Residual Income Generation - A New Paradigm in Retirement Planning
By Anonymous
It seems that every day we hear about a new breakthrough in medicine or a new technology that can help diagnose medical conditions much earlier than has been the norm in past decades. And while some people celebrate these breakthroughs that will inevitably help them live longer, for others it seems like a never ending financial heartache.
The problem here is while some people are fortunate enough to be financially secure in retirement (no matter how long it may be) others are struggling from financial hardship right from day one. Whether this is due to education, financial planning or just plain luck is not really relevant, but what is, is the fact that the longer you are retired the tighter the squeeze becomes.
This effect is becoming more and more pronounced and we are seeing an ever increasing aging population regardless of which part of the world you are living in, and Governments are becoming increasingly concerned as the balance of population grownin the retired sector and outweighs the working population.
Ok, lets take the gloves off for a couple of minutes and look at this from a purely business perspective and without any emotional hang-ups. No matter what country you live in, your Government needs to balance its books, not for the nice politics of life, but for the day to day running of the country and its ongoing cost base (orads, infrastructure etc.).
With the balance of population changing, the income a country earns in direct
taxation start to suffer as the population ages.
i.e. population=100 retired=30 versus population=100 retired=50...that's a decrease
of 20% in taxable income to put things simply.
Equally, if you live in the UK for example, or a country that provides state healcare, you suddenly find yourself in a position where the aging population is becoming a bigger financial drain on the welfare state,l and governmental costs escalate due to the increased and extended cost of healthcare.
So the long and short of it is, that Governments of the day will need to try and find some extra money from somewhere to make up for the deficit, by either cutting costs or increasing income for example...enter indirect taxation! As with all baby boomers, we have the benefit of older age (I prefer to call it hindsight and wisdom) and if we look back on our lives, we can see the effects of indirect taxation and how it creeps into our lives mostly under radar, but the net effect is our cost of living increases no matter how thrifty we become.
So what's the point of all this? In my opinion it is time for us to wake up and smell the roses. We need to have that big wake up call that helps us realize that living a comfortable retirement on the earnings of a small lump sum is no longer sound financial planning.
For the majority of the retiring community, our extended life expectancy, the effects of inflation and the effects of ever increasing indirect taxation is going to eat away at our nest eggs, leaving us financially short in our later years, so a newer paradigm in retirement planning will emerge.
Savings for retirement RIP - enter the age of residual/passive income generation. We will be looking at some ideas for residual income generation in later articles, so be sure to come back again.
More on Retirement for Baby Boomers
How To Fix Retirement Problems Wholesale
Retire Early Or Retire Late: Which Is Best?
Baby Boomers and Social Security
Baby Boomer Retirements and the Insolvency of the United States Government.