People today retire far differently than they did in the past. Let’s look back 30 years and see just what has changed:
In 1985, retirees relied on Social Security for 65% of their income. People could almost live on their Social Security benefits alone. Not so today, when Social Security accounts for just 27% of retirement income.
Many people used to have pension plans that filled in the gaps left by Social Security. In 1980, 46% of all private-sector workers were covered by a pension plan. By 1990, that number was down to 43%. Today, only 19% of companies offer pension plans and many are discontinuing them. In the past, retirement was pretty much covered between Social Security and pensions for many people. That doesn’t apply anymore.Thirty years ago, employers typically covered most health-care costs. Today, most retirees are responsible for their own health care. That’s a huge cost. Medicare doesn’t cover everything, and out-of-pocket health-care expenses are growing at two to three times the rate of inflation.
In 1985, men were expected to live 14 years past retirement age (65 years).Women were expected to live until 84—19 years after retirement. Today, men’s life expectancy is 91 and women’s is 94. That’s 26 and 29 years after the age of 65. And of course, the longer people live, the longer their money needs to support them plusthe more risk to their investments. After all, the additional time also means more chances for bear markets and rises in inflation.
As you can see, retirement has changed dramatically. You can’t rely on Social Security benefits and pension plans any longer to fund your retirement lifestyle. You have to be self-sufficient. And you should assume you will live to be 100. Even if your parents died in their 60’s, with today’s (and tomorrow’s) technology and health care improvements, 100 is a real possibility. You need to take care of yourself and your finances.
Thirty years ago, retirement was mostly covered for you. Today, you need to plan for yourself.
Source: Market Watch