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Why More Americans are finding it difficult to maintain their lifestyle in Retirement

| March 31, 2017
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Matt K. Logan CFP®

Here’s a shocking statement! If you are not funding a retirement program that reach six figures or more by the time you retire in the next 5 to 10 years; you may find it difficult to maintain the comfortable lifestyle you’ve grown accustomed to. Most people assume that one day they will automatically step off the working treadmill into retirement.  But let’s face it, there is no guarantee that when you are 65 or even 70 that you will be financially ready or even able to retire. The reality is that people approaching or planning retirement today are facing a very different environment from two decades ago. Even those astute individuals with adequate assets in either private savings or defined contribution pension plans can expect to see wide swings in equity prices that could impact their retirement income.

It is also not surprising that recent surveys show a jump in the number of people at or nearing traditional retirement age that are still working.  In fact, many say they plan to stay in the workforce for as long as they can. Financial experts concur that a major cause for this phenomenon is usually due to insufficient financial resources. Many people fail to plan for retirement early enough or, because of poor financial management are faced with living below the poverty line if they retire.  These situations also contribute to a lack of confidence in the ability to maintain a comfortable long-term financial status.

The National Institute on Aging confirms that the number of people that continue working past their 65th birthday is increasing.  For instance, census records indicate that the number of individuals past retirement age that are still in the workforce increased from 12.1% in 1990 to 16.1% in 2010. Although it is difficult to pin down the specific number of seniors that are currently in the workforce today, surveys show delays in retirement has skyrocketed and is at or near projected numbers.

There are also a growing number of retired Americans who are unhappy with their financial status that are actively searching for work or taking mediocre jobs.  This retirement delay trend is being influenced by several factors such as:

a) Working as a way to ease financial concerns in retirement.

b) Decline in the value of financial assets. According to the one survey; at least 62% of people between ages 45 and 60 experienced at least a 20% loss in value of their financial assets in 2010.

c) Lower interest rates that occurred between 2010 and 2012 in the U.S. resulted in significantly reduced yields on savings accounts, certificates of deposits, government bonds, and other retirement savings resources. This is particularly impactful for people in or near retirement because low interest rates disproportionately affect conservative investments.

d) Loss of a job or reduced income often cause people to pull money out of retirement saving accounts. Retirees without an emergency fund, often have to dip into savings for living expenses and end up seriously diminishing retirement accounts.

e) Working for job-based health insurance coverage.

              f) Changes in employer supported retirement saving package from defined benefit plans to defined contribution plans also play a significant role in the downfall in retirement readiness. Employee Benefit Research Institute analysis of Census Bureau data show an estimated 50% decline in the number of employees that are offered the opportunity to participate in a retirement benefit plan. 401(k)s has become the dominant type of retirement plan for employees today. However, this retirement vehicle only benefits those employees who choose to participate. Many do not contribute or contribute too little to sponsored 401k plans because…

  • they feel they cannot afford to,
  • are unaware of the long-term benefits; or
  • they are simply not proactive about retirement planning.

 

 A good financial plan can ensure a comfortable and happy retirement. Since there is no one- size-fits-all solution to retirement, it is important to be proactive about designing a plan that will work for you.  For most people, their current income must not only fund their current lifestyle, but must also be allocated to eliminate debts from their past as well as prepare for retirement based on projected financial needs. This may seem daunting, but a qualified financial planner devises a plan to make it feasible. The bottom line is, being proactive about planning for this phase of life can help you to to maintain your current lifestyle and even some perks during retirement.

Matt Logan is a Representative with Matt Logan Inc., and Summit Brokerage and may be reached at www.mattloganinc.com, 336-540-9700 or [email protected].   

 

Matt Logan Inc is an independent firm with Securities offered through Summit Brokerage Services, Inc., Member FINRASIPC. Advisory services offered through Summit Financial Group Inc., a Registered Investment Advisor. Summit Brokerage Services, Inc., its affiliates and Matt Logan Inc. do not give tax or legal advice. You should consult an experienced professional regarding the tax consequences of a specific transaction. These are the views of Matt Logan Inc, and not necessarily those of Summit Brokerage Services, Inc. and any of its affiliates and should not be construed as investment advice.

Sources:

  1. https://www.nia.nih.gov/health/publication/growing-older-america-health-and-retirement-study/chapter-2-work-and-retirement
  2. https://www.ssa.gov/policy/docs/ssb/v72n1/v72n1p59.html
  3. https://apple.news/ABqbC4sM0SB2KGdtXWkKigA
  4. https://www.ebri.org/pdf/briefspdf/0993ib.pdf
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