Living in the State of Florida and being involved in my partner's Finacial Planning business has provided me with a unique inside view of what life in America is like for many of our Seniors. The most worrisome fact is that the majority of Boomers haven't even begun to build a retirement portfolio. I wonder if many are relying on Social Security with top benefits being less than $2000/mo.? What ever the reasons, the truth is simple. There are many on the verge of retirement (within 10 to 15 years depending on Washington's threat to raise the qualifying retirement age to 69 years of age) and these poor folks are about to face some very hard facts about living the life as retired Americans. Here are some of the stories we have encountered. They are not unusual and not even some of the worst tales out there, just ones I know for a fact are true. I will also include some idea of what it will take an indiviual of 50 years old to start now and be ready for retirement in 15 to 19 years.
The first tragic story is about a couple in their late, late 40's to very early 50's. This couple raised two children, one whom they allowed to get into a debt to the tune of $140,000 in college loans for a degree that would allow her to work in a very small, exclusive profession. She has yet to find work and has defaulted on her loan. $140,000 in debt at 23 years old is an absolute tradgedy. They both were raised in pretty afluent homes, lived far above their means, declared bankrutcy once, lost their home, cars and eventually their marraige. The wife was a stay ay home Mom and her only educational and work experience included a cerificate from a trade school that allowed her to work as a dental assistant. She did for about three years until her first child was born some 23 years ago. Her second child was born two years later and was discovered to have some issues with learning disabilities. She homeschooled both her children, except for a short private Christian school stint when her oldest was in elementary school. Her only other work experience was event planning at her medium sized church. When her husband lost his umpteenth job as a wharehouse genral manager, she attempted to return to the work place, beefing up her resume to make it appear she was a proffessional event planner. She was unemployable. She was 48 years old, with little work experience. She never even received a call back from the over 60 resumes she sent out. Face it, ageism is alive and well in America. Couple that with little real work experience and she is still unemployed. Her husband, meanwhile, went from job to job as the GM of various regional wharehouses. He was let go repeatedly, moved his family from State to State, had a bankruptcy and had a terrible time finding housing. The few homes they did manage to move into were motgaged to the hilt and had monthly payments of $3000 to $4000 per month. He made a decent low six figure income when he was employed, but managed to lose every job for various reasons. The last two homes they lived in were rented. They have no equity in a house, they do not own theri own cars; while together the had one car. The husbands company car. They let the small life insurance policy they carried for awhile lapse. I don't have to tell you, there are no IRA's, 401K's, Savings Accounts or investments of any kind. Why would they live this way? Partially and obviously, they were irresponsible, living above their means and teaching their children the same lessons. The other reason was they were living on the belief that they would be beneficiaries to a large estate. As these things seem to go, the estate has dwindled due the market crash, poor management by those named as executors, the real estate bubble and their own interference trying to increace their share through lawsuits and most of all, counting their eggs before they hatched. Living for the hope of an inheritence as your retirement income is almost as foolish as believing a lottery win will be your 'ticket' to retirement income.
The reality of life in retirement has changed since several generations ago. Those in their late 70's and older had a ethic that is sorely missing in many today. The good old ethic of hard work, living within your means and saving, saving, saving. They didn't live in homes they could not afford, drive luxury cars to look wealthy, buy their children everything they asked for, develop credit card debt, use Christmas as an excuse to max out all their cards, travel on credit so they could say; Of course I've been to Bali, Paris, any of the many tropical islands, or __________— (fill in the blank of so called prestigous destinations). The work and savings ethic of many of our grandparents and some of our parents is a lost and forgotten way of life. Yet, even those who scrimped, saved and lived within their means still struggle in this economy. Here is another example:
A widow who received possesion of her husbands SEP account, their retirement account after years of living within their means and making saving for retirement a priority. It totaled about $651,000 at her husdand's passing. (The rest of the estate is stilled tied up in legal wrangling and poor management) She immediately chose a local financial advisor and had him look over her assets. He did some changes in the account, but left it alone for the most part, it was making money. She was stuck with a condo that had no mortgage, but the association fees were high. She payed them. Then she had the horrific experience of being sued by one of her children for a bigger slice of the estate. This created a need for legal represenation and very large legal fees. For three years she paid approximately $680 dollars a month plus a yearly fee of $1500 for the condo that wasn't selling in the real estate crash and had a bill of over $48,000 in legal fees just to keep what was rightfully hers under the law. Then the market crashed and what remained after her unforseen expenses had dwindled to around $280,000. Still enough for her to live comfortably if she continued her frugal lifestyle, but a blow to her finances. Because she chose a reputable and talented financial advisor, her portfolio recovered partially, she finally rid herself of the condo and still lived frugally without a motgage on her primary residence. She receives about $1050 a month in Social Security, far below the max she deserves, but the government decided she made too much money and decreased her check. She has to face Medicare and purchased a suppliment through AARP, a wise move because she has had some health issues and was covered nearly 100% in medical expenses. She still has to deal with the 'donut hole' that occurs in the Medicare perscripttion plan. So, for many months she pays full price for her perscrpitions. That is a costly burden. She tries not to use any of the principle of her retirement account and live off SS and the income from her investments. Even with well over $400,000 in her IRA, she still must be careful, live frugally and try to leave the principle alone. That is where the income comes from and that is only so much per month, the more principle she uses, the less income she will ultimately have. It is month to month survival that is the key to a comfortable retirement. $500,000 is not what it used to be and really not that much money in the scheme of living as a retired person.
Do you have a million, even a half a million put away for those Golden Years of carefree retirement? $500,000 won't get you those RV's, around the world cruises or exclusive retirement communities. The longer we live, the more likely we will need assisted living at some point in our lives. Count on a minimum of $5000 a month if you don't want to live in a dump. Count on more if you are still 15-20 years from retiring. Forget those amazing places unless you can count on an income of $10,000 a month just for the exclusive community living, you'll still need more if you want to purchase food, pay for medical expenses, drive a car or do anything above and beyond. Social Security might give you 15% of that if you receive the maximum because you were a top wage earner before you retired. You need a great deal of money invested in both growth and income in order to retire with anything like $5000 a month to cover all your bills, medical expenses, insurance, food, any mortgages or car payments, gas, cell phones, travel, gifts, clothing, not to mention the basic needs of water, electricity, phone, etc.
Living in Florida, seeing how retired people struggle and realizing what kind of money you need to maintain your account and just live off the income, has been an eye opener. Sure you can just 'get by', but if you've had any sort of life that included the finer things, it requires a lot of money. Your income from your job is over and you will have what ever it is you've managed to invest to determine your lifestyle. It's a completely different way of life. It can be enjoyable, if you start now and make those years a priority. I dont' want to be stuck in an old house with little money for the fun things in life. I figure we need about a million between now and when I am old enough to stop working and retire full time and maintain the life I have become accustomed. Is it possible? Time will only tell, but there is plenty of time for things in life to get more and more unaffordable as I save for retirement. You can't eat at the most modest of resturaunts for less than $40 these days. Cars cost as much as some of our retired folks paid for their first houses. Less face it, it's a hard choice; give up the fun now and plan for an unseen future? I don't know how our parents and grandparents did it...at least I have an IRA with a substantial amount saved. But. there are down markets to avoid and unforeseen things that pop up for people all the time. It is no small matter and hiding our heads in the sand won't make our retirement years any easier. Keep this in mind, this article is to me more than anyone else. If you read it and it helps, that's even better. But we are on our own in this world and no one is coming along to save me; how about you?