The days of a former corporate employer paying a life-time
pension to you and your partner are dwindling. If your
retirement looms, you need to account for ever-rising prices and
how long you'll need to pay them.
My father worked very successfully for 30-plus years at one
company - MetLife Insurance - as was common for many of his
generation. My mother now receives a monthly pension check from
MetLife. She will receive a pension check for the rest of
her life; mom's in the vast minority.
Your eventually former employer no longer provides your
retirement income. Once, companies routinely offered pensions, aka
) plans, under which employers calculated retirement income based
such factors as a worker's years of service, age and pay.
Gone are the days: Only about one in 10 private-sector companies
now provide DB plans, according to the
U.S. Bureau of Labor Statistics
of the companies that offered pensions just a generation ago.
Pensions covered 28% of all retirees in 1979 but only 3% in 2011,
Employee Benefit Research Institute
Introduction of the 401(k) plan and
individual retirement accounts
40 years ago
put the burden of retirement saving squarely on you. This new
paradigm shifts a potentially complex - yet vital - financial
responsibility to individuals, some of whom may have no clue how to
handle investments or create a dependable stream of retirement
With this change, two realities came to light: longer lifespans
and spiraling costs of living.
Today's men who live to 65 can expect to remain alive an average
17.6 more years
; women can expect another 20.3 years. Compare these spans with
12.3 more years for men and 14.7 for women just three-quarters of a
A married non-smoking couple retiring at 62 (the average U.S.
retirement age) must now plan for - and fund - 30 or more years of
retirement. This eludes people who still project life expectancy
similarly to that of their parents' generation.
The second reality: Increased longevity decreases your
overall purchasing power through the years. Costs of what a couple
need to maintain their lifestyle will increase continually over
three decades, if
is any guide; food doubled in price in the past 30 years, for
instance, medical care about tripled and tuition jumped more than
five-fold. The first-class postage stamp, one of the most common
price barometers, increased from 22 cents in 1985 to 49 cents
Do we really expect these upward trends to stop? If prices rise
to follow the average
jumps over the past 80-plus years, today's dollar must
increase to $2.18
at the end of your retirement just to keep the same buying power.
Your nest egg investments need to compensate for this inflation
Seek a competent financial planner to help map out your
retirement money and modify your investment behavior to make sure
you can live the lifestyle you want for all those years to
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is the co-founder of
Crimmins Wealth Management LLC
in Woodcliff Lake, N.J. His blog is
Roots of Wealth
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