Tuesday, June 7, 2011
ARE RETIREMENT SAVINGS FOR RETIREMENT OR BUILDING WEALTH?
11:43 AM | 
Posted by
pensionfinancialservices |
WATCH FOR THE DEVELOPMENT OF NEW PLANS TO PROTECT SENIOR BOOMERS
According to Kevin McCormack, President, Pension Parameters Retirement Planning, retirement funds have traditionally been targeted to—that’s right—retirement. That is why there are tax benefits in accruing retirement savings in various plans. As the number of Baby Boomers are coming “of retirement age” there are some new possibilities that all companies and individuals should watch for in the coming years, including:
· Retirement planning traditionally has focused on "a number." What will individuals need to retire securely? “Many people say they must keep working past the traditional age of 65 because of the rising cost of living,” says McCormack. “The number becomes more difficult to project, depending on the circumstances of each individual.”
· Said a recent Reuters article, $25 trillion is the real number to watch-- from the big picture view. “That is a rough (and conservative) approximation of the amount of wealth controlled by the baby-boom generation, based on Federal Reserve Board data.”
· It’s been estimated that in the next five years, some $2 trillion will roll over into personal individual retirement accounts. “Many in our business worry that workers will use that money on early retirement expenses, or just trying to survive in an uncertain economy,” says McCormack. “It’s a concern because those workers will have no back-up in later years.”
· This has brought up the question: What's the purpose of saving for retirement? Is it security or wealth building? “Depending on each family’s circumstances, those assets, while meant for retirement, may be used early or saved to hand down to future generations,” says McCormack.
McCormack notes that this is why some are beginning to favor the traditional defined pension plans which pay workers a regular amount monthly for as long as they live. Numerous companies are introducing new products aimed at making defined contribution plans behave more like those pensions, at least during the later withdrawal years. A later post will address issues future retirees may face, based on that Big Picture number.
“We’ll see many new plans evolving to meet the challenges of these issues in the coming years – and sooner,” predicts McCormack. “It’s clear that protecting retirees is causing a sea change in thinking.”
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