The Retirement Battle

We are in a time of economic uncertainty. From the top of the government to our very own kitchen tables, we are unsure of our financial future. However, for decades, our financial future has been controlled by someone else. So many people are looking for ways to take control and those people become my clients.

What we fail to realize is that the times have changed. What worked for our parents and grandparents is not working for us. We can't keep doing what we've been doing for the last 40 years and expect to get ahead. Allow me to go back in time.

Pensions have been around since the late 1800s. A pension allows for both an employee and employer to contribute to said retirement account with a fixed payout upon retirement for the life of the employee. The pension was put in place as an employee retention tactic; you work for a company for 30-40 years while contributing a minimum required percentage and the funds are managed by the company or a third party. The funds are invested in the stock market across the globe. When we think about pensions as a retirement plan, we tend to be certain that we'll have what we are being promised in our golden years. I beg to differ and so do those who have experienced a decline in their pension account value or are currently in retirement seeing their net income decline. Google "pension cuts in Detroit" or ask a teacher in Chicago. You are not in control.

In 1935, Social Security was introduced in part as a supplement to retirement with the retirement age being set to 65. Now, the life expectancy in 1935 was age 60. Therefore, although one would pay into the benefit for 30-40 years, the benefit would only be received for a few years if at all. Unfortunately, without Social Security reform and the life expectancy now in the 80s, the fund is nearly depleted. One of two things is likely to occur. The fund depletes entirely in 2037 or a combination of a reduction of the benefit payout for those currently collecting while postponing the age in which one can begin receiving the benefit. In either case, we are still getting the short end of the stick. Again, you are not in control.

In 1978, the 401(k) plan was established. With pensions becoming increasingly expensive for a company or organization to maintain and fund, the idea was to bring more of that cost to the employee with employers opting to match up to a max. Similar to a pension, the funds are managed by a third party. Employees blindly select an investment allocation and off they go contributing to their retirement. For those who recall what transpired in 2007 and 2008, the financial crisis wiped out nearly 40% of funds in a 401(k) and IRAs. Matched by an employer or not, that is still a loss of principal and growth over a period of time. Want to pull some or all of your money out? Be prepared to pay penalties and taxes, have the amount added to your earned income, and potentially increase your tax bracket which only means you'll be paying more in taxes. Wait! Isn't this your money? Once again, you are not in control.

While there's so much more I can include, I want to make sure that I stick to the point and that is to encourage you to take control of your financial future. How can you take control? 

Here are some questions to ask yourself about your retirement plan.

1. What are my options to save for retirement and who can help me make the best decision for me and my family?
2. What am I paying in fees to have my account managed?
3. How much money am I ok with losing?
4. What are the penalties?
5. How will taxes affect me in retirement?
6. Do I have any old accounts I can take control over today?

Take control and retire strong!