The richest generation of all time is now experiencing the effects of our recession. More seniors are becoming impoverished, and many use credit cards to make ends meet. The No. 1 reason is out-of-pocket medical expenses and increasing health insurance premiums.
The National Academy of Science reported nearly one in five (almost seven million) seniors have fallen below the poverty level. The average credit card balance for seniors is $11,000 and climbing. Meanwhile, retirement-planning myths continue to provide shaky financial foundations for all Americans. Here are a few of the worst offenders:
- You will not need as much income in retirement. Actually, many retirees have higher medical costs, higher housing expenses or rental costs and higher energy costs because they need to stay warmer or cooler. There are many other examples of expenses actually increasing.
- Taxes will be lower in retirement. Our government’s circumstances are changing dramatically. The government’s need for revenue will continue to increase exponentially. Many retirees could actually see an increase in taxes (though it may not be called a “tax”).
- I will use my house as a retirement savings vehicle. Obviously, this does not work. Many purchased much larger homes than they could afford, believing that increasing values would provide retirement benefits when their homes were sold. That did not happen, and many people lost money on these purchases. Additionally, large house payments and extra living costs prevented people from using that money to save for retirement.
- I can make larger returns in the stock market. The stock market has averaged approximately 6 percent from 1926 to 2008 and has actually lost money in the last decade. Many experts believe that could last for another decade.
Leading the way
We must dispel these myths and replace them with sound financial truths. We must lead the way by teaching Americans how to save money and keep it saved! We must teach the miracle of tax deferred compound interest, which allows Americans to accumulate higher amounts of cash and provide higher amounts of income. Finally, we must teach the miracle of leveraging: Pennies that buy dollars and dollars that do the work of many dollars.
I am not being a doomsayer; our country still controls its fate. Our industry has a once-in-a-lifetime opportunity, as many events have coincided to elevate what we provide to the highest priority. Our industry must teach these values again. This will put Americans back in control of their financial futures.