If you are a baby boomer you are probably either at the beginning of retirement or it is looming very close. For parents of baby boomers, the years after 65 were dubbed the golden years because many still had healthy years ahead of them and they were fortunate enough to have worked during a period of genuine prosperity. And, fortunately for them, interest rates were relatively high. You could get 5% or more on passbook savings which enabled your saved funds to be stretched even more. This generation enjoyed social security, the first to really be able to take advantage of it as they lived much longer than their parents did.
Fast forward to the world that the baby boomers now face. Interest rates are near 1% or lower due to the Fed artificially keeping rates down. Why? Because the Federal Government has a boat load of debt and to keep their payments as low as possible, they need a very low interest rate environment. Wouldn’t it be nice if you and I could manipulate interest rates on our credit cards or mortgages so that our payments were more comfortable? You bet it would. Unfortunately, this low interest rate environment is turning some people’s golden years into rusty and tarnished years. Imagine saving all your life so that you could live comfortably on the interest on your funds only to find out that there isn’t much interest at all after paying taxes. Every year you dip into your principle to make your living expenses and as you do so, you earn less and less on your money.
If you were prescient enough to have started an IRA during the Reagan years when they were first authorized, you are probably sitting on a nice cache of cash right now…that is if you didn’t touch your IRA during the 90s and 2000s when Congress allowed people to take money out before age 59 1/2, albeit with penalties, for permitted uses. As you face retirement, are you wondering if you have saved enough? Especially with the low interest rate environment?
Have a look at the video below so you can gauge where you are and avoid the pitfalls.