Monday, September 30, 2013

Boomers and Paying for Retirement

Yes, it's time to talk about the Boomers (again).  The U.S. Senate Committee on Aging held a hearing on September 25th, 2013 on the State of the American Senior: The Changing Retirement Landscape for Baby BoomersThe witnesses included Dr. Olivia Mitchell from Wharton, Paula Calimafde from the Small Business Council of America, Dr. Richard Johnson from the Urban Institute and Joanne Jacobsen who is a boomer.  The hearing runs almost 2 hours. Since I haven't listened to it yet, I wanted to relay the comments about the hearing from Carole Fleck's September 25th post to the AARP Blog, titled It's Not Your Parent's Retirement. The post opens with this: "File this one under the Tell-Me-Something-I-Didn’t-Already-Know category: People in the baby boomer generation face an uncertain future in retirement and it’s not clear if they can dodge the prospect of outliving their savings."

The post is full of some great insights from those witnesses, including Dr. Mitchell who is quoted: “'We boomers face a much different future,” she said. “Few of us have retiree medical coverage and traditional defined benefit pensions. Some of us … have not saved enough, nor are we converting our assets into longevity-protected income streams so as to avoid outliving our savings.'”

The experts offer a number of recommendations summarized in the AARP post, such as improving financial literacy, requiring mandatory retirement savings accounts with a percentage of wages, encourage employers to provide defined contribution plans, stop pre-retirement withdrawals from 401(k)s and doing away with the  IRA required minimum distributions.

The Committee also heard testimony about why boomers aren't financially prepared to retire and the blog post mentions several: "increasing debt carried into retirement; rising health care and long-term care costs; the gift of longevity (and the extra years that will need to be funded in retirement); the shift from guaranteed pensions to defined contribution plans; and chronic long-term unemployment among those 55 and older who lost their jobs during the downturn."

The post ends with an excerpt of Ms. Jacobsen's testimony

that she “did all the right things” in planning for her retirement for the last 30 years. However, the past decade has been a struggle. She got laid off at age 52, after working at Verizon for nearly 30 years. She’s been in and out of the workforce ever since, trying to make ends meet.

Her advice to her adult sons: “I have told them that it’s now a ‘do-it-yourself’ economy and [to] always have the proverbial plan b and plan c. There is no stability in today’s job market and absolutely no promise of retirement benefits,” she said.

I think the hearing is a must-watch for all of us, both since we teach planning and paying for retirement and long-term care, and for us personally. Boomers still ROCK!

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