How Retirement Planning Has Changed Over the Past Two Decades
November 10, 2022
Retirement Planning has changed over the past two decades, and there is a new method to approach it. Most people work hard for a living and look forward to the day they can retire and enjoy life at a more leisurely pace. However, the concept of retirement has not been around forever, and the planning and funding for it have changed dramatically over the last few decades.
The Beginnings of Retirement Planning in the United States
Before 1880, most men over 64 continued to work in the labor force. Retirement as we know it began over 100 years ago. The government implemented social security in 1935 to protect the finances of older Americans once they turned 65. The increases in life expectancy over the years have coincided with an increase in the average retirement age, which has impacted the retirement planning process.
Decline in Social Security
The cost-of-living adjustment implemented by the Social Security Administration once outpaced inflation but has lagged significantly behind it since 2009. Ultimately, the SCA is operating at a deficit that may reach the point of insolvency in 2034. Most adults in the U.S. know this and have been told for years not to depend on Social Security for their retirement funding.
The Decline of the Pension Plan
Pension plans (regular payments in retirement by an employer in exchange for years of service) were once widespread amongst employers. However, defined contribution plans like 401 (k) have taken precedence over pensions throughout the past 25 years. Employers contribute and match funds for retirement savings instead of a guaranteed pension.
Poor Retirement Savings
There seems to be a limited understanding of how much money to save for retirement. One in three Americans overall has saved nothing. Even scarier: 42% of baby boomers (aged 59 to 74) have saved nothing for retirement, and 70% have less than $5,000 saved.
Rising Healthcare Costs
Healthcare costs have more than doubled over the last 25 years, from $5,187 per capita in 1992 to over $11,000 in 2018. As we age, our healthcare needs increase, with projections for medical expenses for the future lifetime of a 65-year-old couple exceeding a half million dollars. Individuals with retirement on the horizon must account for these continually rising medical costs as they plan for their future.
Final Retirement Planning Advice
The profile of the average American retiree has changed in many ways over the last 25 years, and planning for retirement has changed with it. Reductions in pensions and Social Security mean individuals must be self-sufficient in their planning and saving. There are no rules for retirement, but there are strategies and an increasing number of tools and supports to assist Americans at all ages and career stages to prepare for their future.
An annuity may help save for retirement needs. Especially annuities that have a locked in rate for several years. They are safe and not subject to the ups and downs of the market.
About 1891 Financial Life
At 1891 Financial Life we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs.