Why even $1M may not be enough for retirement

"Thirty years ago, $1 million was a huge amount of money," says Haitham "Hutch" Ashoo, CEO of Pillar Wealth Management, in Walnut Creek, Calif. "Today, given today's lifestyles and costs, it isn't so much money." 

Why not? "It translates into $40,000 to $50,000 (annually) in sustainable revenue," says Joe Heider, regional managing principal for Rehmann Financial Group in Westlake, Ohio. "That is not that much money on an annual basis." 

Heider says that 10 to 12 years ago, when people earned a lot more on their investments, $1 million could generate $70,000 to $80,000 a year in retirement income. But with interest rates as low as they are, that's not really feasible.

DYI Comments:  The Fed's sub atomic low interest are having a negative effect upon savers and investors alike.  In the example above those with a cool million are not as well off as they may have thought. Those with significantly less the Fed's ultra low interest rates are reducing the retirees principal at an alarming rate.  Many have felt compelled in their zeal for higher yield to move a significant percentage of the dollars they have left into stocks and in many cases junk bonds.  The majority of these people will not be able to absorb a 40% to 50% decline in principal.

The sub atomic low rates are not just effecting retirees but our non-banking financial companies as well.  Plus the ultra low rates have been exported along with the European Central bank low rate environment is now causing more problems than they have fixed.

German financial watchdog: Low interest rates could trouble bigger insurers

(Reuters) - Some bigger German life insurance companies could find themselves struggling if low interest rates persist, according to comments made by the country's top insurance regulator in an interview with a newspaper. 

Rock bottom capital market interest rates in Europe have slashed the income insurers can earn from their investments in bonds and other safe securities, making it increasingly difficult to fulfil obligations to policy holders.

DYI Continues:  For most of the Baby Boom generation it will continue to work for as long as possible full time then moving into part time as they become very aged.  Only the few will have the choice of work most will not.

Best retirement advice for many: Never retire

Sara Rix, senior strategic policy adviser with the economics team of the AARP Public Policy Institute, says the number of people who continue to work in their retirement years is growing, and that's good for them physically, mentally and financially. And it's good for the economy. She says the percentage of people in the 65- to 69-year-old age group who are still in the workforce has increased from 18.4% in 1985 to 32.2% last year. The number of people 70 to 75 in the workforce is also increasing. 

"People are pushing back the date of retirement, for a lot of reasons, including financial," she says. "People are living longer. While not everybody living longer is living healthy longer, many are. They want to remain active, and still feel young. They have contributions to make."

DYI