In a article in the Toronto Star this week they stated that
R etirement is getting more expensive and perilous in the wake of America’s mortgage and financial crisis. The fear of a recession has increased the risk you will have less income in retirement, or have to work longer.
The worst part is it’s starting to get really bad, depending where you live you can feel it more than others.
How bad is it? Worse than after the tech-stock bubble. Worse than after the Sept. 11, 2001, attacks on the U.S. Worse than the start of the Iraq war.
Also another worrying fact is that more and more pensions are starting to publicly admit that they are not properly funded.
Mercer Human Resource Consulting says its pension-health index fell to 77, down from 82 in December, 90 last summer and 120 in late 2000.
The pain of that decline will be felt beyond company or government-sponsored pension plans like the Ontario Teachers’ Pension Plan, which last week announced its sponsors must come up with a plan by Sept. 30 to deal with a solvency deficit of $12.7 billion, or 11 per cent.
When it comes to individual investors the article also stated
Hamilton said individuals will find the same thing if they take the time to prepare a financial plan using realistic assumptions.
“They will know the part about the assets not having done great (if they have invested in more than Canadian stocks),” he said.
The model portfolio tracked by Mercer includes 42.5 per cent in different types of bonds, 25 per cent in Canadian stocks, 15 per cent U.S. stocks, 15 per cent international stocks and 2.5 per cent in treasury bills.
This plan would have lost only 1 per cent of its value in the first quarter. But a selection of Canadian bonds rose in value by 3 per cent, driving down the interest rate that could be counted on in future. Losses on foreign equities were smaller than they would have been if other currencies had not risen relative to the Canadian dollar, at 5.2 per cent for an index of international stocks and 5.9 per cent for U.S. stocks.
What retirement savers may not realize, said Hamilton, is that interest rates tend to stay low for a long time once they have fallen, and the small difference between those rates and the annual inflation of consumer prices is “a very bad thing” in retirement.
“You don’t have any easy, safe way to get decent returns. That means you need more money to provide the same income than you used to. The fact that you are living longer (than you might have expected earlier) means you need more again.
“So, bottom line, it’s an expensive time to retire.”
So right now is not a good time to retire but some people have no choice so what is a person to do?
What would you do/are doing if you have to retire now?