I have long planned on working a little bit in retirement, but I'm starting to wonder if I'll be working more than just "a little". According to the recent MSN Money article, "Sorry, you're never going to retire", the US Census Bureau has some "bad news" for us. The article notes that:
"Back in 1990, only 12.1% of Americans 65 and older were still working. By 2010, that percentage jumped to 16.1%. That's a whole lot of folks getting teased by AARP catalogs and an especially large number of disappointed 65- to 69-year-olds. Back in 1990, only 21.8% of that group was still employed, compared with 30.8% in 2010.
It's not as if you'll be retiring in your 70s, either, as the number of 70- to 74-year-olds in the workforce increased by 5% during that span, while those 75 and older took up 1% more jobs than they did 23 years ago."
I'm not whining here, I think I'm just beginning to realize that what reality may bring with it during my "golden years" may be a bit harsher than I previously envisioned, and here's why.
Rising Inflation
While the government is quoting one number for inflation rates, I'm finding as of late, a very different number playing into our personal finances. And this number is significantly higher than the government's number.
Over the past decade, our personal inflation number has run closer to 3 percent, just a little over where the government has been quoting. However, the past few years has seen it suddenly jump, coming closer to 5 percent, a huge increase in health care, food costs and taxes acting largely to push it higher.
Lack of Secure Investment Options
While inflation might be running high, things like interest on savings, certificates of deposit, government bonds, and Social Security cost of living adjustments remain low. This disparity could leave our buying power greatly reduced as we reach and enter my retirement years.
Not being able to beat or even counteract the real affects of inflation through safe investments can lead us to invest in riskier investments like the stock market. This could put a larger quantity of our savings at risk for the effects of bursting financial bubbles and absorb a greater portion of our savings in a short period of time. Our other option, since we've already paid off all our debt, would be to place money in more liquid options that just don't produce the ability to combat inflation, thereby decreasing the buying power of our money a little bit each year until retirement.
Health Care Costs
Health care costs are huge for our family of four. Even without Obamacare coming into effect, with two small children and a type 1 diabetic wife, we're pretty much forced to have it. Meanwhile, our insurance premiums have skyrocketed over the past few years, currently landing (for health, vision, and dental) at about $150 a week -- or around $7,800 a year -- just for coverage. Add in deductibles, co-pays, prescription expenses, and total out-of-pocket costs and we're looking at over $10,000 a year in health costs.
While I know that costs might decrease eventually, once the kids are off the plan, I'm not banking on overall costs ever going down much with the way health care prices are inflating and as personal needs for my wife and I continue to increase as we near retirement.
Family Expenses
With two young children now, there are also the effects of family expenses to consider as we continue on the path to retirement. While we do pretty well keeping costs low, as the kids (a newborn and a five-year-old) age, costs are likely to increase. And factoring in two possible college educations -- another cost that is far outpacing government quoted inflation rates -- our ability to fund retirement could be diminished even further.
Our current plan to limit the effects of college educations for the kids hinges upon their ability to pay at least a third of the costs (with my wife and I handling the other two-thirds). However, with the cost of a current college education often reaching into the six-digits -- and a good 12 years left to go until our first reaches college age -- costs could be significantly higher, further cutting into our ability to save for retirement. In effect, this could leave the kids having to shoulder a greater portion of their college costs, considering an in-state school, us delaying retirement, or all of the above.
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Disclaimer:
The author is not a licensed financial professional. This article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
Sources:
Notte, Jason. MSN Money. "Sorry, you're never going to retire". January 28, 2013. http://money.msn.com/now/post.aspx?post=72295cf0-ed58-4b25-a66d-134ce329f1ce
January 30, 2013.
