Friday, September 17, 2010

Retirement Deficit: 6.6 Trillion, Seniors forced back to job market

No one wants to reach his golden years and discover he can't really retire. The havoc done to all retirement plans in the US over the last 3 years is undeniable and the damage would be long lasting. Allow me to quote two relevant stories:

U.S. Retirement Deficit Reaches $6.6 Trillion: 'God Help the Poor Gen Xers'
America's retirement crisis has reached epic proportions, according to a recent study by Boston College's Center for Retirement Research. The study estimates that the current retirement income deficit, or the gap between the retirement savings of U.S. households and what they need to have in order to maintain their living standards past retirement, is a whopping $6.6 trillion -- five times the projected federal deficit for 2010.

"The key sources of income retirees are relying on are either under attack, in the case of Social Security, or disappearing, in the case of traditional pensions," said Ross Eisenbrey, vice president of the Economic Policy Institute, at a press conference on Wednesday. "The early Boomers are better off than the late Boomers, and God help the poor Gen Xers. Seventy percent of them are on a track that leads to a fallen standard of living in retirement."

According to the latest retirement income data, half of 65-and-older households have an annual income of less than $29,744 -- about half the median income of younger households. Traditional pensions are disappearing in favor of 401(k) plans, which allow employers to shift much of the cost and all of the risk to their employees, and on top of this, Congress is considering cutting Social Security to balance the federal budget.

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I'd advise watching out for people with certain agenda giving you these kind of news. There are communists and socialists for whom the solution to the problems we face is confiscate whatever we do have and replace it with some 'social security+' system. Have you ever heard a worse idea?

What do seniors who have not saved enough or were horribly damaged by financial collapse - what do they do? Go to work of course.

Beyond the 401(k): Seniors must work longer
After 30 years studying pension systems around the world, Alicia Munnell knows what works -- and what doesn't. As head of the Center for Retirement Research at Boston College, she warned early on that 401(k) plans would fail to provide the level of income that retirees would need. Not many agreed with her at first.

But by 2006, Congress, other academics, and much of the financial services industry had concluded that defined-contribution plans had some serious flaws. The result: the Pension Protection Act, which mandated 401(k) reforms such as encouraging auto-enrollment and the use of target-date retirement funds.

Those measures, however, aren't enough to fend off a coming crisis, Munnell argues.

With savings and housing wealth below peak levels, workers are less prepared for retirement even as Social Security deficits are expected to balloon, threatening future benefits. How to fix the mess? Munnell, a former economics adviser to President Bill Clinton, calls for broad changes in America's retirement system. She shared her ideas with senior writer Penelope Wang.

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Raising the retirement age for full benefits to 70 or higher is something that's being talked about a lot now.

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Yikes. That's preventing you from using your retirement funds so that some calculator at an epidemic's basement is happy with global and national studies.

OK - I'm light years away from my own retirement, seriously. I'm bringing these stories here for general info. If you are concerned about the state of your current investments, consider trying my free software: EzBacktest. Back-test your investment choices, and get some peace of mind - as you lay out plans to your far-future of hopeful retirement.

Cheers!

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