Predicting the future is a rough sort of business to find yourself in, especially with a world that’s been changing more and more rapidly with every passing day. Unfortunately a lot of people planning for retirement find themselves having to do this very thing, having to try and figure out what directions the world will be taking them in once they’re ready to stop working. Here are just a few of the ways in which retirement is changing in the next decades, to help you stay ahead of the curve:
1. Retirees are living longer than ever before.
Advancements in medical technology have increased the average life expectancy of individuals. Retirement planning is becoming more and more troublesome for both actuaries and future retirees (Smart Money, 2012). This increased longevity comes with a need to set up a matching retirement plan, particularly when some
retirements are expected to last longer than the amount of time the retirees spent working. Rather than trying to predict how long your retirement is slated to last, be prepared for the longer estimate in response to these treatments and technologies.
2. Children are staying with their families longer, even after college.
According to a new study released by Oregon State University, young adults in the 18-30 age bracket are having a harder time than ever becoming financially independent from their parents (Journal of Aging Studies, 2012). This greatly affects those looking to retire while their children are still young adults, and can cause a domino effect that starts to influence generations to come. There’s no guarantee of the job market recovering or this trend changing in the next few years, so when looking at your retirement make sure to factor in all of your current familial expenses.
3. Social Security may not be around in the future.
Social Security has always been a problem politically since it has a foreseeable end; between longer life expectancies and the large baby boomer population, social security is anticipated to “face funding shortfalls in about two decades if nothing changes” (CNBC 2012). While it’s quite possible that the government will come to a viable solution to salvage social security benefits, it’s a good idea to plan for the ‘what ifs’ regardless. Plan for social security as less of a guarantee and more as a pleasant possibility so there are no unpleasant surprises down the road. Don’t have your retirement plan hinge on social security as it may crumble within the next few decades.
4. Inflation never stops
Inflation is a very big risk to your retirement dollars. To the couple in their 20’s, inflation will nearly double the amount that they need to save in order to live comfortably by the time they reach retirement. Inflation decreases the value of your savings each year, so it is important to invest your retirement dollars in a portfolio that will outpace inflation. Savings accounts, CD’s, fixed annuities, and most bonds do not outpace inflation. You have to put a portion of your money in stocks or you will be losing the long term battle to inflation.
Retirement is changing, but that doesn’t mean you can’t still build a healthy, strong retirement plan even with a moderately uncertain future. Your retirement is something that needs to be made to last a long time and you’re allowed to take your time putting the right amount of money into it. As long as you avoid the unnecessary risks in relying on social security, and avoiding inflation, and you prudently plan for a slightly longer nesting period for your children, and plan for your own longevity, you can avoid a few of the major pitfalls that your retirement plans may otherwise succumb to.
By Financial Social Media and Jimmy Hancock
References
1. http://www.smartmoney.com/retirement/planning/the-cost-of-living-longer–much-longer-1328897162395/
2. http://oregonstate.edu/ua/ncs/archives/2013/jan/no-more-%E2%80%9Cempty-nest%E2%80%9D-middle-aged-adults-face-family-pressure-both-sides
3. http://www.cnbc.com/id/100338122/Yes_We_Can_Fix_Social_Security_but_It_Won039t_Be_Pretty
