It seems like only a few short years ago no one was worried
about retirement. The stock market was roaring, home prices
were rising and the economy was in solid shape. Everything
looked rosy and many people were planning for an early
retirement or at least one that carried no risk.
Today, though, things have changed. Every day you read
a new headline that gives you pause; "Dancing Bears at
Your Retirement Party", "Americans Delay Retirement As
Housing, Stocks Swoon",
"Savers Feel Pinch of Tight Credit", "Sales of Triangle
Homes Off Again", "Government Benefit Programs in Trouble",
and the list goes on.
What is a baby boomer to do? We have been stashing money
away as fast as we can into our homes and retirement plans,
hoping for the market to drive prices ever upward only
to find that what goes up does indeed come down. We are
now faced with the prospect of working longer, saving
even more and hoping that things turn around quickly.
We could just get depressed, resort to substance abuse
or consider an early death but those options don't seem
all that appealing either. Perhaps the answer to our problems
is a new President, one who promises change or a better
life? That might indeed be the answer but I doubt it.
Very few individuals can fix what is a fundamental flaw
in a very complex system.
The biggest problems you will face in retirement are:
* How long you live?
* What your tax bracket will be?
* How well your portfolio performs?
* What government benefits will look like?
Under "how long you will live" falls one other factor
that will affect everything else; how healthy will you
be? Fidelity investments recently completed a study that
projected that the average couple will need about $225,000
in retirement just to cover non-covered medical expenses.
This could put a real crimp on a couple 's lifestyle.
Also, longer life means your money must last as long as
you do, so, your returns better be predictable.
What about your tax bracket? If you have all of your retirement
savings in tax-deferred savings plans (IRAs, 401ks and
annuities) you might be in for a real shock when it comes
time to pull these dollars out. If you were counting on
being in a lower tax bracket in retirement you may find
that every 1% uptick in taxes will begin to eat away at
the pool of dollars you have saved.
And what about your investment returns? Most projections
of your assets lasting until the end of your life are
based on returns of at least 5-6% per year, assuming you
only withdraw 4% or less. If you experience returns of
less than 5%, even negative returns, your assets will
be expended much sooner than you expect. Can you predict
with certainty that the market will perform the way you
need it to once you get to retirement?
Government benefits are even a greater risk. The last
article listed above gives you some of the stark statistics.
Medicare will consume over half of all tax revenue by
2042, Medicaid is already dipping into its trust fund
and Social Security will be out of money by 2041. All
of this means your benefits will be reduced, you will
have to wait longer and taxes will need to go up in order
to prolong these programs.
Is there hope? Sure, but you will need to take action
to make it happen. Now is the time to begin creating tax-free
income sources that you can use in retirement. You also
need to look for ways to guarantee your returns or find
products that have more predictable returns. This doesn't
mean that you have to give up on market based returns
though, as there are several products that can meet these
criteria.
The important thing for you to do is educate yourself
about what actions will impact your future retirement
the most, both negatively and positively. Once you have
this knowledge you can find ways to maximize your potential
retirement income and protect your assets without giving
up choice and control.
Here 's hoping both you and your money survive.
About the Author : Marc Cram is a CFP
in Durham, North Carolina. He works to protect and increase
people 's assets using safe liquid investments. Marc can
be contacted through his blogsite at icbnews.com/marc.
You can download a free 12 page article on how to safely
and conservatively build wealth at www.wealthyyou.us
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