What has changed in income planning over the past five years? Given that this Income Planning e-newsletter is now five years old, this is a good time to look back and compare.
Our August 2004 inaugural issue carried a feature about how boomers nearing retirement were grappling with two opposing forces–lack of savings versus desire to spend.
The first editorial talked about how the old retirement income image of a three legged stool–pension, savings, and Social Security–may be morphing into a four-legged chair–401(k), savings, part-time earnings, and Social Security.
The first news articles covered: a proposed income annuity incentive bill; how to use variable annuities and variable universal life policies in life cycle plans; the possible creation of indexed income annuities; and how little control people felt they had in the post-recession market of 2004.
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Does any of that sound familiar? It does to me.
In August 2009, boomers are still torn over how to finance retirement; the four-legged chair is the dominant model for many retirees; life cycle planning and investment are commonplace; and worry about lack of control over the retirement future clouds the horizon.
However, today’s income planning scene has subtle but important differences. To wit:
Boomer’s notorious lack of savings is still a problem, not only because of the spend-spend-spend lifestyle of yesteryear but also because of layoffs, furloughs, prolonged joblessness, and increased medical costs related to aging and related matters.
But countless surveys tell us that boomers, and many other demographic groups, are now turning away from spend-spend-spend, and for the same reasons.
Now, boomers are into save-save-save–if they have jobs, and even if they don’t. Bank savings rates are up; sales at second-hand-goods shops are up; and consumer buying is so depressed that the federal government offered its Cash for Clunkers rebate allowance program in August to stimulate car purchases. Not all boomers participated in this activity, but news reports indicate that a large percentage of boomers did.
As for the four-legged chair, the recession of 2008-2009 seems to have made that a functional retirement model. Countless reports have detailed how mature workers now say they plan to take Social Security and work at the same time–if they can find work. Gone are the giddy stories about taking early retirement, as early as age 50, for instance. Now, the focus is on coming up with enough money to sustain oneself in the later years–and to fill in the gaps left by the two big recessions of this decade.