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Golden Years? Maybe Not


Megan McArdle, business columnist, The Daily Beast
David Certner, Legislative Policy Director, AARP

BY IAN MYLCHREEST -- The whole country needs to save more money for retirement. That’s the only solution for what is looming as a retirement crisis, says business columnist Megan McArdle. Calling the problem “the not so golden years,” the Newsweek correspondent writes that “American retirement is in freefall.”

“We didn’t save enough, no one saved enough,” said McArdle in a recent interview on KNPR. And not even the old-style pensions can help. “Many of them are in deep trouble if they haven’t been closed down entirely.” It is simply easier to dispense with corporate pensions than run the risk of it not being funded properly – companies got used to easy gains in the stock market in the late 1990s, but were not prepared to fully fund pension plans when the market fell back.

The problem has been compounded by better health and longer lives. Longer retirements require more money to sustain the same lifestyle.

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The recession also contributed to the financial problems facing retirees. The Federal Reserve is pushing interest rates very low and so that means a significant drop in income for retirees who typically keep a large portion of their savings in bonds that pay interest.

More directly, the recession also cut the value of many assets held by retirees, including their homes. The stock market has hit a record in recent days, but home prices are only just starting to rise after a very big drop.

Many people say it’s impossible to live on less, notes McArdle, but we’ve just become used to two cars and larger houses than our grandparents. It’s possible to save if we spend less.

Thursday, May 9, 2013