The game has changed in terms for retirement for the Baby Boomers. The question used to be not if you would be able to retire it was how much will you have in retirement? Now the question is can you afford to retire? This is a completely different approach from the days when the economy was blowing and going. There are valid concerns that the Baby boomers are facing. For many timing could be everything.
Investment expectations are lower. The market is flat over the past 10 years. This means that someone who thought the high returns of the 80’s would continue is in for a shock. Retirees who were banking on returns of double digits are in for a terrible surprise. This means that retirements may have to be delayed or standards of living during retirement reduced. Some are even taking on part time jobs to supplement income.
Forced early retirement is a reality. Many companies are looking at salaries being paid to employees with decades of service and seeing an opportunity to cut cost. This means that there are more layoffs and buyouts being forced upon older workers than ever before. This can create a dual problem. The decrease in available Social Security Benefits along with the added years of withdrawals from a retirement account can cause severe short falls. This again means reducing the planned expenses during retirement, finding another full time job to delay retirement or working a part time job to supplement income.
Employers are less likely to offer any guaranteed retirement benefits. It used to be that a pension was more the rule than the exception. Most people worked for one company all of their lives and then received a pension and some form of health insurance benefits. This changed as companies wanted to avoid the responsibility of having to fund shortfalls in pension plans. The 401K became the standard retirement plan. Still health insurance was included in the retirement package and some even still had a small pension plan. Those plans are disappearing. The cost of health insurance is skyrocketing and with the change in laws many companies are concerned about how they are going to continue to pay for increases in costs of coverage. Companies that have pensions are beginning to want to buy participants out with a lump sum payment. This will shift the responsibility to the retiree. So for many retirees the certainty of having that fixed monthly payment is disappearing. The certainty of having heath insurance subsidized by their former employer is also becoming a thing of the past. The benefits packages that once were taken for granted are rapidly going the way of the dinosaur.
The certainty of a 401K is now that being able to retire on the returns is that it is uncertain. For many people simply investing in a 401K no longer holds the allure it once did. They seen the accounts of friends and their own accounts dwindle over the past years rather than increasing almost automatically. Those who are participating are much more interested in a return of their investment rather than a return on their investment. This is creates a squeeze that many are finding difficult. Do I retire at the age I had planned and risk that returns do not improve? Should I continue to work longer if I am able? How do I reduce my planned retirement expenses?
Many people have to make difficult decisions as a result of the new realities listed above. Some these may change but some may not. The days of a certain comfortable retirement are not as likely as they used to be. Even people who started saving early are being affected. In order to overcome these issues you have to be willing to adjust and make some hard decisions.