NY Times Article Shows Retirees Hit Hard By Financial Market Turmoil

image Yesterday, the #1 emailed story in the NY Times finance section was Retirees Filling the Front Line in Market Fears and it shows a sad and shocking reality that seniors are facing.  Older Americans with investments are among the hardest hit by the turmoil in the financial markets and for many it means they need to rethink retirement.  “They’ve got to adjust their expectations of retirement,” said Martin Baily, a senior fellow at the Brookings Institution.

Surveys by AARP, the Transamerica Center for Retirement Studies and the Employee Benefit Research Institute have found that more workers nearing retirement age are putting off their plans to retire, curtailing contributions to their 401(k) accounts and borrowing from the accounts to pay for living expenses, including credit card and mortgage debt.

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“This really highlights the new world of retirement,” said Richard Johnson, a principal research associate at the Urban Institute in Washington. “It’s a much riskier world for retirees, because people don’t have defined-benefit plans. They have pots of money and they have to worry about making it last.”

It’s definitely worth a read and it goes to show you how many people can benefit from the safety of a reverse mortgage.

Retirees Filling the Front Line in Market Fears

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  • Could it be possible that with all of the baby-boomers facing retirement, the financial sector decided to “crash,” so less money would be paid out to those individuals??? If all of the retirees pulled out their money from these institutions, these institutions would have failed for certain WITHOUT ANY FEDERAL INTERVENTION. Think about that for a minute…

  • To add on to what Richard Johnson said, what would have happened to the employers if the employers had not switched to defined contribution plans? While defined benefit plans may secure the interests of employees, the opposite is generally true for employers. Imagine how much worse the stock market would look today.

    Here is the place where the American worker has had little or no voice. Who should bear the risk of employee retirement, employees or employers? Unions have been fighting this battle for years. Most have seen a major shift away from defined plans. Since most of the government retirement plans in which many boomers will participate are modeled on a defined benefit concept, what kind of strain do and will market losses and negative state budgets place on these plans?

    The retirement and investment models that have been accepted standards within the pension industry may prove to have significantly missed the mark for many. I know of few retirement planners who have contingency plans in place for their individual clients in case retirement plan assets or benefits will be significantly lower than pension administrators have indicated and employers promised. Usually these amounts are the accepted starting point for retirement planning with little or no thought given to what might happen if those amounts will be significantly lower than prognosticated.

    Reverse mortgages may yet turn out to be a significant part of the answer to the situation but only when home values begin to turn and increase. When that turn will come, is not yet in sight. The annual rate of those increases in home values following the turn will be an important part of the benefits that boomers will ultimately see from reverse mortgages.

    While not all is lost and significant retirement asset losses may be recovered, the anticipated growth assumptions in current retirement planning may prove to be invalid. These are unsettling times.

    The hard thing to consider is what will happen to younger generations….

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