Tuesday, January 30, 2007

Are We Saving Too Much For Retirement

Are we saving too much for retirement? Well a group of economists think so. I am skeptical. They focused there study on the generation before the baby boom (the generation born between 1931 and 1941). This group of retires will not face the same risks that the baby boom will. The baby boom is a tidal wave that will swamp this countries social services. They may not receive full social security benefits. The cost of medical care is a big unknown. Medical costs are escalating at more than twice the rate of inflation. Who will pay?

The study also assumed that retires will sell their homes before retirement. Most seniors I know want to stay in their homes. The reality is that people will adjust their spending down to meet their economic realities. Most people don't lower their lifestyle because they want to. The study also assumes most people spend less during retirement. This is only true if the mortgage is paid off. Many baby boomers will not have their mortgages paid off at retirement. I find this study flawed but interesting.

Here is the link to the article in the New York Times.

http://www.nytimes.com/2007/01/27/business/27money.html?em&ex=1170306000&en=17eca0f82d2e08d8&ei=5087%0A

Libby Mihalka
The Financial Pragmatist

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