Wednesday, March 26, 2008

Pending Financial Problems Depend upon How YOU Define Retirement

Read the current financial news today and much of it a abuzz with articles warning about how most of us nearing retirement are seriously unprepared financially to retire. The studies these articles are based upon take current life expectancy, which is increasing, rising medical costs including the expected increase in use of medical services by seniors, and the cost of maintaining some stereotypical retirement lifestyle. When these expenses are then compared to the published information about the status of this group's retirement accounts they come up seriously short. Of course, most of the people touting this line are financial and investment adviser's whose livelihood depends upon selling the very financial products which are deemed needed to solve this pending problem. Don't get me wrong, most of these financial and investment advisers know their business, are intelligent and are professionals with high integrity. But, like all successful sales people, they not only believe in their product and are also armed with stories, which they believe, of problems people have encountered because they failed to plan properly. The stories they don't tell are the ones about the numerous people who didn't follow the financial plans and advice that these advisers tout and end up living very well.

Mention retirement and the image that immediately comes to mind is that of a person reaching 65 and exiting the labor force entirely. The person and spouse then buy an RV and hit the road or move to beautiful community for seniors where they divide their time between golf, swimming and cookouts with fellow seniors. Following the active retirement lifestyle comes the medical problems that result in the retirees spending their remaining days in care homes and spending thousands of dollars per month for medical and other care. These are the people who the media and experts have in mind when they write the scare stories about a pending crisis in retirement funding.

However, individuals are unique and the fact is that individual people are different and have different desires and expectations. Not everyone retires at sixty-five. As I mentioned in a previous post entitled What Will Happen When the Boomer Generation Retires, increasing numbers are voluntarily electing to continue working full or part-time. Some, who failed to make adequate provision for retirement, do it out of necessity, some do it for the money alone, but others, their financial security taken care of by savings and generous pensions, are working by choice. In addition to the increasing numbers who are electing to continue to work and earn some income, others see their expenses decrease substantially in retirement. Many people enter retirement with the car, mortgage and other bills paid off, the children educated and on their own and no more commuting and other work related expenses to be concerned about. For many of these people a happy retirement is spending time with the grandchildren, friends, their gardens, church and other charitable activities. For both of these groups their incomes will easily carry them through retirement.

As to high medical expenses, again people are different and those with the huge medical and care bills are probably not representative of the majority of retirees. Health and medical expenses are just starting to be given serious attention by retirement planners. Instead of merely assuming that medical expenses will be high, some planners are now beginning to recommend that people begin including healthy life style choices in their lives now so as to try to avoid high medical expenses later. The high cost of health care and pending collapse of Medicare will probably provide a bigger incentive for people to take care of themselves that all the lecturing by politicians and media public service announcements combined.

Yes, people should make plans now for their future retirement and should not hesitate to consult and use various financial experts. However, the plan, and the funding of it, should be for the individual's (and spouse) vision of what they want for retirement and not based on some, one size fits all, formula.

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