Retirees Face Rude Awakening as Retirement Realities Set in
For those near retirement, your accumulated savings accounts and retirement income plans seem like a lot of money. After all, you’ve put in some serious sweat equity over the years to stockpile $104,000—the average accrued retirement account, according to the 2015 Government Accountability Office. Under perfect market conditions, the 4-percent withdrawal rule doesn’t generate much income. A 6-percent payout rate from a guaranteed lifetime income annuity is better, but even with Social Security income, it’s tough to live on.
This a rude awakening for baby boomers and a wake-up call to all succeeding generations. Remember, the lump sum you saved is only as good as the maximum income it generates—everything else is secondary.
The clock is ticking for most middle-class baby boomers and it’s minutes before midnight. The only real retirement salvation for most boomers may be a decent payout rate from a guaranteed lifetime income annuity. What other investment or saving vehicles can generate predictable income one can’t outlive? That and a HECM home purchase with no mortgage payment and delaying Social Security benefits to age 70 may salvage many boomers from an impoverished lifestyle.
The rules for accumulating retirement resources are not the same as the dispensing of them. The real retirement apocalypse is coming during distributions where the immutable math of the sequence of returns and market under performance collide. That coming trainwreck may deplete many retirement plans at some point in a retiree’s 80s, while many baby boomers will live into their 90s. Watch the interview about the sequence of returns with Tom Hegna, popular platform speaker, retirement specialist and best-selling author. Tom has two retirement books entitled, Don’t Worry, Retire Happy and Paychecks and Playchecks. Tom has also hosted the PBS Special, “Don’t Worry, Retire Happy.”
For all other succeeding generations, this is a wake-up call out of your indifference to your future. You can’t live for today. That’s just some false axiom rooted in a myth.
Tomorrow, you’ll wake up and you’ll be age 70 with 30 years to go. The lethargy toward retirement planning is caused by a false sense that when you’re young, time is on your side. Einstein is often quoted, “Compounded interest is the eighth wonder of the world. He who understands it earns it … he who doesn’t … pays it.”
But even compounded interest needs time and lots of it, as do you. Paying yourself first and often will determine your lifestyle in retirement and whether they’re golden years or years of regret.
In the old agriculture of America, storing up for the winter was a matter of life and death. The harvest had to be adequate enough to supply six months of winter, that’s half the year, every year. Retirement funds need to be adequate enough to supply every year for a minimum of 30 years.
Nationally syndicated financial columnist Steve Savant interviews Tom Hegna, popular platform speaker, retirement expert and best selling author. Tom has two retirement books entitled Don’t Worry Retire Happy and Paychecks and Playchecks. Tom has also hosted the PBS Special, Don’t Worry Retire Happy.