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With the dust finally settling around the nation's economic crisis, baby boomers are taking stock to see if their retirement plans need revising.
There are many ways to adjust to today's economic uncertainty: from working longer to changing investment strategies or living situations.
The shocking news for many is that some of their safety nets may no longer be viable.
Declining real estate values mean many can't turn to homes for money. Tumult in financial markets resulted in declines in 401k plans. And some experts say Social Security may not be there when needed most by the baby boom generation.
For the second consecutive year, Social Security benefits didn't rise, something which hasn't happened in over 75 years. What's worse is, beginning in 2016, payroll tax revenue will be insufficient to pay full Social Security benefits, according to Allen W. Smith, a retired economics professor and author of the new book, "The Looting of Social Security."
"A pledge in the 1980s to only spend Social Security funds on benefits was broken by every presidential administration since. Money earmarked for seniors was diverted into the government's general fund and used for whatever politicians chose to spend it on," says Smith, whose high school textbook on economics was used by 600 schools nationwide.
"Approximately $2.6 trillion of Social Security revenue that was supposed to be saved and invested for paying benefits to baby boomers, was instead spent for other things and replaced with non-marketable government IOUs," he stresses. According to Smith, these IOUs represent only a claim against future government revenue. They have no monetary value, until and unless the government raises the money through future tax increases or borrowing to repay the missing money.
Against this backdrop, many are altering retirement plans:
n Keep Working: Some seniors are now planning to stay on the job longer. Many who are physically able to work longer are postponing retirement until the future becomes clearer, because they know that once they retire, they may be unable to re-enter the workforce given today's high unemployment.
n New Priorities: Many are shifting investment plans to ensure the money they need within five years of retirement is safe in low-risk investments, like fixed-income funds. This can help them endure short-term market drops while the money they need later grows in more aggressive investments.
n Belt Tightening: Many who are approaching retirement age are cutting back on spending and putting more into savings, in case their Social Security benefits get cut. Practicing austerity, and wisely investing the money that is saved, is one of the most viable options for seniors.
With Social Security benefits accounting for nearly 40-percent of average income for retirees over 65, Smith is advising seniors to exercise caution in their financial decisions. Purchases that can be delayed probably should be delayed, and for those still in good health, working a little longer than planned could make a big difference in quality of life when they do retire. For more on the Social Security crisis, read "The Looting of Social Security."