Retirement & Health Planning In Financial Crisis
People are asked to opt out of receiving marketing literature; if they do nothing they will receive it. It is certainly a good way for a company to expand its database rather than to ask those same people to take positive action in order to get the same correspondence. It seems it is part of human makeup not to bother opting out. This is something when applied to finance and retirement might just be the spur to those who haven't bothered to save. If they are told for example that they will be included in a company pension scheme unless they opt out, many people seem to think why not. They do not need ant personal action to join. When you think about how many Americans admit to having no significant retirement savings it may just be the answer to increase numbers. Studies suggest that perhaps two thirds will stay in the plan if it is proposed.
Automatic Individual Retirement Accounts (IRA)
An automatic IRA would work on the principle of human inertia. Workers in companies of a certain size that do not have company-sponsored retirement plans would have to contribute to an IRA plan unless they chose to opt out. There would not be a great deal of work required by the company, merely connecting the employee to a qualified financial institution.
It is thought that 60 million U.S. workers have not got a retirement plan from their employers. An automatic IRA would solve this but although legislation has been proposed there is little sign of it being introduced nationwide. Some States have taken their own initiative but nationwide standardization is the ideal.
Social Security System
The problem is that there is a crisis that doesn't appear as though it will go away. Retirement could be a misery for the next generation, much the same as it is currently for those who have retired with only Social Security benefits to fund their lives. Social Security was never designed to be more than a support to personal retirement provisions. In addition the Social Security System is in trouble and while the Republican Party maintains a majority in both houses of Congress, the House of Representatives and the Senate those problems may not get much priority.
Health Costs and Insufficient Savings
The present situation is alarming. Too few people have good provisions for the future and all the time costs that previously could have been earmarked for retirement increasingly seem destined for health provision. Many are recognizing that they are falling short of what they will need in later life but are seemingly unable to do anything about it.
It appears that 40% of couples believe that they will be alright with a retirement fund of $500,000. It might surprise them to know that another survey predicts that if a couple both lived into their 80s, their healthcare costs could well take over 75% of that.
Over the last 50 years statistics suggest that consumer goods and services have gone up on average eightfold. That is if you exclude healthcare. It seems healthcare has gone up 274 times. It is clear that things are out of control and that is partly due to the poor quality of current benefits; improve quality and facilities and sense may return to the sector. If it doesn't then inflation will continue to soar and no more money will be deflected to where it could really make a difference; retirement provision.
So What Should Happen?
Inertia is not an option. Everyone should take some time to look at their financial situation and recognize how they stand. If they are living from pay check to pay check they should look at where their money is going. If there is no surplus at the end of the month then clearly it is unlikely that any provisions are in place for the future. Those with regular income at least have the chance to change direction and try to trim expenditure. That can be done with top 10 just right installment loans at a much lower rate of interest. The monthly saving should go straight into an account that is intended to help the future.
Surpluses can be created in other ways. One is increased income and another trying to trim monthly expenditure. That can be anything from small but regular purchases that add up over a month to seeking cheaper suppliers for telephone, insurance and utilities. At this stage there are no major sacrifices involved while the money that can be set aside will certainly help future retirement.
What Does the Future Hold?
It is unlikely that automatic IRAs will be available nationwide any time soon or that Social Security can fill the void that lack of savings has created. Healthcare will remain an issue, especially for the elderly. It is clearly up to individuals to understand the importance of good financial management and start to prioritize saving over spending. Will it happen? It is to be hoped so.Read more Comments