Back in “the good old days,” retirement happened at 65, the company gave you a gold watch and a lifetime pension, and you led a life of leisure as you ran out the clock in Florida or Palm Springs. Today, most of the Over 50’s who stop working before 65 will do so involuntarily, many of those who have a choice will work past that age, and the notion of a guaranteed company pension is about as common as a pay telephone. Making a bad situation worse, a whole host of other retirement assumptions are proving to no longer be valid.
Number One on Yahoo Finance’s list of “5 Retirement Assumptions You Can’t Make Anymore” is “I’ll Be Married When I Retire.” Okay, we DO50’s are quite familiar with the fallacy of that notion (though, of course, many of us may remarry, or perhaps be cohabitating, when we reach retirement). The point of the article is that couples who saved together for retirement would, in a divorce, have to split assets, then use them separately for two households instead of together for one. Which would reduce the lifestyle for each.
Other no longer true assumptions include:
- My assets only need to last 30 years — people are living well into their nineties, so maybe that needs to be bumped to 35 or even more.
- My money will last if I only withdraw 4% of my portfolio annually — in a low interest environment, you can’t earn 4% safely, so you have to withdraw from principal. Plus, a big market drop early in retirement can completely destroy a withdrawal plan.
- My home is a great retirement asset — we’ve seen that values can go up and go down. Your home is illiquid; there’s no guarantee you’ll be able to get your price exactly when you want to sell.
- My spending will go down in retirement — actually, spending could easily stay the same if you’re active and want to travel. Later, as you slow down, you may face high medical costs, as Medicare only covers about 62% of average medical bills.
More scary details in the article. What are you doing to secure your future retirement?