The Future of Retirement ... Is it in Jeopardy?

I have read several articles lately that really bring home the need for Congress to get its act togetherand put aside all this polar opposite positioning.  We need President Obama to realize that this is America, we are all in this together, and let’s get something done on two BIG ISSUES. What I am referring to are the issues of how long we need to work before we retire and the future of Social Security.

Let me provide you with the "Cliff’s Notes" version by highlighting the key pieces of information I think are important for you to understand.

The first issue: “How Much Longer Do We Need To Work?”

For as long as I can remember, the age of retirement was assumed to be 65 years old.  Some people would retire earlier and some later, but on the whole, 65 was the typical age of retirement. Next, when determining the income rate at retirement for this discussion we’ll use YOUR PRE-RETIREMENT INCOME LEVEL.  Finally, the sources of income one might have could include, investments, IRA, 401k’s, pensions, social security, home equity etc.

It is not surprising to know that the longer you work into retirement and allow these pots of income to grow and higher benefits to be achieved the greater the chances are you will reach those higher income numbers. What was surprising to me to learn was that waiting from age 66 to age 70 before you draw on those pots can increase your income level by as much as 26% - 35%. Studies are now showing that 85% of households would be prepared to retire at age 70. This means that many individuals will need to work longer than the previous generations, but they will still expect to enjoy a reasonable period of retirement.

Now, for those that are considering retiring in 2013 or 2014, I am not saying that you should put it off, your plans are in motion. But, for those of us in our 50’s maybe we should take a closer look at our goals and what we have saved to get us there.

The second issue: “Social Security Outlook”

From what I have read, a very clear picture can be painted to show that Social Security is going to run out of money by 2033 and at that time the only revenue will be there to fund partial benefits.

Folks, we still have control over the first issue within our own future, but with Social Security, we need Congress and the President to get real, address this issue, and make some changes NOW. If you are interested in my thoughts on this, I would be more than happy to discuss it with you.

We realize how important it is for us at HMC Partners to be active plan managers always managing risk, and return; and, how important it is for those who are not working with an advisor to do so.

Let’s all drop a line to Washington to “Get the Job Done Right AND DO IT NOW!”


Sources: “National Retirement Risk Index: How much longer do we need to work?” by Alicia H Munnell, Anthon y Webb, Luke Delorme, and Francesca Golub-Sass. June 2012

“Social Security’s Financial Outlook: The 2012 Update in Perspective,” Alicia H Munnell.