There was an interesting quiz called "Have You Learned Your Lessons?" which appeared in last weekend's Wall Street Journal. It was based on a recent report that included surveys of those planning for or already in retirement.
The answers to the surveys emphasized the point that unless US policy makers can get another asset bubble going in stocks and housing, many people, ages 55 and older are in deep trouble.
That "bubble" strategy is exactly what the government has been trying to do - the problem with that strategy is that asset bubbles always burst and when they do - they leave a terrible mess.
According to the National Retirement Risk Index, published by the Center for Retirement Research at Boston College, 44% of US households could find themselves unable to maintain their current standard of living.
I strongly believe that these people will NOT be able to maintain their standard of living because of poor retirement planning.
Let's look at 401k plans, which makes up a large portion of many people's retirement plans. A report from the University of Michigan took a look at a group of 1.2 million workers in more than 1,500 401k plans over a two-year period. The report showed that an incredible 80% of workers made NO changes at all during the two-year period.
This is, to put it mildly, incredibly stupid.....
Individual circumstances probably changed during this time period - age, risk tolerance, overall finances, etc. I cannot emphasize enough - a 401k should be adjusted as your financial circumstances change.
And on top of that, the financial markets certainly changed. Most of these people were probably still locked in to the 'conventional investing wisdom' and had far too many of their assets invested in US stocks.....
And this in a period when US stocks are no higher than they were a decade ago...what a waste of time and hard-earned money!
What is really scary is the statistic showing that the end of 2007, on the eve of the 2008 market meltdown, nearly half of the workers surveyed (ages 56-65) had 70% or more of their 401k in equities...22% had more than 90% of their 401k in equities!
What were they thinking?? Or maybe they weren't thinking?
What ever happened to raising your allocation to fixed income investments as you get older? I guess people just got too greedy.....
Now many of them will have to go back into the workforce in what should have been their golden years.
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