Financial Literacy - Securing retirement
retirement
Rethinking retirement in tough times

Inflation. Rapidly rising inflation for key consumer expenditures is another savings exterminator.

"One of the problems is they're (baby boomers) spending those retirement dollars on rising energy costs, rising medical costs, rising housing costs and there's only enough to go around," says Carl George, CPA, immediate past chairman of the National CPA Financial Literacy Commission at the American Institute of Certified Public Accountants.

Some 33 percent of respondents to an AARP survey in May indicated that they stopped putting money into their 401(k), IRA or other retirement account because of concern over the economy and inflation. In Bankrate's own survey, 23 percent of those polled either decreased contributions or stopped making them altogether, and 9 percent have pulled money out of their IRA or retirement account due to the economy.

Changes in the landscape Credit card debt, inflation and scant personal savings aren't the only reasons why early retirement isn't in the cards for most of us.

Changes in retirement incentives within the Social Security system and the elimination of mandatory retirement have contributed to the recent trend toward later retirement, according to the "Health & Retirement Study," an in-depth, long-range study on retirement issues released last year by the National Institute on Aging and the University of Michigan.

Another culprit: a reduction in the availability of private pension plans. Over the past 20 years, defined-benefit pension plans have gradually become scarce while defined-contribution plans, such as 401(k) plans, have become much more widespread. While about 40 percent of workers in the private sector had only traditional pension plans in 1985, only 10 percent of workers had these to the exclusion of other plans in 2005, according to EBRI. Over the same time frame, those who had both types of plans fell from 35 percent to 27 percent. Meanwhile, 63 percent of workers participate exclusively in defined contribution plans such as 401(k) plans, up from merely 25 percent in 1985.

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The shift is ushering in an era where workers must take more of an active role in retirement planning whether they're prepared to or not.

"Contrary to the past, workers are much more in charge of their retirement well-being and of making decisions for their retirement," says Annamaria Lusardi, an economics professor at Dartmouth College in Hanover, N.H., and contributor to the "Health & Retirement Study."

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