Setbacks can derail retirement savings
By Helen Huntley
ST. PETERSBURG TIMES
May 21, 2006
Here's another reason to start saving for retirement as soon as you start working: If you wait until the last minute, life might torpedo your plans.
For many people, the 50s and early 60s are peak years for accumulating retirement savings. In an ideal world, end-of-career salaries are high and expenses decline as children leave home. But in the real world, things often go wrong.
That's what Boston College researchers found when they analyzed the lives of a group of adults who were 51 to 62 in 1992 and who were interviewed regularly over the next 10 years as part of a national study. The vast majority – 69 percent – experienced some type of major negative shock in that decade. When shocks to spouses were included, only 18 percent sailed through unscathed.
“Life's uncertainties can upend the best-laid retirement plans,” Richard Johnson, Gordon Mermin and Cori Uccello wrote in “How Secure Are Retirement Nest Eggs” (available at www.bc.edu/centers/crr).The most common shock was a new diagnosis of a major medical condition, with heart problems the most frequently mentioned. One-third said their health limited their ability to work. Workers with less education were most likely to have health problems. But job loss was just as common for college graduates as it was for high school dropouts. For married people, divorce was the most financially devastating event. For singles, it was becoming disabled and unable to work. Other serious financial shocks included widowhood and entering a nursing home.
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