Not long ago, turning 65 meant a“gold watch,” a secure company pension that provided income every month for the rest of your life. And throwing away the alarm clock forever. Your worries were few and far between.
Unfortunately, those days are gone.
Today, baby boomers face more headwinds in retirement than ever before.
Companies have been slashing retirement benefits and pensions as we know them have been going bye-bye. As a replacement, we have 401(k) plans and other retirement plans that do not have guaranteed paychecks for life. So it’s really critical that people know that and have a plan.
With these company pensions being a distant memory and low interest rates that are virtually pushing savers and retirees to no return on their money, the world is more difficult than ever before!
Unfortunately, that’s just the beginning of the story!
We’re living longer than ever before – which means our money has to last as long as 30 – possibly even 40 years after we retire. Our healthcare and medical expenses are going through the roof – and it’s going to get even more expensive in the future. And baby boomers, more than five years later, while doing better, are still picking up the pieces from the last 2008 financial crisis. From which- nobody went unscathed.
Fox Business: This Isn’t Your Grandmother’s Retirement Click Here
The go-to solution for many retirees is to work beyond their mid-60’s – even into their 70’s. But that’s more out of need than it is desire. This is a big change from the days of your grandma’s retirement. So many people are ready to retire today, but they can’t because they haven’t positioned themselves properly with guaranteed income to last the rest of their life. The biggest change that the baby boomer generation (and every generation that will follow) has to prepare for- is a much lengthier retirement. They are creating a whole new life stage that we’ve never seen before.
The time to get started is now. Right now. Because the sooner you start, the better off you’ll be!
Forbes: An Outdated Strategy Could Be Jeopardizing Your Retirement Click Here
In a recent study, 42 % of baby boomers said they intend to cycle between periods of work and leisure. Only 17% of baby boomers plan to retire and never work for pay again. Age is no longer the most decisive factor for when a baby boomer decides to retire. Instead, accumulating the resources needed for retirement freedom is the biggest factor that plays into that decision.
Retirement isn’t as easy as it used to be. Your parents and grandparents were taken care of. They had the security of both a company pension, and a well-funded Social Security system. Plus, interest rates at the bank were yielding unbelievable returns. $500,000 in a bank in 1981 generated $90,000 a year in income. Today, that same $500,000 would only generate about 400 bucks a month in a CD or savings account.
Fidelity: Smart Strategies For Retirement Income: Click Here
Retirement takes a lot of planning and preparation. You need sources of lifetime income. Currently today there are a lot of income planning tools out there like a fixed index annuity or a hybrid annuity. These annuity products, that are designed to generate income for life, can be the best feature in your financial house.
Annuities can be the foundation of your retirement house. The foundation is used to cover your basic needs during retirement. After you build the foundation, the walls of your house are built for income- either income now, or income later. Finally you have the roof. The roof is designed for risk. This is where you find traditional investments such as stocks and mutual funds.
A comprehensive retirement plan will contain a good tax strategy. A good tax strategy will help you avoid having withdrawals bump you into a higher tax bracket. This is needed in any retirement plan because you never know what’s going to happen.
If, for example, you all of a sudden have a health event and have to start drawing 3, 4 or 5 thousand dollars a month from your IRA- you’re going to have to pay taxes on that money and you’ll have to pay more because you’re drawing more money.
You may have $500,000 or more in your 401(k) or IRA, but that’s not all yours. If in the end you were able to keep all of that money, that would be a different story. The reality is that you have a major partner in that account- the IRS and the state of Oregon, if you happen to live in Oregon. For every dollar you take out, a huge chunk of that is going to come out for taxes. If it puts you in a higher tax bracket then you’ll have to draw out even more of your retirement account and give it to the government.
Today, retiring successfully and retiring comfortably won’t happen by accident. It will take careful and thoughtful planning. And although everyone would love to walk off into the sunset and know their retirement was taken care of by their company, or the government, that’s not happening. Ultimately, this responsibility falls squarely on your shoulders. We encourage you to know the obstacles and work with someone who can coach you to and through retirement.