Sunday, June 22, 2008

The New Millennium Retirement Part 1

We are all aware of the Baby Boomer's coming into retirement which started when Kathleen Casey-Kirchling born in January 1946 started her social security benefits and leading the way to 80 million citizens who will be retiring in the next decade. We will be witness of their culture, success and failures relating to their retirements; what to do or not to do. As planners we learn strategies and methods to facilitate our client’s retirement goals and ambitions. One area we neglect to address is that times are different now and they will be a very hostile environment to our pocket books, existing retirement ideologies. The old adage don't try to fix it if it isn't broken. I want to say it is broken and it will give many unprepared citizens a false sense of security. Boomers will enjoy a different variety of benefits that we will not enjoy. One fact is that their portfolios include a defined benefit plan. These plans are a way of the past, when big companies allocated funds for their retirees who the only factor was to stay employed for a period of time, usually over twenty years or more. We know our labor force of today change jobs as frequently as three years or less. Employers cannot fund defined benefit plans any more to stay competitive against globalization and keep their doors open. Just remember GM woes with their retirees and how they could not cut costs with these plans in force. We have witnessed the biggest real estate shift and crash in U.S history, next is the Credit market and retailing industry as we fight our way through Stagflation; Boomers enjoyed the bull market of the 80’s, although they suffer some hiccups in the stock market's history during the well publicized Black Monday on October 19, 1987 and September’s 11 attack to our World Center buildings. Our portfolios and planning will endure the lack/troubles of social security funds as they may run out by 2040 if our elected officials don't do anything about it; there will be fewer workers per retiree ratios. Our boomer enjoys 10:1; we will have a 2:1 ratio.

What are we ought to do?

We cannot foresee the future but we know we have to deal with the problem sooner than later. The problem being: what are our options? We have many, but our government has limited the amount by establishing timing bombs with our 401ks, IRA’s and Roth’s. These vehicles help in the long run but will not be enough. They complement retirement portfolios but will not be enough. Boomers will enjoy their defined benefit pensions, 401ks, Roths, Real Estate holdings, Stocks,bonds, and of course social security pensions; to include Medicare and Medicaid. If, you are thirty, forty and fifty-something, you will lack some of these benefits. So, what are you ought to do?

Planning, Planning, Planning and more planning

We have the solutions and strategies that will address these concerns. The only main problem is that we love to procrastinate and leave planning for much later. Stay tuned for more to come.

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