Challenges to Retirement

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We all dream of someday enjoying a financially comfortable retirement, where our many long years of working are rewarded with relaxation, fun, and the ability to fully dictate how we spend our own time.  However, this American dream has drastically changed shape over the last several decades.  It is now extremely rare to be lucky enough to retire from a job with a pension that will allow you to maintain the same lifestyle.  Increasingly, Americans are responsible for investing in their own retirement accounts through IRAs and 401(k)s.  Unfortunately, it appears that many U.S. households now have no plan for retirement at all or factoring costs of aging such as Life Alert costs. A recent survey conducted by the National Institute on Retirement Security found that 38 million working-age households, which is a whopping 45 percent, do not have any retirement assets or accounts.

Even those who are carefully planning for their retirement in the future are facing a number of fresh challenges that can hold them back.  Popular investment site, The Motley Fool, outlined these challenges in a recent article, and they are summarized below.

• The Federal Reserve has kept interest rates on lending low for the last six years. While this is a plus if you are planning to buy a house, it is a negative if your investments lie in CDs, money market accounts, bonds, and/or savings accounts, as these forms of investment make money solely on the interest they earn.
• Senior citizens have seen the stock market crash and rebound several times by this point in their lives. This makes them partial to distrusting the stock market, and therefore are turning down investment opportunities where they feel the reward is not worth the risk.
• It appears that if action is not taken, the cash reserves that fund Social Security will run dry by 2033, which would result in a 23 percent cut in benefits. This would be disastrous, as the Social Security Administration recently reported 52 percent of all senior couples count on Social Security for at least 50 percent of their income, and 47 percent of unmarried seniors count on it for at least 90 percent of their income.
• While this may change in the future as Americans continue to live longer, the job market for seniors is not favorable. Businesses tend to gravitate toward younger employees who are willing to accept lower wages starting out.
• Medicare does not cover 100% of a senior citizen’s healthcare costs, and out-of-pocket medical expenses continue to rise. While pharmaceuticals and medical devices constantly improve and target medical issues in a more personalized manner, the cost of such technology is expensive.
• Senior citizens are increasingly entering retirement in debt. Shockingly, senior citizen student loan debt has increased 500 percent since 2005 to 18 billion dollars, with only 20 percent of that being parents paying off the debt of a child or dependent.  Additionally, over the past two decades, it has become less common for seniors to enter retirement with their house paid off.  In 1992, only 25 percent of all homeowners 62 and over still had a mortgage payment. By 2010, that number had increased to 45 percent.