In your mind’s eye, how do you see yourself living retirement? Does it include the activities that you enjoy now … without the time you spend at work? When you have the time, do you see yourself seeing the world? Retirement presents an opportunity for some life-changing experiences.
But there are a few things that can cause those retirement dreams to become nightmares.
If your retirement plan includes a pension, you may want to consider the risk. It is a fact that many private and public pension plans are sadly underfunded. Some public pension plans are the worst offenders. As an extreme example, the Illinois General Assembly Retirement System is only 13.5% funded.
A long period of very low interest rates means that pension plans with large bond investments have generated low returns. It has caused others to take greater risk. At some point that can affect the pensions of those who believed their Golden Years were paid for.
Living longer than you expected is another risk. In 1950 the average life expectancy was 68. That meant that the average worker retired at age 65 and died three years later.
Sixty years later, in 2010, the average life expectancy was 79 and many people are living longer. In 2010 there were 1.9 million people over age 90 and three quarters of those were women. One of the biggest concerns that retired people have is running out of money as savings are eroded by inflation. How would living past age 90 affect your retirement plans?
The third thing that is causing the average worker concern about retiring is insufficient savings. Fewer people are covered by pension plans. Many employers have replaced guaranteed pensions called “Define Benefit Plans” with 401(k)s and 403(b)s known as “Defined Contribution Plans.” This transfers the responsibility for retirement from the employer to the employee. Too few people are taking advantage of these programs, not saving enough, and making unwise investment choices. This can result in insufficient savings when the time comes to actually retire. One result is that more and more people continue to work well past the traditional retirement age of 65.
What is to be done?
We have to accept a greater responsibility for our own retirement. We have to be honest about how safe those pension promises are, whether we work of a large corporation or for a government entity. We have to start saving early and make wise investment choices. One of the wisest things people do as they prepare for retirement is get the services of a competent retirement professional who will guide them to a safe haven at the end of the road.
Korving & Company is an investment management, financial advisor, and financial planning firm that specializes in working with retirees, couples who are serious about retirement planning, and women who have recently suffered the loss of a spouse.