Retirement Plans Under Siege
If you are in your 50s you may be familiar with the "sandwich generation" concept — a reference to the squeeze many folks this age find themselves in as they struggle to put their kids through college even as they assume greater financial responsibility for their long-lived, under-saved parents. Well, that's not the only fiscal squeeze in your life. You're also sandwiched smack between two painful economic periods: a lost decade in stocks and the worst recession in many years. Together, these downturns have made it nearly impossible to save for your fast-approaching retirement.
Let's look at the lost decade first. The Dow Jones industrial average, now mounting a run at 10,000, first saw that historic threshold way back in March 1999. Then, you were in your 40s, the market was on fire and retirement seemed pretty well on track. Typically, you would have had about $85,000 in your 401(k) — not exactly a king's ransom, but with decent returns and steady contributions enough to grow and provide a measure of safety in your life plan. The problem is that your nest egg did not grow, at least not enough to make a difference, for 10 long years — and counting.
So somewhat suddenly you are now far behind the retirement savings curve. Okay, you've still got your highest earning years ahead of you, even if there aren't that many of them left; and having put much of your kids' college tuition and other child-related expenses behind you and (if you're lucky) paid down the mortgage as well, you may be counting on socking away big money for a few years. It sounds great. But how's that working out?
If the Great Recession hasn't already claimed your job (or your spouse's) it has certainly put it in greater peril and very likely slashed your income or at least curbed your income growth. These are the years with which you were going to make up for lost time, and they are disappearing in a cloud of economic hardship. What will you do? Here's a game plan: