| Sargent & Lundy Savings Investment Plan |
| WHOSE NEST EGG IS IT, ANYWAY? |
| The following excerpts are from the July/August 1998
"401(k) Alert" newsletter published by Investors Press. The opinions
expressed may or may not reflect those of the SIP Committee.
Are you counting on your parents to help pay for your retirement? You may be in for a big disappointment since they could actually end up asking you for help. Continuing advances in medicine and health care are ensuring that Americans live longer lives. According to the National Center for Health Statistics, life expectancy rose in the U.S. from 70.8 years in 1970 to 75.7 years in 1994. On average, that translates into roughly five more years of retirement. As retirees live longer than ever before, they face the real danger that whatever money they have saved may run out before they die. Consider this example: a 65-year-old couple with $750,000 in retirement savings plans to spend $50,000 plus earned interest in each year of what they expect will be a 15-year retirement. If it lasts another five years, they'll need another $250,000 - an additional one-third of their nest egg - to maintain the lifestyle they intend. Where will they get the extra money? The handwriting is on the wall; you may not be able to count on an inheritance from Mom and Dad to close your own savings gap. "The prudent person takes steps now to help their parents manage their assets and income more effectively and in turn build a more secure nest egg for themselves," advises James Weil, Vice President, MetLife, and a nationally recognized expert on aging and long-term care. Healthy, active retirees may, indeed, need more money than they anticipated. And if parents become ill, even affluent families can watch helplessly as savings are eaten up to pay for extended, around-the-clock care. Possible solutions include buying annuities, which provide income that cannot be outlived, and long-term care insurance, or using home equity to finance elder care bills. What can you do to anticipate your own potential savings shortfalls and become more financially secure? Participating in your company's 401(k) plan can replace some financial dependency on parents and Social Security. Increasing your contribution by as little as 1% over a significant period of time, say 20 years, could replace the portion of your nest egg you thought you might inherit. The best strategy, however, is to adopt a total financial planning approach that considers your own and your parents' long-term financial needs. Talk to your parents now, not when a crisis strikes, about their savings situation and determine if you and your siblings will need to help them finance their retirement. Even if you are a disciplined saver, your parents' unexpected needs could erode your savings and jeopardize your own retirement security. |
This page updated on 7/28/98