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What’s your retirement risk?

By Jennie L. Phipps ·
Tuesday, November 6, 2012
Posted: 5 pm ET

I stood in line waiting to vote for about an hour Tuesday at the community center in my Detroit-area town, all the while listening to my neighbor complain that she didn't like either of the candidates. "It doesn't matter who wins. Neither of them are going to be able fix my problem," she grumbled. "Hitting the lottery is the only thing that's going to help."

Her sentiments were reflected in the latest retirement analysis released Tuesday by the Center for Retirement Research at Boston College. The center concluded that based on the National Retirement Risk Index, more than half of U.S. households "may be unable to maintain their standard of living in retirement."

The report pointed out that from 2007 to 2010, retirement risk jumped 9 percentage points for these four reasons.

  • The housing bubble burst, raising risk by 4.5 percentage points.
  • Interest rates fell, pushing risk up 2.2 percentage points.
  • The age at which people are able to collect full Social Security benefits is rising, increasing risk by 1.6 percentage points.
  • Investment returns continue to be rock bottom, raising risk 0.8 percentage points.

The hardest hit households, the center says, are those whose members plan to retire soon with no time to recover from the recession and households with high incomes that they can't sustain without well-paying jobs, the center says.

My neighbor is feeling the pinch from the decline in housing prices that hit Michigan and other Rust Belt states particularly hard. In this part of the country, housing values are still much lower than they were six years ago. This fall in home prices wiped out the equity that many people, including my neighbor, hoped to use to help fund their retirements. And like my neighbor, many face big mortgage payments caused by the decision to refinance when times were good.

The lesson in this for anyone far enough away from retirement to have breathing room is the importance of paying off the mortgage or otherwise freeing yourself from a big debt that, combined with taxes and insurance costs, can eat up your retirement income.

Here's a retirement planning truth: If you have a roof over your head that is all yours, you can muddle through, even if you don't have a fortune in pensions and savings.

Are you set for retirement? What financial obstacles do you see?

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November 11, 2012 at 8:35 am

Vickie B, That was actually Thomas Jefferson. Ford may of change the wording but same concept. A government big enough to give you everything you want is big enough to take away everything you have.

Vickie B.
November 09, 2012 at 8:15 am

"A government big enough to give you everything you want, is a government strong enough to take away everything you have." Gerald Ford

William Burton
November 08, 2012 at 12:19 am

If you're considering an expense and are not sure you can honestly afford can't. Don't give in. You got in this position via your own weakness. Change your ways...NOW!

The economy hurt a lot of people....but a lot more were hurt by their own poor decisions.

November 08, 2012 at 12:16 am

Seeing this coming seems like a no-brainer. The baby-boomers (I'm one) are now reaching retirement age at the same time the birthrate is falling in the U.S. That's fewer workers to pay into social security for those retired. The original system was designed when the average life expectancy was 67. Its now somewhere, I believe, in the high 70's, and will likely be in the 80's before long. For decades, politicians in Washington decided to be generous with taxpayers' money, so up until now, retirees received far more in social security than they ever paid in, even applying prevalent interest rates to their 'contributions'. So except for a lucky few who either made shrewd investments earlier in their lives, or had very high-paying jobs and were very self-disciplined about their spending habits, or inherited large amounts of wealth, or we're all going to be working a long time after we turn 65.

November 07, 2012 at 11:39 pm

This article failed to mention that it was never good to refinance your house it was only made to seem good by unscrupulous people who was only out for the money. Also Robert check out the Senior Service agency in your area. They can assist with help for your wife and household maintenance etc. These programs are mandated by the federal government in all states so although it maybe run differently in your state it has to be there someplace. I hope this is helpful.