No doubt you recall riding in the car in past years with your young kids and being bombarded over and over again with the question, "Are we there yet?" Turns out that, today, the same question relates to retirement.
For many of us, retirement is a moving bar if not a distant destination. One only has to look at the flurry of media reporting about "the retirement crisis" to know the majority of seniors have insufficient funds as they enter their later years. The recent Retirement Research Consortium Meeting, held August 6-7 in Washington, DC, included such topics as "The Great Recession, the Social Safety Net, and Economic Security for 50+ Americans" and "How Would Social Security Changes Affect Medicare Costs and Seniors’ Out-of-Pocket Spending?"
A sponsor of the Consortium is the Center for Retirement Research at Boston College. The Center posts numerous Briefs and Working Papers on its site, one of which caught my eye: "Falling Short: The Coming Retirement Crisis and What to Do About It," by Alicia H. Munnell, who also authored a book on the topic. According to Munnell, "Today’s workers will need more income because lifespans (and retirement periods) are getting longer, health care costs are rising, and interest rates are very low."
Munnell's advice comes as no real surprise. "Working longer," she writes, "makes an enormous difference. ... First, it increases the size of an individual’s monthly Social Security check by 7-8 percent for each year of delay. ... Second, working longer allows people to contribute more to their 401(k) and provides more time for assets to grow; between ages 62 and 70, a typical individual’s 401(k)/ IRA assets are estimated to nearly double. And, third, working longer substantially shrinks the number of years over which an individual needs to stretch his retirement nest egg."
While Munnell also promotes saving, perhaps less common is her counsel regarding home equity: "Generally, retirees think of their home equity more as an emergency reserve rather than a potential source of retirement income. However, given the challenge of ensuring retirement security, this view may be a luxury that many can no longer afford. If households do not have enough from Social Security and their 401(k) assets, they should consider tapping their home equity by either downsizing or taking a reverse mortgage."
What strategies are you pursuing on the road to retirement... and are you there yet?