LOOKING GOOD, OR NOT?
The Economic Realities Behind All those Positive Headlines
A recent article: A secure retirement a fading dream for growing numbers
highlights a December 2012 AARP Florida survey that reflects a sobering reality for Floridians 50 and older, and by extension, older Americans across the nation.
The survey’s results showed that 53 percent of Florida voters age 50-plus now say they plan to put off complete retirement, compared to only 8 percent who say they are very likely to retire as planned. Asked why they are planning to work past what they considered “retirement age,” 62 percent of them said they will need the money. Only a little more than one in four (27 percent) say they are very satisfied with the money they are putting into savings. Some 35 percent are not very, or not at all, satisfied.
Just 48 percent of those AARP survey respondents are expecting a pension from their employer, and less than half expect income from stock investments (46 percent), an IRA (38 percent) or a 401(k) retirement account (33 percent). Overwhelmingly older Floridians say they are banking on Social Security to be there for them when they retire. In fact some 83 percent say they expect Social Security to provide income for them in retirement.
Contrast those expectations with the reality that if proposed cuts to Social Security go through, Floridians will see Social Security benefits cut by nearly $8 billion over 10 years, with many losing thousands of dollars in hard-earned benefits.
REVEALING RAW DATA
What can we make of this extreme disconnect between headlines and apparent realities?
Let’s start with the Consumer Price Index (CPI), which measures changes in the price level of consumer goods and services purchased by households. The CPI in the United States is defined by the Bureau of Labor Statistics as “a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.”(wikipedia.org)
The first thing you’ll notice is that the cost of many of CPI’s components is going up faster than the overall index. These items include food, energy, drugs and medical supplies, hospital and related services, oil supplies.
Because these areas are where most retirees and people nearing retirement spend their money, these price rises go some way in explaining why those particular groups are feeling the brunt of economic pressure.
Couple that with the “reality” of our current low interest rates, and it becomes even clearer why it’s hard to stay ahead of the game today. The cost of peoples’ basic needs are rising at a faster rate than inflation – no wonder people are feeling overwhelmed, even beleaguered.
WHAT TO DO?
Is there anything positive we can leave you with, you might ask. The answer is yes. For those of you who have not yet reached retirement and are looking ahead at all the factors discussed here, we offer this advice:
1. Start making the maximum contribution to your IRAs
2. Pay down any credit card debt
3. Use this difficult time as a motivator to plan for your future