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Dream on; Act today

A report by Ernst & Young, reveals that the middle class is much more vulnerable in retirement than what was previously thought

A report by Ernst & Young, released last month, commissioned by Americans for Secure Retirement, is shedding light on what most of us suspected but perhaps had been trying to ignore: the middle class is much more vulnerable in retirement than what was previously thought. What a surprise.

As headlines have been reporting, pensions and social security alone are no longer a guarantee. Investment portfolios have taken severe blows …have you checked yours lately?

While the Fed has been artificially keeping interest rates down in the hopes consumers go out and buy, and stimulate the economy, it seems the days of buy now – and a lot – pay later, are dwindling. If you are among those not spending, where’s your money going? Your mattress? Think again.

Remember what happened to an Israeli woman whose daughter wanted to surprise her with a new bed. The daughter tossed out the old lumpy mattress not knowing her mother had stashed her life savings in it: close to $1 million.

Yes, we know we must act now if we want to extend our American Dream into retirement. But what happens when you have to choose between an immediate need and a dream? The dream is deferred, hands down. This is exactly what some in D.C. are trying to tackle. The House and the Senate are considering bills that would create greater accessibility to non-qualified lifetime annuities by creating a tax incentive to convert a portion of a person’s savings or assets into a “paycheck” for life.

Here’s why you should care: According to “Hispanics and Retirement: Challenges and Opportunities,” The Hispanic Institute & Americans for a Secure Retirement, just 25.6 percent of Hispanics nationwide are covered by pensions plans, compared to 42.5 percent of whites and 40 percent of African Americans.

Nationally, the mean annual income for non-Hispanic white retirees is $24,351, compared to $16,947 for Hispanics. In Arizona, according to the Census’ 2007 American Community Survey, the mean retirement income is $22,456 for the total population and $15,256 for Hispanics.

At greater risk of outliving their assets are small business owners, for whom the sale of their business is their de facto retirement strategy; women, rural and farming communities, and Hispanics.

You get the picture. Jonathan Higuera’s feature article provides a good overlook of retirement planning basics, including a worksheet for you to peruse your dreamed retirement against the realities of your investment portfolio. In Health, Julie Amparano outlines different types of health-related insurance plans available to protect your income, assets and financial stability.

If you are pushing your chips forward betting that somehow things work themselves out; if you have been stingy with your retirement savings because you’re too busy with the here and now; or because you need disposable income to act as your family’s official bank and loan officer, stop and think: if you go broke, who’ll take care of them and you in your retirement?

Many Americans will be forced to reduce their standard of living, some by as much as 51 percent, to avoid outliving their financial assets. How well will you fare?

Dream on; act today.