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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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Constance D. Wier
November 07, 2012 at 5:43 pm

"Good people vote in bad politians".

November 07, 2012 at 5:29 pm

My house, truck and cars are paid for. I maxed out my Roth IRA and 401K years ago. No bills, debt free retired 6 years ago. Haven't had to touch the 402K or the Roth yet. The only thing making retirement shakey is Obama. The little bastid can't stop spending. Inflation is coming.

November 07, 2012 at 5:09 pm

Many Baby Boomers (grasshoppers) got greedy and spent all their equity and borrowed heavily for an opulent life style. The rest of us ants prepared for retirement through 401Ks, IRAs,and moderate lifestyles. You reap what you sow!

John B
November 07, 2012 at 4:24 pm

Golly gee. We must have done something wrong. I've been retired (early) for almost 11 years and the wife for almost 6. We saved and invested through a financial advisor while we worked and now our lifestyle is no less than it was before retirement. As for the home equity, it was never part of our retirement nest-egg, even though we've got an ARM that's currently at 2.875%. I read these trite articles about the gloom and doom of retirement and laugh.

Will Republican
November 07, 2012 at 4:20 pm

for all who voted democrat this is just a begining! prepare yourselves its going to get worse! obama is spending more than we have!! obuma has no clue on economy or business and you people voted him in !!!!!!!
Good Luck for us all!!!!!!!! We are going to need it!!!!!!!!

November 07, 2012 at 4:09 pm

To Bob H.: Since Harry Reed and Nancy Pelosi took over as the majority in 2006-democrat cotrolled house and senate, the unemployment started to rise and everything has been going downhill since. When they gained control in 2007,unemployment was less than 5%. In Bush's first 6 years, there was no problems with employment and national debt. If you were paying attention to the facts you would have seen this coming.It did not happen overnight.Be prepared for 4 more dismal years!

Mary Ellen Brown
November 07, 2012 at 4:04 pm

I was raised by parents that grew up in the Depression of 1929. They were hard workers,with Dad sometimes juggling 3 jobs to put food on the table and clothes on our back. One of the problems today is that people don't understand the difference between 2 words:Need and Wants. People do not know how to be responsible consumers. Get real! Households today have upwards of 2 or more electronic devices for entertainment. We "want" what we don't "need".My son,when he was in 2nd grade had to make a list of needs and wants- shelter, clean water, healthy food,medical care,weather appropriate clothing for example. We are not content with our needs met. We want more ,better and bigger stuff.There's nothing wrong with that if we have the means to have it. But if we are not paying for our basic needs FIRST,we are not being responsible for ourselves. I realize that there are people with legitament needs for help.Just saying...

Bob H
November 07, 2012 at 3:43 pm

Oh, this story was written yesterday and printed today. How do I know? It was on the news.

Bob H
November 07, 2012 at 3:41 pm

How odd that the American people are being bombarded with horrible news about the economy, possible downward slide in a very dire recession, bad news for people that hope to retire early, and many major companies saying they will layoff worker's in December. Why weren't we told all this on Monday or God forbid, Elecetion Day? Sorry...Gas at the pumps to skyrise. Interesting.

John R. Boyarski
November 07, 2012 at 3:07 pm

For many of us the road to a secure retirement starts not with the "lottery" i.e. good fortune, but with a realistic assessment of what standard of living we are willing to accept and the achnowledgement that many of us have been and continue to live beyond even our current incomes let alone a reduced future retirement income. We may not be able to get a better job right now, but almost all of us can start "getting your own money working for you" by starting a savings and investment program (however small), paying down mortgages early by prepaying an extra $50 or $100/month. The point being is that it is truly up to each od us, not our neighbor,not the government to take charge of our own lives and take action to improve our future income security ... no one will or can do this for you. It is clearly doable ... Believe in America and believe in yourself!