Category: MoneyCrashers

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7 Factors That May Affect Your Retirement

man on computer work3In 2010, a Pew Research report indicated that three out of every four members of the workforce expect to keep working for pay after they retire. 60% of them believe this will be by choice, not necessity – but pre-retirees may be more optimistic than justified in their expectations. According to the Center of Retirement Research, less than half of all households are financially prepared for retirement at 65; a quarter will need to work at least one to three more years; and almost one in ten will need to work past age 72 or longer.
 
Whether by need or choice, it’s clear that plenty of folks are likely to continue working in one capacity or another after they officially retire. The decision of whether or not to do so is dependent upon a range of factors.

Factors Affecting Retirement Security

Financial security for American citizens usually results from a combination of government programs, personal assets, and employer benefits. However, each of these factors is undergoing historical transformations right now. Unfortunately, these transformations may mean Americans have to move the goalposts back a bit when it comes to their retirement goals.

1. Investment Volatility

Conventional wisdom suggests that the average annualized return for common stocks over a period of 10 years or more is positive, somewhere between 7% and 9%. However, statistics have a way of disguising inconvenient truths: According to AllFinancialMatters.com, there is actually substantial volatility in the numbers – mainly related to start and end dates.
 
Suppose three brothers work for the same company and each invests $50,000 in its 401k plan over a period of 30 years. Joe, the oldest brother, begins investing in 1966 and – assuming the results mimic the S&P 500 return – retires in 1996 with $1,871,111 in his account. Bill, the middle brother, who began investing in 1976, retires in 2006 with $1,520,397 in his account. And Mike, the youngest brother, begins in 1983 and retires in 2013 with $1,050,416. These figures do not include the effects of inflation or the deduction of fees.
 
Older workers – those most likely to retire in the coming decade – found the impact of the last stock market decline to be especially harmful. Two-thirds of those between the ages of 45 and 60 reported at least a 20% decline, according to one survey. As Gad Levanon, director of macroeconomic research at the Conference Board, observed, “The older you are, it makes it more difficult to make up for [loss of value] and more people are delaying retirement as a result.”

2. Low Interest Rates

Many retirement professionals previously advised that an annual 4% withdrawal rate would result in sufficient funds to last through 30 years of post-work life. In other words, a fund of $1 million could provide $40,000 per year.
 
However, due to lower yields on fixed income investments, many retirement planners now recommend a withdrawal rate between 2.7% and 3.0% in order to achieve a 90% probability of not outliving your assets. Lowering the distribution rate means that income must now be replaced from other sources, and your standard of living must be lowered.
 
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Do You Have Something to Say?

writing a bookFrom the Neanderthals who left hand prints on the cavern walls of El Castillo, Spain more than 37,000 years ago, to the G.I.’s crude drawings of a long-nosed fellow peering over a fence announcing, “Kilroy was here,” humans have sought immortality through art. The same impulse that drives the graffiti tagger in Los Angeles drives the white-haired Hamptons matron to pen a letter to the local newspaper about animal leash laws: a desire to be seen, heard, and remembered.
 
The digital revolution gives us an opportunity to communicate and disseminate ideas, concepts, and opinions without intermediation. Today, every wannabe Stephen King, Tom Brokaw, or Larry McMurtry can write and publish as they please. Grandfathers and grandmothers can pass down family stories to younger generations. The entire world has an opportunity to become both more knowledgeable and more expressive than ever before.

Technology and Self-Publishing

The first electronic book – Peter James’ thriller “Host” – appeared on two floppy disks in 1993 and sold 12,000 copies. Five years later, the first e-readers appeared with mediocre market success. Amazon, the world’s largest book retailer, introduced the Kindle reader to America in 2007, forever changing the dynamics of book publishing. Today, electronic books can be viewed on a variety of readers, mobile phones, tablets, and computers.
 
In the first quarter of 2012, net sales of ebooks exceeded hardcover sales across the industry for the first time. While paperback books remain the industry’s most popular format, their dominance is likely short-lived – according to Mashable, Amazon’s ebook sales surpassed paperbacks in the fourth quarter of 2011. The reason for the ebook’s dominance is clear: Production costs are lower and profits are higher (despite the fact that ebooks typically sell for less than half of what hardcovers sell for).
 
