Mary Beth Franklin wrote a pretty good piece in Investment News recently. In it she describes the quandary in which we find ourselves, with Social Security's financial solvency threatened, employer retirement plans all but disappearing, and the personal finances of many individuals ravaged by the recent market meltdown.
The strongest force driving the increasing stress on retirement resources is one of the greats benefits of having lived in the last century -- increased health and longevity. In the 1930s, when Social Security was created, only a small percentage of workers lived to normal retirement age of 65, and it was rare that anyone would live to be 80. Now, a planner would be remiss to project retirement income only to 80 years old; the standard is 85 and I usually see projections to 90. What started as a five year commitment now can stretch for 25.
This enormous societal improvement has had the singular drawback of straining the economic resources devoted to providing an income to retirees. Fortunately, the longevity has been accompanied by improved health and health care. Therefore, today's 65-year-old is more productive than one from the Roosevelt era. And therein lies a large piece of the puzzle to restoring sound retirement financing for our society. Encouraging our seniors to delay retirement by adopting incentives and removing disincentives. Every year of delayed retirement reduces the total retirement income required and provides an additional year of earnings on savings dedicated to retirement. then the discussion can turn to the specific sources and funding mechanisms.
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