The World Turned Upside Down

As the British surrendered at Yorktown their band played a song called "The World Turned Upside Down" in wry acknowledgment of the improbable American victory.  By underestimating the Continental Army and applying traditional tactics to a guerilla war,  King George III and his Empire unwittingly gave birth to a new superpower that would eventually surpass it in dominance.  The world had indeed been turned upside down.

Arguably, the world of retirement planning is being turned upside down as well.  Underestimating how the rules have changed and applying the wrong tactics will result in too many Americans failing to achieve their retirement goals. Scare tactics that reference cat food as a retirement staple miss the point;  few people will actually run out of money. Instead, the risk lies in dramatically reduced lifestyles due to a lack of quality and relevant planning.

Ironically, the issues and trends that have changed the rules of retirement are hiding in plain sight.  The key is to recognize them and respond accordingly:

• An aging population is straining social programs.

• Longevity is a double-edged sword.

• The onus is now on the individual to accumulate wealth and turn it into retirement income.

• The transition from growth to income planning is counter-intuitive for advisors and clients alike.

• Cognitive impairment will be the next great challenge of retirement planning.

• Home ownership is fading as a way to build retirement wealth.

• Rising taxes will undermine the buying power of retirement assets.

• Low interest rates are rewarding borrowers, not savers.

• Volatility is reducing the appetite for stocks.

• Lost jobs and market declines are causing delayed retirement.

• Income, rather than age, will trigger retirement.

• The cost of healthcare and how to save for it remains the elephant in the room.

Future posts will address these and other challenges we all face when reconsidering retirement.  In the mean time it shouldn't take a midnight ride to warn of the reality that the rules of retirement are changing and we must rally accordingly.