Will Retirement Soon Be Obsolete?
Posted: Tuesday, February 17, 2009
by Terry Mitchell
http://commenterry.blogs.com
This latest market downturn may be the final death knell for the concept of retirement. Even before it hit, many companies were scaling back or even eliminating their pension plans. That is, those which were among the handful of employers that still offered them. Most of them had long since abandoned pension plans in favor of employee-directed (and employee-funded) 401(k) and other retirement accounts.
So where does this leave people who have been planning on retiring soon or sometime in the near or distant future? Obviously they are going to have to take a serious look at re-thinking their plans. Those who had been planning to retire within the next five years will be impacted the most. The market is not likely to recover quickly enough for these people. Most of them will probably have to postpone retirement for several years or forget about it altogether, even under a best case scenario.
But even most of the rest of us – the younger baby boomers and those who followed – might be forced to give up on our retirement dreams. With Social Security being inadequate – even assuming it won't eventually go bust – and pensions pretty much a thing of the past, most of us had been depending on that money in our 401(k) and/or IRA accounts to carry us through retirement.
Now that money has become severely depleted and we're unlikely to put as much of our hard-earned wages into the market as before, even after it bounces back. We are going to be reluctant to invest in stocks, wary of having the next bear market eat up years of gains in a few short months, as it did this time, and sending us back to square one.
Therefore, we are going to put much more, if not all, of our retirement savings into safer vehicles like CDs and money market accounts that grow only at about one to three percent annually, compared to the stock market's historical average gains of ten percent a year. Those kinds of paltry returns will not be enough to fund a viable retirement for most of us.
As a result, retirement (at least in its truest definition) will soon become obsolete. Most of those who are working now will continue to work, at least part-time, well into their 60's, 70's, and 80's. Only disability or death will ultimately bring their labor to an end. Our parents and grandparents don't know how lucky they were.
This Article has been viewed 809 times. (Not updated in real-time.)
Top-level comments on this article: (2 total)Terry, your summations right on target. Many will be forced back to work. Is that bad, not necessarily yet it does say the days of wine and roses are long gone for most Americans. A good friend of mine, who worked his entire life has lost almost everything with his investments. His rental homes empty and rotting, he now seeks a new business opportunity. He lamented to me that after an entire lifetime of working hard and saving that he finds himself and his family in this situation along with millions across this land. Best wishesRobert, thanks for your insights into this issue.
I'm afraid you are very right, Terry. Although, I have already retired, I still have retirement benefits with my last company that I haven't touched and have recently heard that they have decided to start putting our benefits into a 401K. I'm thinking this is very bad news. Just before the market started dropping a couple of years ago, I pulled out all of my 401k and managed to save it all--now I look at losing a big chunk due to this new plan. And again, like you say, I think Soc. Sec. will eventually go belly-up and everyone will be in deep!Good luck and may things improve sooooon.SandraSandra, thanks for sharing your input on this issue.
We want your comments! If you can read this, you don't have javascript enabled, so you can't use this comment system. Please enable javascript.