Boomers' plans are in the retirement red zoneArticle added by Paul Cross on September 26, 2013
Paul Cross

Paul Cross

Pekin, IL

Joined: December 21, 2006

If you are within 10 years of retirement, you are in the red zone. There are 77 million baby boomers in the red zone, and some are in the red-hot zone (within five years of retirement). But it's really not the person, but the retirement plan that puts him or her in the red zone.

Boomers need to plan now to protect and grow their retirement plans in order to avoid poverty. Boomers also need to explore money-smart ways to lock down the maximum Social Security incomes.

Illinois’ official $97 billion underfunded pension liability is set to approach $200 billion, according to Moody’s. Moody’s calculated the underfunded liabilities for Illinois' pensions, the largest state-run pension plans, at $133 billion, compared to the state’s official calculation of $81.3 billion. The big difference is relative to the state’s assumption of an 8 percent yearly average investment return on pension fund investments. Moody’s took a more conservative approach, with a 5.67 percent assumed rate of return on pension invested assets.

The state's public employee pension funds have $91.5 billion in assets and $378.6 billion in liabilities, according to the report, "Promises Made, Promises Broken — The Betrayal of Pensioners and Taxpayers". The report further reveals state pension funds' combined underfunding tops $4 trillion, with Illinois holding the largest pension deficit.

States facing a particularly large unfunded liability at a per capita level and as a percentage of their annual gross state product include Illinois, Ohio, New Jersey, Oregon, Connecticut, Nevada, New Mexico, Hawaii and Alaska. Unfunded public pension liabilities present a unique threat to state government finances. While many have tried to turn a blind eye to the pension crisis, the problem is simply too big to ignore.

State employee pension plans are underfunded by $4 trillion and federal employee pension plans are underfunded by $741.4 billion. And now, the government wants to take control of 401(k) plans. How would that play out in the long run? Recognize that Social Security is the largest holder of the national debt, at $2.7 trillion — more than China and Japan combined.

In a documentary by The University of Pennsylvania’s Wharton Financial Institutions Center, reference is made to five converging inancial forces that are about to engulf us from all sides, and there is not anything we can do to stop them. We must take steps to provide for ourselves.
The boomer alert

Financial universities and economists around the globe have concluded and documented that income annuities can assure retirees of an income stream for life at a cost as much as 40 percent less than a traditional stock, bond and cash mix. All things considered, you can be assured of income for life and continued growth on your retirement plan with the right annuities.

Boomers’ greatest fear

For decades, the greatest fear was running out of money during retirement. Now, many are going broke before retirement. Many are forced into early retirement before becoming eligible for Social Security, and they are spending down IRAs, 401(k)s and other retirement plans.

Bill Clinton once said, “Social Security is not enough to sustain the standard of living of almost any American retiring today, so you will also have to make provision for your retirement.”

The retirement red zone is not the place to gamble with your retirement, even for those who enjoy the thrill of bungee jumping on Wall Street. Now is the time to convert a retreat into an advance with safe ways to protect and grow your retirement income for life. That’s not only peace of mind, that’s sleep insurance.
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