The perception of, and planning for retirement has changed dramatically over the last century. In the early 1900’s, retirement was not a life goal. It was often something that one was forced into if they lived an unusually long life. In 1915, the average life expectancy for men was 52; for women it was 56.1 Hence, retirement was not possible, let alone a consideration.
Nowadays, it’s possible for current retirees to spend as much or even more time in retirement than in their working years. That financial transformation has been made possible with pensions, Social Security, Medicare, along with easier access to a broad array of investment options.
But for those planning for their future retirement, they are met with a new set of challenges not seen 25 to 50 years ago.
The biggest obstacle is the increasing rarity of company pensions. If someone does have one, it is not uncommon for it to be frozen. As a result, many face the reality that there is no lifetime income stream beyond Social Security. If you couple that with people living longer lives, the need for monthly income to cover a lifetime worth of fixed expenses becomes a large gap to fill.
The result leaves retiree hopefuls to save on their own. Once retired, the money must be stretched out for the remainder of their lives.
As the 401(k) has grown in popularity over recent decades, there has been a heightened focus on investment performance on retirement savings – and rightfully so. The larger the nest egg, the more to live on. The problem is that the market has largely underperformed over the last 17 years relative to what it has done the last 50.2 A low interest rate environment and 2 bear markets being the culprit.
Another major change over the last 100 years is the technological explosion. There are seemingly endless amounts of articles, programs, and calculators to be found online – the financial world is at our fingertips. But anyone who has combed through a handful of websites looking to do some planning on their own has probably experienced a paralysis by analysis scenario.
Ultimately, there is no easy answer. The best approach is to look at all factors – your broad array of investment options and risk factors alongside the retirement you are hoping for. The earlier you start planning, the better – no matter the age – as time will be on your side.
If you're looking to get the conversation started, feel free to call our office and set an appointment with myself or one of our other advisors today.
1Noymer, Andrew. "Life Expectancy in the USA, 1900-98." Life Expectancy in the USA, 1900-98. Berkeley University, 1 Sept. 2005. Web. 24 Mar. 2017.
2Gray, Tim. "Emerging Markets, Even in Turmoil, Have a Place in a Portfolio." The New York Times. The New York Times, 15 July 2016. Web. 24 Mar. 2017.
The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.