How Will You Pay for Retirement?
By: Source: AARP.org Date Posted: 2007-05-24 15:08:00-04:00
Let's face it: your retirement won't be the same as it was for your parents or grandparents. They probably counted on personal savings and investments, a pension, and lifetime health insurance from their job in addition to the safety net provided by Social Security.
But in today's world, generous corporate pensions and retiree health plans are becoming relics of the past and many people wonder how they will pay for retirement. Wendy M. wrote to us from Rutland, Vermont, with this concern:
I have to say, that as a single Mom in my early 50's, I worry all the time about how I will be able to retire and also have quality health insurance. I was brought up to take care of myself and not ask for any charity, but I think when the time comes to retire, that I will have to ask for assistance.
I know that I am not living as well as my parents. As others have stated, our parents retired with pensions and medical benefits from their former employers. Now it is up to us, as individuals to put away funds for our retirement, and there are not going to be any medical benefits provided by my employer. I keep thinking my economic situation is more in line with my grandparents' generation. The future for me, at times feels bleak.
The nature of retirement is changing, and people like Wendy know it. Ensuring a secure retirement these days has become a little more complex. While we can still count on Social Security to make ends meet in retirement, you'll also need savings (either on your own or through a 401(k) at your job), maybe a paycheck from a job in retirement, and adequate and affordable health insurance.
For most people, Social Security remains the most essential part of their retirement, because you cannot outlive your benefit. In fact, nearly two out of three current retirees rely on Social Security for most of their income.
But Social Security alone is usually not enough to retire comfortably. The average American needs to replace about 70 percent of the amount they earned while working. Currently, Social Security replaces an average of about 40 percent of that pre-retirement income.
So where can you get the other 30 percent? For most people, that additional money won't come from a traditional pension plan. Instead, it will have to come from savings, and maybe even from working longer.
And it's no wonder, with the need to put kids through school, possibly assist elderly parents, save adequately for retirement, and meet ever-rising health care costs.
While Social Security is currently taking in more than it pays out in benefits, over the long-run the program needs fixes so that it will remain strong for future generations. The changes do not have to be drastic. But now is the time to act. By making moderate changes to Social Security now, we can keep it strong for our children and grandchildren and give them peace of mind.
It's time for our leaders to stand up and address this issue. Join with millions of other Americans to support candidates who will give us action, answers and accountability on health and lifetime financial security.
Share Your Thoughts
People like Wendy deserve to have a decent quality of life in retirement. We believe that Social Security must be strengthened for future generations.
We'd like to hear from you. Tell us how you're planning for retirement.
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