The way people prepared for their retirement has changed dramatically over the last few decades. It used to be that most people planned and saved for their retirement the same way and those plans were fairly predictable. However, nothing could be further from today's reality where planning and saving for retirement is a much, much different scenario.
Decades ago most retirement plans consisted of a combination of Social Security and a company pension plan. Retirement preparation and planning has changed over the years because the way people work and live has changed as have our social behaviors. For example, most women work outside the home versus staying home and raising a family. And most companies have done away with private pension plans and other company benefits that used to be standard such as health insurance, etc. That means planning and saving for retirement has been forced to change as well, but why?
People Are Living Longer
While life expectancy in the U.S has been fluctuating over the last few years, the current life expectancy for a man is 84.3 and for a woman, it's 86.6. This is a far cry from the past, which means people will need to save more money to retire on because they will be living longer.
Pension Plans Are Almost Non-Existent
It used to be that people would stay at their jobs for a lifetime and their employers would provide them with a pension plan. Therefore, between Social Security and a company pension, they would have enough money to live comfortably. However, most employers no longer provide pension plans. And, unfortunately, the average Social Security check today is only about $1,348, which isn't enough money for most people to live on. That means today's retiree has to find other ways to supplement their income.
Most People Have More Debt Than Their Parents Did at Retirement
Between rising housing costs, insurance, and food as well as the fact that it's much easier to borrow and carry a line of credit than it was decades ago, most people are retiring with much more debt than previous generations. For example, people used to buy a house with a 30-year mortgage, which was typically paid off by the time they reached retirement. However, this is no longer the case for most people so they are retiring and having to include a mortgage payment as part of their monthly expenses, which takes a huge chunk out of their monthly income. Divorce rates are much higher now than they once were. Therefore, there are more people retiring alone. This impacts monthly expenses as those expenses aren't split between a husband and wife.
The Bottom Line
Planning and saving for retirement in the 21st century is much different than it was decades ago. That means retirees have to be more proactive and vigilant when trying to find different ways to supplement their income so they have enough money to live on throughout their golden years.