If retiring in America seems more difficult that it should be, that’s because it has been getting tougher since 1984. Ideally, people work until some nominal retirement age, then relax into a modest lifestyle until they die. Many retirement plans are based on the idea of saving early, living frugally, and eventually reaching that goal. Unfortunately, those ideal plans tend to be based on what was normal in the 80s. Since then, nominal interest rates have been declining, inflation has continued, lifespans have increased, and health care costs have risen. The interest rate decline is reaching zero, which has already been surpassed in many European countries, making it difficult to have a valid investment strategy. Inflation has been moderate, but it is inexorable and now exceeds the interest rates. Lifespan increases should be celebrated, but they also increase the investment amounts required. Health care should be included in inflation, but older people are more sensitive to health care costs, and effectively witness a greater increase in living expenses. Each of the trends mean assumptions made decades ago are no longer valid. None seem to be reversing to a significant extent. It is becoming evident that the crisis has had less to do with personal action and more to do with external forces. An individual can still succeed, but that’s by ignoring old assumptions, recognizing personal abilities and needs, and redefining their retirement – but it will be harder, especially for those who started later or who had less to work with.
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