Retirement |

More Retirees at Risk

Via this Marketwatch story detailing the latest U.S. retirement survey data comes the chart below depicting how less than half of U.S. retirees will be able to maintain their standard of living after they pick up their golden watch and their last paycheck.

Of course, one easy solution to this worsening problem is to lower your standard of living (i.e., spend less) while you’re working so that the transition into your golden years is much easier, but that’s kind of an un-American thing to do.

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Retiring Early is Un-American

It wasn’t immediately clear that the usage of the word “Un-American” in the title above was appropriate, that is, until reading this definition at Wikipedia:

Un-American is a pejorative term of U.S. political discourse which is applied to people or institutions in the United States seen as deviating from what are widely perceived to be fundamental American cultural and political values

Now, there are clearly no politics involved here. Rather, it is the deviation from well established cultural values, namely, ratcheting up your lifestyle at least as fast as your income rises, that makes those who choose to spend much less than they earn during their working years a candidate for retiring early as detailed in this USA Today story.

As with most journeys, retiring early starts with a few simple steps, the most important being this: You have to calculate – there’s no getting around it, really – how much you’ll need to fund your lifestyle for as long as you (and your partner) will live. This won’t be easy because you don’t know just how long that will be.

But what you do know is this: Retiring early means calculating more years into the equation — say, 30 instead of 20. For the average American household, that could mean saving an extra $400,000 or so on top of what you might already need for a traditional retirement plan.

Once you know your “number,” there are only two other steps to commit to memory: Start saving and stop spending. Put another way: Live not just within your means, but well below, says Rick Miller, president of Sensible Financial Planning in Waltham, Mass.

Living “well below” your means really is un-American – it goes against the fundamental American cultural values of consumerism and debt.

I’ve often said that a large part of the U.S. economy is driven by people buying things they don’t need with money they don’t have and, while some may point to that as being a great post-World War II success story, it results in millions upon millions of people who might never be able to call it quits as part of the traditional work force.

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For the first time since before the financial crisis, more Americans think they’ll have enough money to be comfortable in retirement than not according to the latest Gallup survey.

On its face, this is not very surprising given the dramatic rise in stock prices and home prices over the last year or so, developments that are pretty hard not to notice if you’ve given retirement even a passing thought. The latter is probably more important since, for better or worse, housing plays an outsized role in the finances of most American families.

It would appear that, more than anything else, we’re confident that the Federal Reserve will be able to keep asset prices inflated and that confidence may be misplaced.

Not surprisingly, how people think about retirement is quite different depending on how close to it you are as confidence goes down in the survey as age goes up with only 45 percent of those aged 50 to 64 answering yes to the question while 48 percent said no.

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When first reading the questions posed in this story at the Atlantic about how bad financial illiteracy is around the world, I thought they were some sort of trick questions, designed to make even smart people feel a little dumb when they sped through them at too fast a pace.

But there were no tricks involved – they were as simple as they appeared at first glance – as we get a better glimpse into just how bad people all around the world are when it comes to simple math and how little we know about the financial world, problems that adversely affects billions of people financially who are easy prey for big banks and our other Wall Street overlords, both of whom are quite good at both subjects.

The most interesting part of the report (to me at least) was how much financial illiteracy (or literacy below) varies around the world and a pie-chart seemed to be in order.

Go read the questions that were posed if you really want to be gobsmacked.

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The title - The best states to retire in are a little surprising – of a CNN/Money story about a new Bankrate survey is likely only surprising to people who live on either the East or West Coast, regions that are almost entirely absent from the list. It would be better to see these highlighted on a map, but the message is made clear simply by listing them.

1. South Dakota
2. Colorado
3. Utah
4. North Dakota
5. Wyoming
6. Nebraska
7. Montana
8. Idaho
9. Iowa
10. Virginia

There’s a little detail in the report about what makes each of these states appealing and both health care and tax rates appear to be prime considerations.

What’s really surprising about this (at least to me) is that these are almost all cold-weather states, a factor that, traditionally, has kept retirees away from these areas in favor of warmer climes like Florida and Arizona.

Of course, this is just one survey and you need look no further than a link embedded in this story – Related: Best Places to Retire – to find that places like Florida and North Carolina are still popular (though even this list includes a good number of Rocky Mountain areas). It would appear that, as was the case for my wife and I, positives such as low population density, low crime, etc. are no longer being easily trumped by cold weather.

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