Will pension plans not work anymore?
Change is the only constant.
If you strongly believe in it, you’d probably agree with the fact that the retirement concept does not, or rather, will not work anymore. It’s not supposed to!
Given the fact that the retirement age or concept was introduced to society long back, it naturally, needs to fade out with time. So, what’s new to keep in mind when going for retirement planning…
Firstly, how does the pension system work?
Going deep down, we need to figure out how at all did the pension system work. In fact, how is the pension system of a state or nation strategized?
It’s primarily based upon the average life expectancy of the people of the nation. And in this, lies the answer to why retirement plans won’t work out well any longer!
The higher the life expectancy, the lesser would be the success rate of pension plans.
Can you figure out why?
When the former upswings, the burden of the non-working (or, more technically, the non-productive) population on the working population heightens too! When the average life expectancy is low, this burden is bottom-rung as well.
[Read Also: Why would you choose a 401(k) plan?]
Differences in ‘life expectancy’ between now & then
A little research lets you find out that the average life expectancy back then was way much lesser than what it is today. It was somewhere near 60, which means a majority of the population never reached the retirement age!
With the growing years and incessant advancement in medical science and health services, life expectancy is growing!
You’ll often hear the happier men and women say, “age is just a number” or “life begins at 50”! From the socio-economic perspective, that reaches out to say that people are living far beyond 60.
Today, the average life expectancy in the U.S, as of 2022, is 79.05 years. The figure showed a 0.08% increase from the numbers in 2021 which was 78.99 years. This rate of increase has been remaining more or less the same over the past few years.
All of this clearly indicates that the life expectancy figures would remain on the rising part of the curve, at least for the next few decades, if not more.
And consequently, it would become harder and harder for pension plans to work!
Retirement planning, taxes, pension: all these can get complicated. Make sure you get in touch with a professional financial advisor who can make this process seamless.
In California, you can, however, consult Samuel Rad, Los Angeles financial planner, for an effective retirement planning strategy that helps you meet your financial goals.