Traditional Retirement Planning is in Trouble - Don't Get Comfortable the 3 Legged Stool is Broken

Traditional Retirement Planning is in Trouble - Don't Get Comfortable the 3 Legged Stool is Broken

If you're over 60, you're probably familiar with the traditional "Three Legged Stool" model of saving for retirement; Social Security, Pensions & savings. You may have used this method in planning your retirement income. Well don't get too comfortable - the stool's broken! If you've watched the news much lately, I'm sure you're aware of the the challenges facing us. In this post we'll look at the problems you WILL be facing and then a solution to securing your retirement savings.

PROBLEM #1 SOCIAL SECURITY:

Have you looked at your Social Security statement lately? When you do, read the first page very carefully. Pay close attention to the first paragraph of the second column.

In 2016, the Social Security Administration will begin paying more in benefits than they collect in taxes. Were you aware that without changes, the Social Security Trust Fund will be exhausted by 2037 and there will be enough money to pay only about 76 cents for each dollar of scheduled benefits? Probably not. Even more shocking recent news reports state that the Social Security Administration will pay more in benefits than they collect in taxes in 2010! That puts us 6 years ahead of the government's 2016 prediction. A recent article on this from the New York Times can be found at the link at the end of this article.

Social security is currently the largest social welfare program in the U.S., constituting 37% of government expenditure and 7% of GDP. It was created in 1935 as a part of the signing of the New Deal. Many people don't realize that the average life expectancy in the U.S. was less than 62 years old when social security was created in 1935. The government never planned on having more than 50 million Americans to provide retirement income for, and that number is only going to continue to grow with the baby boomers now reaching retirement age. It was meant to be a supplement to retirement, not the main course. Don't put your head in the sand hoping this problem goes away - IT WONT! Start doing some planning now.

PROBLEM #2 PENSIONS:

I hear it all the time, "I don't have to worry I've got a state pension." I hope this isn't you. Pensions aren't what they used to be. Most state pensions are woefully underfunded.

We all know private plans have failed left and right, and many more companies have just discontinued their plans without much warning and to add insult to injury, the Pension Benefit Guaranty Corporation - the government backup for failed plans - is massively underfunded by billions and billions of dollars. Now, even state and local government plans are at risk of collapse.

In fact, a recent study conducted by Joshua Rauh of Northwestern University basically said 45 out of 50 state pension plans were at risk of failing in the next 10 to 20 years! Will yours be one of them? What if it is? How will you recover the income. This problem isn't going away. Do some planning now!

PROBLEM #3 SAVINGS:

Here are some scary statistics:

* One-half of American households have accumulated less than $1,000 in net financial assets and $35,000 in net wealth.

* Consumer debt (SPENDING) is a significant reason for low net financial assets.

* The one-fifth of households with the lowest financial assets held, by far, the highest consumer debts, most of them unsecured (mainly credit card debt).

* A majority of Americans in households with incomes of $35,000 or less believed that they are more likely to accumulate a $500,000 nest egg by winning a lottery or sweepstakes (40%) than by patient saving and investing of relatively modest sums (30%).

Do you fall into one of these categories? Do you know if your income will last and how much you'd have? This calculator may help. It allows you to input your financial numbers and look at different outcomes. I also have a new program called "Booming Income" that is available for you to configure income for life tailored just for you.

BONUS PROBLEM #4 INFLATION:

As if those weren't enough problems to keep you busy trying to plug the dike, you have to consider inflation. Right now with all the bailouts, printing money, reducing interest rates to zero etc, inflation has not reared it's ugly head.....YET! Rest assured it will. The Feds can't sustain the money manufacturing indefinitely and when the flow becomes a drip watch out.

Right now inflation is only running between 1-2.5%. Do you know the highest inflation rate on record? In 1979 it climbed to a breath taking 13.9%. If that happened again, how long would your savings last? If you can't answer that, you may want to take advantage of my free consultation.

SOLUTIONS:

Here's just a few ideas:

* For the younger, don't get caught in the government pre-packaged savings plans; 401k, IRA's etc. Life Insurance is a better option. (more info on this at "Let's Talk Retirement")

* Use an annuity "bucket" method to create income now with one "bucket" set aside to grow for future income.

* Put a portion of your nest egg in a Fixed INDEXED Annuity to allow for growth indexed to the market with NO LOSS guaranteed.

* Add an income rider to the FIA to let the money grow in a side fund at 7.2-8% for income. This allows the asset to double every 8-10 years.

* Move money into tax deferred annuities to reduce or eliminate taxes on social security & brokerage accounts.

* There's much more you could do.

IN CONCLUSION:

Listen, there's a lot of things to worry about these days; your income doesn't need to be one of them. You just need to take the time to do some planning so you know what needs to be done. I have new products that will immediately add 8-10% to your existing funds and give you 8% guaranteed compounded interest for income. Why would you "Park" your money at 1-2% in money market or CD's when there are these kinds of options that will still give you access, use and control of your funds? If what you knew to be true about your future income turned out NOT to be true, when would YOU want to know about it? Don't wait another minute do some planningand get some peace of mind.

Safe Savings

(NY Times article: here.)

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