A colleague of mine once said that each generation creates its own definition of security.

What my colleague didn’t say was that every generation creates its own definition of retirement security, and these days that definition is increasingly fluid.

For the “Greatest Generation”, with ever dwindling numbers still alive, retirement security was a steady job, a gold watch at the company’s annual retirement dinner, and monthly checks from a traditional defined benefit pension plan and from Social Security, along with whatever savings had been accumulated – the traditional “three-legged stool” of retirement security. I often described my mother as being able to “open” three envelopes each month from: (1) social security; (2) an immediate annuity she got in exchange for a deferred annuity; and (3) interest on her CD’s to meet her everyday living expenses.

For the Baby Boomers, employers began substituting 401(k) plans for defined benefit pension plans, adding another dimension to the retirement income mix. However, long term tenure at “the company” was gradually displaced by a new reality, as many opted for careers (voluntarily or not) that included more than one employer, at best freezing any vested pension benefits at relatively low levels of income, and requiring they roll any 401(k) savings into an IRA. The three-legged stool began to get shaky as inflation devalued those frozen benefits, market gyrations took their toll on 401(k), Rollover IRA and personal investments, and average longevity increased in parallel with skyrocketing health care costs.

Now, as Boomers reach the traditional retirement age of 65, studies of “retirement income adequacy” and “retirement income replacement rates” are changing the definition of retirement security. Expectations are lower, and include deferring retirement by continuing to work, full or part time — at a time when unemployment rates are very high.

So, faced with investment risk, inflation, recessions, increasing longevity, increasing health care costs, etc. what should YOUR definition of retirement security be?

Each of us must personally take control of our retirement security by making the sum of our personal retirement assets, Rollover IRA and non-qualified assets the cornerstone on which to build our future retirement income. Of course you should maximize the contributions to your 401(k) account, but for most of us it’s going to be the 75% of our financial assets that are outside of our employer plans (that’s the average for so-called middle market investors) that will create our retirement security.

Managing those personal assets means diversifying investments and paying the lowest reasonable fees well-before retirement, to gain the biggest benefits possible from compound growth. And when you retire, it’s about choosing the right income vehicles, (annuities are hard to beat) that will deliver the security we all seek. If you’re uncomfortable doing this on your own, seek out fee-based advisors whose skills are broad enough to manage both investments and annuities.

And whether you’re 30 or 70, the time to start taking control of your retirement security is – you guessed it — right now!

Jerry Golden
Golden Retirement, LLC