For this particular installment, we offer some cheer, not fear. Which is by way of asking, are you a glass-half-empty or glass-half-full type of person?
Well, for those awash in what often seems to be a veritable torrent of depressing stories about retirement as a financial disaster in waiting, maybe it should be glass half full. That is, for those rendered restless and sleepless by all that pessimism, perhaps half-full of something strong to ease the anxiety. But put the bottle down and hold on! A smart Ben Steverman story for Bloomberg.com—headlined Five Reasons Not to Despair About Retirement—makes a convincing case for retirement optimism. Here are excerpts from his excellent piece:
“Told the U.S. faces a retirement apocalypse, [Americans] try to avoid thinking about their financial future.
“Here’s a little something to lure them out of their mental bunkers: From wages and debt levels to health-care costs, some of the scariest financial trends are reversing. That doesn’t mean Americans can stop saving. But they may want to take a break from all the worry and self-flagellation to enjoy some actual good news on the retirement front.
“The Old News: The financial crisis vaporized $3.8 trillion worth of retirement assets in 2008, according to the Investment Company Institute (ICI). The S&P 500 stock index plunged 44 percent from its peak.
“The Good News: While only about half of workers have access to a retirement plan at work, those who were able to save in a 401(k) throughout the recession did well. If a worker steadily contributed from 2007 to 2012, their balance rose by an annual average of 6.8 percent. That estimate, from a new study by ICI, the fund industry trade group, doesn’t reflect U.S. stocks’ double-digit surge in 2013.
“The Old News: Medical care costs have risen more than double the inflation rate since 1990.
“The Good News: Costs are slowing way down. Medicare spending per beneficiary didn’t rise at all from 2012 to 2013. While no one is sure how long the trend will continue, the government now estimates the Medicare trust fund won’t be exhausted until 2030, six years longer than it estimated two years ago.
LIVING ON LESS
The Old News: About half of Americans risk not having enough money to maintain their standard of living in retirement, estimates Boston College’s Center for Retirement Research.
The Good News: Many retirees find they can happily get by with less. When T. Rowe Price surveyed 1,500 retirees, 85 percent said they didn’t need to spend as much as before they retired to be “satisfied.” And two in three said they liked the freedom from “keeping up with the Joneses.”