My husband and I are facing the reality that our retirement won't look anything at all like our grandparents' retirement. We won't have a pension plan to pay for a winter home in Florida or a fat Social Security check to cover our basic expenses. According to a recent article by DailyFinance, Americans are starting to accept the new financial realities of retirement. Like many baby boomers and members of my Generation X, we are afraid of outliving our retirement savings. We already realize we may be working until 80. According to DailyFinance, there are 5 pillars of financial security that can't be ignored.
Letting the pension dream die
We make financial sacrifices every month so we can squirrel away at least $25 each for our Roth IRA accounts. According to experts, in 1983 there were 175,000 pension plans. Today there are only 25,000. I had a pension plan for only two years before it was frozen. The company I worked for didn't contribute anything new to the pension and wouldn't let new employees join. Without pensions, we will be more reliant on our Roth IRA plans, which weren't even introduced until the 1990s.
Expecting a decrease in benefits
My grandparents had reliable because the Social Security program used to be strong and stable with so many baby boomers working to pay into the system. With the so-called "un-baby boom" going on now, there won't be a lot of workers to pay into the system in the near future. I am expecting decreased benefits as well as increased taxes to compensate for the national debt problem. Instead of contributing to the regular 401(k) plan offered by my company, I opt for the Roth 401(k) since I will be able to take out money when I'm older without owing income taxes.
Riding the stock market seasons
I don't like investing in the stock market because it's unpredictable. One of the pharmaceutical companies that I invested in recently went bankrupt. Still, I have to invest in the stock market whether it's a bull or bear market. The DailyFinance article points out the old rule was to "buy and hold." I made that mistake by holding onto the pharmaceutical stock until it went bankrupt. My solution is to invest in exchange-traded funds or ETFs. I try to make regular contributions each month during bull and bear markets.
Staying put in our home
My grandparents were able to move several times before and during retirement. They used the equity in their homes to purchase fancier homes as move-up buyers. Since our home is barely worth what we paid for it after 8 years, we haven't been able to move. Moreover, it's quite possible home values in my community will decline in the next 20 years. We will be retiring in place. And, unlike our grandparents, we won't have two homes.
Experts say people today are living a lot longer. Most of our parents and grandparents retired at age 62. We expect to be working until we are 80. Since we may live to be 100, we still have to replace our income for 20 years. I have no idea what the world will be like in another 40 years when I'm 80, but I know I'll be glad to be retired by then even if I'm living in my son's spare bedroom.
More from this contributor:
- Retirement Benefits
- Investing Education