.

Most people think that seniors past age 55 will be protected from reductions in these entitlement programs, but providing full coverage for them is a two-edged sword – doing so increases the likelihood of a new tax, which would likely add to retirement tax burdens.

4. Retirement Dates Are Frequently not a Free Choice

According to a 2004 Health and Retirement Survey (HRS), 37% are forced to retire due to poor health or economic downturns, etc.

5. 401Ks Have Been Decimated

Were your savings (including your 401k) devastated with the stock market crash last year? Mine did. Many people saw their 401k and other stock market accounts take a 50% hit, which has led many comedians to rename them “201k”. For many people, their 401k was the bulk of their retirement savings, so this stock market crash seiously damaged their retirement plans.

Humpty Dumpty Was Not a Retirement Expert

But there is some good news. Luckily, you can repair a broken “Nest Egg”.

You can work longer, semi-retire and take a part-time job, work from home, start your own business, etc.

If you’d like to start an online business, but are hesitant because you’re not an internet expert, one very good starting point for gaining all the education about internet marketing that you’ll need to be successful is to sign up for the Online Success for Beginners course.

A report by Butrica, Smith and Steuerle (2006) noted that working just one (1) extra year can boost annual retirement income by 9%, while working just five (5) extra years results in an additional 56% annual retirement income.

If you’d like to learn how to generate a second income, so that you can have a rewarding, financially secure retirement, check out Darren Salkeld’s new MaxPro Marketing System and get his FREE Report and FREE Audio describing the age-old secrets of creating wealth.

If you enjoyed this post, make sure you subscribe to my RSS feed!