With the full support of Amazon, authors have rebelled against traditional publishing houses, seeking a higher percentage of royalties or threatening to publish on their own – Bowker Identifier Services claims that self-published book titles grew 60% from 2011 to 2012 alone. Writers who never thought they would be able to publish are taking advantage of the new technology.
 
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Is America the New Rome?

roman colosiumThe example of the first great republic in recorded history (509 B.C. to 29 B.C.) was omnipresent in the minds of America’s founders as they created a new republic centuries later. As a consequence of their deliberations and, perhaps, the “protection of divine providence” as written in the Declaration of Independence, the United States of America, in the mind of many of the founders, was intended to be the modern equivalent of the Roman Republic. The Roman Republic ended with the infamous assassination of Julius Caesar in 27 B.C..
 
After a protracted civil war, Octavian became the first “Imperator Caesar,” or Roman emperor. The subsequent period – post-republic – of Roman dominance is known in history as the “Roman Empire.” While Rome enjoyed an additional 500 years of world dominance and internal conflict under the Caesars, history reports its disintegration in the fifth century A.D. (476 A.D.) following the successful invasion of the barbarian Germanic tribes.

Common Influences on the Founding of Each Society

While the facts of the founding of the Italian city Rome are shrouded in myth, the Roman Republic was established in 509 B.C. by the overthrow of the last Roman king (Lucius Tarquinius Superbus) and expulsion of the Etruscan theocratic government by the Latins, one of the three Italic tribes in central and southern Italy. Similarly, the “Republic for the United States of America” was birthed in a bloody revolution against the British King George more than 2,000 years later.
 
According to historian Carl J. Richard in “Greeks & Romans Bearing Gifts: How the Ancients Inspired the Founding Fathers,” the earlier Roman Republic heavily influenced the founders of America who shared many common fears and hopes of the earlier architects of that Republic. These included the following:
 

Fear of Centralized Authority

Having learned the lessons of despots and emperors, both societies attempted to establish checks and balances to avoid abuse of unchecked government power. The Romans replaced their king who served for life with a system of two consuls elected by citizens for an annual term. America’s founders created the executive, legislative, and judicial branches to diffuse potential power and abuse.
 

Open Societies

Rome welcomed other people – particularly its vanquished enemies – into Roman citizenship, even accepting the gods of the newcomers. Likewise, America has long been recognized as a “melting pot.”
 

Selfless Leadership

Rooted in agrarian societies, commitment to family and mutual citizen interdependence were basic in each society. Cincinnatus, a Roman farmer, saved the republic from invading Aequi tribes in 458 B.C. and again in 439 B.C. when a conspiracy threatened the government. In both cases, he was named dictator, but shortly thereafter resigned his commission to return to farming. George Washington, a Virginia farmer who led the fight against the British, resigned after his second term as president to return to his Virginia estate. Both men are examples of leaders who put the needs of their country before their personal interests.
 
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What Is Global Warming and Climate Change – Facts & Effects

climate-changeClimate change – specifically global warming – is one of the more controversial issues mankind is facing. Consensus about climate change’s definition, effects, and causes, especially the role that humans play in the acceleration of climate change, is virtually impossible to reach. The controversy is particularly clear in the energy industry, where many assert that there is no scientific agreement about the causes of global warming or its potential problems.

Differing Opinions on the Effects of Climate Change

James Taylor, senior fellow for environment policy at the Heartland Institute, claimed in a 2013 Forbes Magazine article that the majority of scientists “believe that nature is the primary cause of recent global warming and/or that future global warming will not be a very serious problem.” His conclusion was based on what Taylor stated was a “peer-reviewed survey” appearing in Organization Studies.
 
Further fact-checking reveals that the scientists surveyed for the Organization Studies paper were not considered experts in climatology. And despite the claim of Mr. Taylor, the study wasn’t designed to to gauge scientific belief in global warming. In fact, the study group consisted of 1,077 professional petroleum engineers and geoscientists in Alberta, Canada, and its purpose was to understand the bias and rationale of those who consistently deny a link between global warming and human activity. As such, the scientists were specifically chosen because they worked for the oil industry.
 
The difficulty of sourcing impartial and accurate information about global warming and its possible causes in the midst of aggressive campaigning by both sides (environmentalists and energy advocates), dilutes the importance of the issue and confuses the average citizen. And interestingly, concern about global warming and its existence is split along partisan political lines according to a Pew Research Poll released January 27, 2014. It found that:
 
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