What are you saving for retirement? Now, Double it!

No, really.  We’re serious this time.

You have probably been told over and over to increase your retirement savings.  Increased lifespans and higher costs of living have contributed to increased projections for what you actually need for retirement.  More recently the retirement accounts of many Americans have taken a beating as a result of the current economic downturn.  But now looms a potentially even bigger issue.

First, when you take your money and place it in a retirement account, it generally does not remain there as cash.  Instead, it is invested in the market.  Briefly, the “market” consists of stocks and bonds which are bought and sold among willing buyers and willing sellers for what each party thinks is a fair price.  It does not necessarily bear a direct relationship to the health of the underlying companies.  Instead, it has its own supply and demand.  When something like the economic downturn happens and stock begins trading at lower prices across the board, it often means that investors are trying to sell their stock, but no one wants to buy it.  Sellers lower their expectations of what price to expect until some buyer decides to purchase the stock.  In economic recessions, the cause is fear and panic in the market.

So why am I giving you a brief lesson in the economics of a recession?  Am I predicting a market frenzy due to some new crisis like the housing crisis?  No.  But it serves as a useful model for something much more predictable and much more difficult to prevent: the population is getting older.  Basically, the older population is going to retire and they will want to sell the assets in their retirement accounts to get cash to live on.  In order to do so, they will have to sell to someone.  Relatively speaking, there will be fewer people to buy.  At least, that’s the conclusion touted in this recent Wall Street Journal interview.   It is, essentially, another way to get to a result similar to the current market: too many sellers, not enough buyers.

The interviewee essentially predicts that with slow rates of return and inflation adjustments, the net growth in baby boomer retirement accounts will approach 0% in the coming years.  As such, more aggressive saving will be needed to counteract the decreased rate of return you can expect within your retirement account.

Planning for retirement is one important facet of your long-term care and estate planning.  Additionally, speaking to an attorney to learn how you can “have your cake and eat it too” can help ensure that all the time you have spent saving for retirement isn’t wasted on large medical bills.  Proper planning for Medicare, Medi-Cal, and, if applicable, VA Aid & Attendance benefits can help preserve your eligibility for these programs while protecting your nest egg for personal expenses during your life and for your heirs.    Remember that your long-term planning should not happen entirely inside or entirely outside a lawyer’s office.  Coordinating your financial planning and retirement goals with your estate planning documents is the best way to ensure that your goals are met.

Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things…

FREE REPORT:  This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order.