Retirement Planning

Retirement Planning Challenges

There are 7 challenges that we see new-age retirees face today.  These challenges include things such as: longevity of life, loss of pension, social security, taxation, inflation, healthcare, and investor error.  In the next few paragraphs, you will learn how each challenge affects you, and the way you ultimately save for retirement.

Challenge #1: Longevity

Americans are living longer than ever, which means retirement accounts are being stretched out over more years.  During the last century, the life expectancy of an American citizen has nearly doubled.*  It is estimated that every 12 seconds an American turns 65.*  And the 80+ population is growing faster than the general population.*

*Sources: (1) "Beyond 50: A report to the Nation on Economic Security," Ken McDonnell, research analyst, Employee Benefits Research Institute.
(2) Counsel of Life Insurance, 1998. (3) NBC News, 2000.

Challenge #2: Loss of Pension

Over the past few decades, there has been a major decline in the number of pension plans offered by American Employers.  Currently, there are approximately 35 million Americans covered by pension plans.*  In 1985 there were over 100,000 plans in force, and now that number has decreased to only 30,000 plans in 2003.*

*Source: "The Really Troubled Program", Time Magazine January 4, 2005.

Challenge #3: Social Security

Social Security was initially intended to be a supplemental source of retirement income for a minority of Americans.  And now, it has become the primary source of retirement income for the majority of Americans.  Over 65% of retirees rely on social security for 50% or more of their income. And 33% rely on social security for 90% or more of their income.*

The social security program is projected to have more money paid out than paid in by 2018.  And by 2042 it is projected that the social security program will be exhausted all together.*

*Sources: (1) AFL-CIO. org. 2004. (2) "The Really Troubled Program", Time Magazine January 4, 2005.

Challenge #4: Taxation

Taxes are one of the most serious challenges for the American Worker and their savings ability.  Taxes represent the average American Household's single largest expense, currently at an average of 30% of total household income.*

*Source: Special Report No. 122, April 2003, Tax Foundation.

Challenge #5: Inflation

Inflation is another challenge that the American Retiree will face.  The problem with inflation is that it can drastically erode your spending power, and most people do not take this into consideration when planning their finances.  For example, if inflation continues to rise at it's current rate of 3% annually, and today you need $50,000 of income to live comfortably, you will need $65,000 in 10 years, and $97,000 in 25 years.

Challenge #6: Healthcare

Healthcare has been labeled as the #1 most critical issue in America today.*  The average healthcare expense per person has risen from $1,067 in 1980, to $5,775 in 2003, and is expected to increase to $8,704 in 2010.*

*Source: (1) 2004 Health Confidence Survey, Employee Benefit Research Institute. (2) National Center for Health Statistics, 2004. 

Challenge #7: Investor Error

What people think and understand about investing is not nearly as important as what they do.  It is estimated that 59% of workers do not have a retirement account.  And 60% of adults have saved less than $10,000.* 

From the period of 1984 to 2003, the S&P 500 returned 12.98% per year.  However, the average investor only saw about 3.51% of that.*  The reason... Investors tend to move their money around too much and their portfolio tends to suffer as a result of this.

*Source: Dalbar, Inc. 2003

The Good News. O'Neil Financial has Solutions!

We want to work with you every step of the way to ensure you make it through all 7 retirement challenges so that you can enjoy the retirement you have worked so hard to achieve.  We do not want you to spend your golden years worrying about whether or not you will run out of money in retirement.  At O'Neil Financial, we will provide you with solution after solution until we come up with a retirement plan that works for you.

If you would like O'Neil Financial to take a look at your current retirement plan, as well as educate you on some of the latest advancements in retirement planning, then click here for a free consultation.