While reading through the Wyoming Tribune Eagle today I came across an article entitled "Put more money into retirement savings." This article referenced a study by Ernst & Young that was commissioned by Americans for Secure Retirement. After reading the article I decided to go to the source and find out who Americans for Secure Retirement are and get more information on what retirees can expect financially post retirement. Right up front I want to say that I didn’t do an extensive amount of research into Americans for Secure Retirement or their coalition members. I was primarily looking to see if AARP has any involvement with them since I know that AARP is working diligently on this same issue. In looking through the list of coalition members, I found the names of some organizations that sounded familiar, but none that I am personally acquainted with. I’m giving you this information so that you can do your own due diligence before deciding whether to support the proposals of this group or not. It appears that they have quite a few members who are in the business of selling annuities and the coalition’s solution appears to be linked to more people buying annuities. This doesn’t mean they aren’t legitimate or it isn’t a good solution, it just means you should be double sure to do your homework.
Anyway, back to the quest6ion at hand. Will you outlive your retirement assets? Unfortunately, the answer is probably. According to the press release put out by Americans for Secure Retirement, “almost three out of five new middle-class retirees will outlive their financial assets if they attempt to maintain their pre-retirement standard of living.” When I checked the results for Wyoming the news got even grimmer. According to the study approximately 8 out of 10 people nearing retirement (58 to 65 years old) and 7 out of 10 people at retirement (65 years old or older) in Wyoming will outlive their retirement assets.
Pretty scary news but there are things you can do whether you are at or near retirement age or even if retirement is a long way off. The following suggestions apply whether you are twenty or twenty three times over.
- Trim your budget. If you are a long way off from retirement this will enable you to put more into your retirement account and fund that rainy day/emergency account that you have been meaning to start. If you are close to or at retirement, trimming your expenses back will help to preserve your assets.
- Review your financial goals. Whether your financial goals are for tomorrow or 30 years from now, reviewing your retirement savings and strategies on a regular basis is an important step to ensure that your money is working for you. As you get nearer to retirement your needs and tolerance for risk change. I’m not suggesting that you chase the market or make drastic changes on a regular basis but I am suggesting that as you get older you make prudent changes in your portfolio to reflect the fact that you are getting closer to relying on your retirement nest egg as a source of income and probably won’t be as comfortable riding the ups and downs of volatile markets as someone who has 30 years until they need the money.
- Rethink how much money you will need in retirement. The old rule of thumb of retiring on 70% of pre-retirement income doesn’t seem to be holding true anymore. According to a financial consulting firm at an AARP conference I attended, people need to plan on having 100% of their pre-retirement income available to them at retirement in order to maintain the same standard of living post retirement as they did when they were still drawing a paycheck.
- Plan on retiring later. By continuing to work you reduce your dependence upon your retirement savings and leave more money for those days when you can no longer draw a paycheck.