Your Father’s Retirement Plan vs. Your Retirement Plan - the 3 Major Differences
The generation of Americans that grew up during the deprivation of the Great Depression, and then went on to fight in World War II, have been described as “The Greatest Generation”, a term coined by journalist Tom Brokaw.
The greatest generation built America into a superpower and experienced the prosperity that came along with it. This was a time when the majority of people stayed at the same job most of their lives and received a lifetime pension when they retired at 62 or 65. That pension, along with social security and personal savings made the process of planning for retirement a relatively easy task.
Compare that retirement scenario to the retirement planning challenges facing this generation’s sons and daughters - the baby boomer generation, and the variance on many levels could not be starker. Planning your retirement is no longer an easy task.
The key difference between retirement planning for boomers and retirement planning for the greatest generation can be summed up in one word: PENSIONS.
Although some boomers still receive pensions when they retire, slowly but surely, they’re becoming a thing of the past. The vast majority of boomers entering retirement will not be receiving a pension. What’s taken the place of defined benefit pension plans are defined contribution plans, better known as 401k or 403b plans.
The second difference was that retiree’s of the greatest generation had paid off their 30-year HOME MORTGAGE close to or a few years before their planned retirement. It’s hard to remember that 30-year mortgages were originally designed so by the time you retired, your mortgage would be paid off in full. As a result, you would need less income during retirement. How many of us boomers getting ready to retire soon could say we are about ready to pay off our mortgages? The sad fact is that many boomers have 2nd mortgages on top of their first.
It seems odd today, yet most people of the greatest generation didn’t believe in having debt beyond a mortgage. They valued safety over risk and generally speaking, were practical and sensible with their money.
The third difference between the generations has to do with lifestyle and standard of living. The parent’s of boomers were naturally frugal with their money and they truly LIVED WITHIN THEIR MEANS.
That term is popular again, but back then it certainly wasn’t the latest trend or a popular phrase – it was just good common sense practice. It was also vastly easier to not overspend since credit cards were not yet widely used. Some folks had credit cards from Esso gas stations, Sears or a local department store. Home equity loans or home equity lines of credit had yet to be invented and believe it or not, one income could support a family quite well.
It was also a time when cash was used 95% of the time when making a purchase and ATM machines had yet to be invented. Today, it seems almost impossible to imagine not having ATM’s available. It’s also hard to remember how important it was back then to plan ahead and take out enough cash for the weekend.
Those were indeed interesting and different times than today.