The Rules of Retirement Have Changed: What You Need to Know NOW

My father was my hero and one of the smartest guys I knew. When I was young he offered plenty of advice on life, and I remember his retirement guidance well:

• Don’t rent. Buy a house, and it will be worth 10 times more when you sell it. • Buy blue chip stock. You will retire rich. • When you retire, put the money you’ve saved into something safe like a CD paying 5% and live off the interest. • Work for a good company 30 to 40 years, and you will retire with a solid pension. • Social security will be there for you after your career to help pay for half of your retirement.

You get the picture.

Nowadays, these rules are dead. Today we are lucky to have any equity in a house. And pension? What pension? I know one person who will get a pension, and he is a police officer. Most of my friends work for private companies, and none of them for more than 10 years. How about social security? They are now saying it won’t be around when I retire. The latest information shows that it may run out by 2033.

If you are lucky enough to make it to retirement and have a few bucks, going to the bank and getting a CD to live on the interest is out of the question. I recently researched the best 1-year CD in America—it’s paying 1.08%. Let me do the math for you. You’d retire with $1,000,000 and get to live off the interest of $10,800 per year. That’s not even $1,000 per month!

Because the rules of retirement have changed so drastically, one thing is for certain. You have to rely on yourself if you want to retire comfortably. The mammoth question is—what do you do? Ignoring it or procrastinating will not fix the problem for you and your family.

Ask yourself these simple questions. How much am I going to need when I retire? Calculate your basic living expenses and add some room for luxury needs. Will I want to travel? Will I have enough to do all the things that I want to do? From there, figure out what you can count on for income such as social security (hopefully it will be there), rents, etc. Will your savings, such as your IRA and 401k, generate enough income regardless if the account goes up or down to meet the difference between income and expenses? Not sure? Read on.

What we need today more than ever is a way to generate guaranteed income for the rest of our lives. We need a private pension. The insurance industry has taken notice and responded to help us. The latest and greatest annuity products are geared for today’s challenges. Take a look at what I’ve done:

I took my $400,000 IRA and rolled it over to a fixed index annuity with an income rider. Up to this point, the only reason my IRA ever went up was because I added money to it. Otherwise it remained flat for the last decade due to all the ups and downs. Now, I can pay .85% as a fee to have this income rider that will GUARANTEE my value grows at 6.5%. I’m 46 years old now. I calculated that when I’m age 66, my $400,000 will have increased to $1,555,403 and pay me income of $71,318 guaranteed for life to use after I retire.

That’s what I’m doing about this retirement problem. What are you doing about it?

About the Authors: Sam Liang and Rich Rubino are partners at Rubino and Liang, LLC in Newton, Mass. They host a weekly radio show on WRKO and WBZ, two of Boston’s largest radio stations. For more information, visit