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Retirement Planning: Percentages Tell a Story November 3, 2008

Posted by retirementwithaplan in retirement, social security and pensions.
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As folks re-examine their retirement plans, some telling information was recently published by the Employee Benefits Research Institute.  Even after trillions of dollars in retirement worth was wiped out in retirement accounts ranging from 401(k) plans to IRAs to some pensions who did not invest conservatively, the majority of our economy’s retired participants never felt the loss.  And with good reason: they are relying in Social Security for a great deal of their retirement income.

Although those percentages seem out of place, the actual income draw for those unfortunate enough to be in the bottom three-fifths the EBRI’s chart does not give them a living income.  Many have never had the benefit of a pension, participation in any tax-deferred accounts or had the ability to save extra income.

True, Social Security was not meant to pay more than 40% of anyone’s income.  It was meant to keep retirees from falling into poverty. A nation with too many poor does not move – it stagnates.

The downside of a service economy is the low pay many in the service sector have and still do receive, the unreliability of the sector to provide a steady stream of income throughout all economic scenarios ( bump like we are encountering now usually sees those jobs shaved at an alarming rate and across all pay scales), and inability to move with ease from one career (not job) to another without incurring great financial hardship.

We can be thankful that SS was never privatized.  We can be hopeful that the stock market will return – which given enough time, it should.  We can be prudent in the future and skeptical about the promises of retirement.

The essence of a plan is planning for disaster. At what point did that change to ignoring the possibility that something bad could happen?

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