WEDNESDAY, OCTOBER 19, 2011
by Ed Sneneh
Financial planning for individuals and businesses have never been in need more than times like those, times of recession. While people need planning in good time, proper planning in bad time is even more critical.
Confidence in Retirement Drops Sharply
A recent report on retirement published by Sun Life Financial (sunlife.com) revealed a number of interesting and alarming issues in the United States. Among the main findings of that report was the sudden and sharp drop in the confidence of the American people in retirement.
Confidence of the Americans in retirement dropped drastically to a record low of 36% by September 2011, from 44% a year earlier. This decline was the result of the total decline in confidence in the economy, personal finance, personal health, government benefits, and employees benefits. Confidence in the employee benefits was the hardest hit, lower 31% in the past 12 months. The number of Americans who felt “Not at all confident” that they will be able to pay for basic living expenses in retirement has doubled from 14% in September 2010, to 28% in September 2011. This lack of confidence was parallel in receiving Social Security & Medicare benefits comparable to today’s retirees which plummeted from confidence level of about 15% to 9% for the same period of time.
According to numbers from different studies about one third of people with 401K and other retirement plans stopped putting money into their retirement accounts. And, one in five workers prematurely withdrew funds from those retirement accounts. These two factors have further negatively impacted the confidence in retirement.
The percentage of Americans who contemplated delaying their retirement because of the economic conditions by 3 or more years jumped from 43% in December 2008 to 61% in September 2011. People who expected to be working at the retirement age of 67 dropped from half in December 2008 to about one third in September 2011, and those who see themselves working full time at retirement age rose form 19% to 29% for the same period of time. The age group that witnessed the sharp increase in the expectation to have full time employment were people age 60 to 66 years.
Not surprisingly, the economic downturn was a significant factor that resulted in these new trends. The number one reason for delaying the retirement was to earn more money to live. Most other reasons such as "staying active, staying social, keeping health benefits, concerns about social security," remained steady with the exception of "love own work" where there was a drastic decrease in ' I love my career/not ready to end my career" t o only 10% in September from about 19% a year before!
Work Till Drop
One in five Americans indicated that they perhaps will work till they drop, and that they plan never to retire. According to other recent studies about 39% of Americans do not when they will retire, or refuse to retire! Only 29% of Americans think they will retire before age 67 years! More people are spending less in entertainment and eating out, cutting back on holiday gifts and postponing large purchases, canceling travel and vacation time, and even delaying routine and elective health procedures.
The numbers above reveal the importance of financial planning for individuals and businesses. No one plans to fail in his/ her life, but people fail to plan, and that's why eventually many fail.