How They Try to Scare Retirees

      I'm not saying that those of us who are retired, or near retirement, shouldn't be financially prudent, live sensible lives, and exercise and eat our vegetables. But sometimes we have to stand back, get some perspective, and ignore all the anxious advice we get about retirement, often from people trying to push a political agenda or sell us a financial product.

     Here are some of the ways, it seems to me, that people in the media (and some bloggers too) try to scare retirees.

     They shout fire in a crowded theater about Social Security. It's a big Ponzi scheme! It's running out of money! Baby Boomers will topple the system!

     Well, the facts are that Social Security has the resources to pay full benefits until the year 2033. That gives politicians 20 years to make adjustments. Some relatively simple changes, such as extending the retirement age or lifting the cap on the payroll tax, could easily solve the problem. And even in the event that nothing changes, Social Security will still be able to pay 75% of its obligations. Now, nobody wants to take a 25% pay cut. But it's not the same as going broke.

     Also, consider that when our parents took their first Social Security check, circa 1980, the average monthly benefit for a retired worker was $321. Accounting for inflation, that $321 would be worth about $900 in today's dollars. But the Social Security Administration says the average benefit for today's retired worker is $1,272. That's a lot better than what our parents got. Even if we had to take a 25% pay cut – not something I'm recommending – we'd be better off than our parents.

     Also, everyone shakes a finger at the hapless American middle class, telling us we're not saving enough to retire. Fidelity Investments just released a study headlined: "More than half of Americans are at risk of not covering essential expenses in retirement." A report from the National Center for Retirement Research at Boston College says 50% of households will not be able to maintain their standard of living in retirement.

     The Employee Benefit Research Institute, a Washington-based think tank, puts a finer point on it, saying just 56% of Baby Boomers and Generation Xers are saving enough for retirement.

     But let's stop for a moment and look at that figure. It means 44% are not saving enough. But does that mean 44% of Americans are destined for a life of poverty in their old age? No. Many of the 44-percenters have built up some nest egg – maybe not enough for a comfortable retirement, but enough (along with Social Security) to keep them out of poverty and stave off starvation, especially if they're willing to move to an area with a lower cost of living, or share some expenses with family or friends. Furthermore, it's younger Gen Xers who are more likely to be behind on their savings. And those Gen Xers – people in the 40s – have time to catch up.

     A current report from a group of three financial associations says average pre-retirees, age 60 - 64, have $360,000 in their retirement accounts -- which doesn't include assets people have outside their retirement accounts. Now, I'm not saying there aren't some people in need, for clearly there are. But most of us are doing okay, and even if we're not, we should just start being more assiduous about our finances -- we shouldn't have a heart attack about it.

     And speaking of heart problems, as if we're not already scared enough, everyone tells us that our medical bills will bankrupt us in retirement. Fidelity published a report saying the average 65-year-old couple will spend about $230,000 on health care. But remember ... that's an average, including all the plastic surgery and Botox injections for the 1-percenters.

     It's true that Medicare does not pay for all our medical expenses. That's why it's important to purchase a supplemental insurance plan – at a fraction of the cost of regular health insurance. It's also true that if we become incapacitated and are forced into a nursing home, the expense can be astronomical. That's why we all should consider long-term care insurance, especially if we have assets to protect.

     Then we hear from some Cassandras that there's a war on seniors. Ben Bernanke has allegedly declared war on seniors by keeping interest rates low. President Obama has supposedly declared war on seniors by raiding Medicare to pay for his health plan. And the Republicans want to balance the federal budget on the backs of the elderly – privatizing Medicare and getting rid of Social Security entirely.

     But remember 2005? A re-elected President Bush went on a tear with his idea to replace a part of Social Security with individual retirement accounts. He got nowhere fast. Of course, seniors should be watchful of politicians trying to target retirees for major cuts in benefits. But the idea that there is an organized war on seniors is the product of politics and paranoia.

     Finally, everyone tells us: Don't kid yourself, you will not spend less in retirement. You need 80% of your pre-retirement income, or even 100% of your pre-retirment income, to live a comfortable life. Well, from my experience, I can confirm that's true . . . if you have a Bucket List that includes extensive European vacations and shopping excursions to Rodeo Drive. But most of us will have lower expenses, and we also have a lot of control over our expenses.

     Remember, as retirees with lower earned income, and some investment income, we pay lower taxes. We also pay no Social Security tax. Our housing costs should go down – maybe the mortgage is paid off, and the local government likely offers a senior discount on real-estate taxes. And then we can exercise some control -- we can downsize to live in a smaller, less expensive place with lower real-estate taxes and lower utility bills. We don't have to support our kids. And we no longer have to set aside 5% to 10% of our income to save for retirement!

     Again, I'm not saying we should ignore reality. We should plan out our retirement and live within our means. But after that . . . hey, don't worry, be happy!