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5 retirement realities to accept

By Jennie L. Phipps ·
Sunday, September 23, 2012
Posted: 6 am ET

I was looking at a picture of my grandmother the other day. The photo was taken 70 years ago when she was about the age I am now -- 61. Her hair was white and pulled into a severe bun. She wore lace-up black shoes, heavy stockings and a flowered cotton dress. She was already a widow.

By the time she died at 94 -- one morning she just didn't wake up -- she had seen the world change dramatically, and she had -- sometimes reluctantly -- changed with it. She traded in her bun for a pixie cut, her dresses for slacks and a stylish blouse, and her lace-ups for sneakers. When money got tight, she opened her own little candy business that she ran until she was 90.

When I think about retirement, her experience always comes to mind. What will my life be like if I'm lucky enough to live another 30 years? And what can I do to make those years worth living?

Allianz Life's Vice President of Consumer Insights Katie Libbe offers these five insights into retirement that shed some light on things that will change in retirement and how we must deal with them in order to make retirement planning worth the effort.

Don't think you can work forever. Allianz points to an Employee Benefits Research Institute report that says 50 percent of people retire earlier than they planned. They leave the working world because of their own or family members' health issues. More than 20 percent lose their jobs. "Bottom line, the ability to work longer is not always in your control, so you should plan accordingly," says Libbe.

Don't think you'll save your way to heaven. Even my frugal grandmother had to figure out a way to make more money. The future won't be any different. Allianz points to a survey that divided respondents into four wealth quartiles, ranging from $26,000 to more than $1 million. None of the people reduced spending in retirement by more than 14 percent, and the wealthiest group actually increased their spending by 7 percent.

Recognize that Social Security isn't going to be enough. Libbe calculates that while Social Security will replace approximately 57 percent of a $20,000 annual salary, if you're earning $110,100 a year, Social Security will replace only 29 percent of your income.

Don't doubt that health care will be increasingly expensive. From 1999 to 2011, wages rose 50 percent, but health care premiums skyrocketed 160 percent, according to the Kaiser Family Foundation and HRET Survey of Employer-Sponsored Health Benefits. Be prepared to pay bills that will be even higher.

Be ready to grapple with inflation. At 3 percent annual inflation, $100,000 of purchasing power decreases by 14 percent in five years and by 45 percent in 20 years.

My favorite picture of my grandmother shows her baking cookies with several of us grandkids gathered around, anticipating the results. I'm not a great baker and I don't have any grandchildren, but I'm up for the challenge of growing old gracefully that she met so successfully.

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1 Comment
mike moseley
November 15, 2012 at 8:58 pm

I am 61 and can not get a job - I have tried. I averaged 85,000/yr
for about 15 years,

My wife co-owns a busiess that is having real problems ( selling wool and knitting)

We owe about 45000 on a new kithen that we got when I had a consistent income (we are 61 and 60) Otherwise the house is morgage free,

My wife has about 200000 dollars in various bonds.

we each feel that the bond market as well as the entire us financial system is about to collaspe.

What would you recommend we do with our 200000, I suggested we invest internationly - in euro's and China prehaps. I agree with her that the dollor is about to collaspe, leaving people like my 92 yr old mother with a trust fund of 5 million just easy picking for the crooks that we have been subsidisinng, Too Big to Fail - yet they continue to receive enormous bonases.

Any third grader could manage the firm much better. So stop giveing me the argument that we need to reward the best and the brightest- a monkey could do better. This argument is utter BS