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?