By John Packard
I’ll admidt. I am rather a bear these days. I cannot say that I have not been accused fo being a doom and gloomer by my peers. Things are happening right now that are unprecedented in our country’s history.
The good thing is that American’s are perennially optimistic. This has gotten us through tough times in the past, and hopefully in the future.
There are some interesting statistics which have come out which should be the sound of alarm bells:
On Wednesday, an annual survey of Americans recorded the largest-ever plunge in retirement confidence in 18 years of polling.
It’s not uncommon for long-term confidence to ebb and flow with changes in the economy, but the sharp drop reflects larger factors led by rising medical costs and an unusual plunge in home values.
That doesn’t mean the outlook for retirement is completely bleak. But the sobering trends have several implications, analysts say:
• Americans will need to start saving more, and many current retirees may need to cut back on spending.
• Pressure may build for politicians to revamp policies, ranging from incentives for saving to big programs like Social Security, that affect retirement incomes.
• So-called “human capital,” people’s skills and ability to work, is suddenly even more important to long-term wealth. That, not houses, appears to be the reserve that many Americans will tap, as retirement becomes a blend of work and leisure.
Americans having to work longer? Well yes. It seems that this is the natural progression of things. This will be due not only for the financial necessity but also because people are living longer. You can only golf so much before you burn out. Being active and adding to the economy is a good thing.
Still, the current financial landscape is daunting.
Americans are getting a financial wake-up call on several fronts. In the newly released survey, the percentage of workers very confident about having enough money for a comfortable retirement posted its sharpest ever fall, dropping from 27 percent in 2007 to 18 percent in 2008. The poll, involving 20-minute interviews with more than 1,000 Americans in January, found healthcare to be an overriding concern affecting both finances and the timing of retirement. Among people who left the workforce earlier than planned, 54 percent say they did so because of health problems or disability. And 44 percent of retirees say they have spent more than expected on health expenses.
Hopefully people will now realize that they cannot just spend money arbitrarily and think that all will be well. Prosper along with its affiliates have been preaching this message for four years now.
With everybad event, there is something of equal positive value happening; some indicators suggest that the nation’s long-low savings rates is starting to rise, although a decisive shift is not yet clear.
Workers can set the stage for a good retirement if they save just 6 percent of their paychecks in savings, with a 3 percent employer match, and invest prudently. A key challenge, of course, is that so many people fail to do this. Unfortunatly, Social Security thus plays a huge role in US retirement, and some experts say more government policies will be needed.
One area, which promises to be a central focus in the election campaign, is chow to ontrol healthcare costs.
Another is how to get more Americans to build up personal savings.
The one thing I fear is that the governments role in “taking care” of its aging population will come with its own nefarious problems. Mainly a dramatic increase in tax subsidies to finance what are sure to be expanding government sponsered retirement plans. This in itself could cause more pressure on an unstable economy.
Sty tuned. A bunch will happen after this years election.
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