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What’s your retirement risk?

By Jennie L. Phipps · Bankrate.com
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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35 Comments
Louise
November 07, 2012 at 11:32 pm

Note to Robert:Your story is very touching. I feel badly that twice you voted for a President who has no idea the situation you and your wife are in..and there are so many others. You can't blame your doctor who did not have a crystal ball. As Americans we depend on our President to really be in touc hwith the American people. It is clear Obama is not. His healthcare plan is a at best a joke. His plan brings Americans to the mercy of the government who will call the shots is our everyday life. The wealthy will get the best medical care while the less wealthy will suffer.His plan is very much like that in European countries..where people have died waiting for care because they were not the wealthy or the elite. Obama may at best make sure people have some food on the table..but at what cost. I wish you and your wife the best. Cancer is a horrible disease..my husband is a survivor and had excellent medical care. We feel what we know today as great medical care will be sacrificed under Obama's plan.

j.michael carney
November 07, 2012 at 11:13 pm

The country needs to heal ,Obama needs to make a move to get some republicans on his cabinet ,some business leaders , get some common sense in his ear. I really think if he doesn't do this we will go off the cliff. I hate to think that the country will fail because leaders couldn't do the right thing( its just that there so far apart on everything)

Robert
November 07, 2012 at 10:22 pm

I retired sooner that I had planned because my Doctor told me to hang it up. Still, I had planned and plotted carefully over my working years and was sure I was OK. I'm ten years old than my wife, so she was still working. That was nine years ago. My health insurance covered both of us, and her insurance covered both of us, and in two years I was covered by Medicare. It appeared we would be in good shape. Three years following my retirement, my wife was diagnosed with cancer. In spite of two different insurance carriers, we lost our house, we lost all of our savings, but managed to hang on to some of our investments. I had Social Security so we moved into a cheap apartment in a cruddy area, but we had a roof over our head. My wife survived the cancer. We were left with $927,350.10 in medical bills. My investments seemed to be doing OK, and we thought that if we just left them alone,for a while, we would be able to be OK. We were not sure what we would be able to do about the medical bills. Then the market tanked, and my investments just evaporated. The cancer treatments ruined my wife's health and she could no longer work. After a two year battle, she was granted a small disabiity pension from Social Security. We now live on our collective social security income of $1,456.00 per month after taxes and Medicare payment. We pay health insurance for my wife as she must wait three more years for Medicare, but even then we will still have to continue to pay for Supplement to Medicare insurance. We have this internet conection with our TV. We got rid of our car, so no money needs to be spent on maintenance, gasoline, or car insurance. We kept one cat, my cello, and my .357 Magnum. My wife kept her engaement and wedding rings but sold all her other jewelry. There was a time when our motto was, "Life is too short to drink cheap wine." Now our motto is, "An occasional bottle of cheap wine is better than no wine." I am so grateful that by living in a cheap cruddy nighborhod, we have access to a library and a public transit system. We never go out after dark, but I'm lucky enough to live were I can get a concealed carry gun permit, and I do carry my .357 when ever we our outside, although I now load it with .38 Special+P ammunition. A year ago, we threw in the towel and filed bankruptcy, to get rid fo the medical bills. I voted for Obama in 2008, and I voted for him again this election. I hope that things will get better for the younger folk. By the way, I have also had to learn that having teeth is overrated. We are getting by, but getting by is not living. My wife's health continues to deteriorate. I am hoping that I do not die before she does as I don't know who will care for her under those circumstances. I made huge error in judgement when I decided to listen to the Doctor and retire. I should have just kept working until they hauled me to the morgue. I wish you all the best.

Bill
November 07, 2012 at 8:51 pm

A note to Harry. I am not sure you are right about food. Look how much it has increased in price in the last year and you haven't seen anything yet. Wait until next year!

Larry
November 07, 2012 at 8:29 pm

We the people of the United States in order form a more perfect union, establish justice, insure domestic tranquility, provide for the common welfare, do hereby??? What the heck happened? According to Forbes Magazine 400 people control 1/8 of the the nations wealth.
Hope and pray the Bozo's in congress and the President can compromise on something without killing the middle class.

James
November 07, 2012 at 8:06 pm

Cathy I couldn't aggree more with with you point of veiw, I refuse to blame one group of people for any and everything thats not like I want it. The poor, the blacks, the whites didn't put the country in the position that it's in today, but we all as a group can get us as a country headed in the right direction. If we're willing to work together as a nation ( the congree and senate) then and only then can we take our place as a nation to be proud of.

Elton Ripley
November 07, 2012 at 7:41 pm

Yes, it's the poor that ruined this country, they just have too much power, unlike the rich.
And who needs socialized medicine? Just because the rest of the developed world has it and some undeveloped parts. It's nothing but another freebie that the rich don't need and the poor don't deserve.
And now that Obama is back we probably won't get that third war everyone so looked forward too. Yes they bankrupt the country, but the rich have money so their kids won't have to serve.
It's definately the poor that started this mess, corrupting the banks, starting wars, being unable to afford the for profit health insurance, insisting on eating AND owning a television.
I stand with you, well actually behind you, when I say, Not in my gated Community!

Harry Elston
November 07, 2012 at 7:37 pm

A note to Kathy. Yes dear, your right about one thing and that is the President has an agenda that fills your basic needs: food and water.

Joseph Perry
November 07, 2012 at 7:27 pm

The problem with being an extremist is that you create goals which are unatainable and disapointed when they are not atained. The only thing Obama and Romney shared was:
opponents view: they could do nothing right and never told the truth.
supporters view: an honest person who could do no wrong
Must all things be Black or White. Do you demand that things be your way or not done at all. A democracy does not allow you to have everything you want though you can have much of what you want. Thomas Jefferson and George Mason understood the workings of a Democracy better than anyone as can be seen from their contributions to a New Nation. Thomas Jefferson is a study of extremes having a life style that differed from what he contributed as being mecessary for a Democracy.
Our attitudes define us as an extremist. I see both candidatest as lacking both honesty and ethics. A democracy for half a nation and a didtatorship for the other half is not a Democracy.

Kathy
November 07, 2012 at 7:25 pm

Yes, it will be a tough road for President Obama in the next four years. He has made major strides to right the country on the right track but not as much as people wanted due to the gridlock in Washington. He made great decisions regarding terrorism and the killing of Bin Laden to make this country a safer place to live since 9/11.
Also, Obamacare can help so many citizens during life-threatening illnesses without the person losing their life's savings on medical costs that their insurance does not pay today.
Is it the truth that we want a safe, secure place to live, healthcare to meet our medical needs without breaking our savings bank, and the opportunity to strive what we need financially in a free country without any limitations? To me this is what our country stands for and most important in our lives right now and President Obama has an agenda that fills our basic needs. Pray for him in the next four years that House of Representatives will be more open to what he says and also President Obama listens to their point of views to come to right decisions for us and our country.