Following up on a previous post on the five top retirement stories of 2011, here are some important emerging trends that might not have made the headlines, but they still require your attention in the months and years to come.
1. New products and services to generate retirement income
Financial institutions are jumping on the bandwagon to help retiring boomers deploy their 401(k)s, IRAs and retirement savings to generate lifetime retirement income. Some of these products and services may show up soon in your 401(k) plan at work.
For example, at the beginning of the year, independent financial advisor Financial Engines introduced their “Income +” service, which can help you turn your 401(k) accounts into steady retirement income. Late in the year, United Technologies Corp. announced an in-plan annuity option for their 401(k) plan, one of the first such publically announced moves among major Fortune 100 corporations. Other institutions, such as Fidelity Investments and Vanguard, are drawing attention to their managed payout funds.
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Lessons learned: Be on the lookout for retirement income options in your 401(k) plan, and take the time to learn about them. For that matter, anybody in their 50s and 60s should be learning all they can about how to generate retirement income from their savings.
2. The Department of Labor issues regulations on expert advice in 401(k) plans
In October, the Department of Labor issued regulations that are designed to improve access to expert advice for people who participate in their employer-sponsored 401(k) plans. The guidelines require unbiased investment advice and allow investment firms to deliver this advice, providing the advice is demonstrated to be unbiased.
Such advice typically focuses on how much people should be saving and how to invest your assets during the years when workers are saving for retirement. Studies have shown that employees tend to save more and reallocate their assets after receiving such advice.
Lessons learned: If your 401(k) plan offers financial advice, learn more about it, and find out how much it costs. Often your accounts will be charged for this service. In many cases, the advice will tell you to save more and use an asset allocation that’s similar to target date funds. In this case, you might skip paying for the advice and just boost your savings on your own by moving your money into your plan’s target date fund.
3. High unemployment and the consequence of boomers working longer
OK, maybe the unemployment news has been in the headlines all year and then some, but let’s put two and two together. Boomers can’t afford to retire and plan to work until their 70s, and they actually have lower unemployment rates than people in their 20s and 30s. Employers are beginning to wring their hands about aging boomers hanging on to their jobs, because they’re perceived to be more expensive and less productive than younger workers. And watch out as the younger generation becomes more disillusioned with the economy and its job prospects, and begins to flex its political muscles, as witnessed by the Occupy Wall Street movement. This will be a sticky issue for years to come, for both employers and individuals, young and old.
What happens when baby boomers keep working?
Lessons learned: If your retirement savings are inadequate for retirement anytime soon, explore alternative, win-win ideas for continuing to work, such as reducing your hours and mentoring the next generation of workers. Make sure you keep your work skills up to date, and nurture your network.
4. Many more children in poverty than the number of retirees
No matter what measure you use, poverty among Americans under age 18 is far higher than poverty among people age 65 and older. Some studies report that poverty among the elderly is under-measured, but the fact remains that Social Security and Medicare have been credited with lifting many elderly out of poverty.
Now don’t get me wrong! The answer is not to reduce Social Security and Medicare benefits, so that the poverty rates equalize between these two groups. Instead, we should be looking for ways to address poverty among Americans of all ages. And when legislators look to reduce the federal budget deficit by trimming Social Security and Medicare programs, they should look for changes that impact more affluent retirees while protecting retirees who are below the poverty level.
Lessons learned: Collectively we’ll all be better off without significant numbers of our citizens in poverty. Not only is it the right thing to do, but aging boomers will need smart people — today’s children — to take care of them in their later years. That might not happen if significant numbers of children are short-changed in their formative years.
5. More and more people looking for a “good death”
While most of my writing focuses on helping people live long and prosper during our retirement years, we can’t escape the inevitable conclusion to our life’s journey. Discussing end-of-life issues is tricky in America. Witness the demonization of hospice counseling as “pulling the plug on grandma” during the recent debate on health-care reform. But this topic was the subject of an excellent and tactful article in Contingencies, an actuarial journal that admittedly doesn’t generate headline news.
The article notes that families who take advantage of Medicare’s end-of-life counseling report outcomes that are more satisfying emotionally for all concerned — the patient, family and friends, and health-care professionals. This counseling often results in saving money by forgoing desperate yet expensive life-extending measures, although saving money certainly isn’t the goal of these services.
Boomers will receive a preview of coming attractions as they help their parents transition. My father moved from the hospital into hospice care after counseling from his doctor, and our entire family was very grateful for this decision. Boomers will probably redefine how we finish our lives, just as we’ve redefined all stages of life throughout the decades.
Lessons learned: If you haven’t already done so, adopt a medical directive that spells out the treatment you’d prefer as the end draws near. The people you care about most — your spouse, children and close friends — will be comforted by knowing your wishes.
The trends reported here are some of the tougher issues we collectively face, as our nation navigates uncharted waters with the aging of the baby boomer generation. The best way to meet these challenges is to face them head-on, so kick these ideas around with work colleagues, family and friends. We’ll figure it out together!
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