Halloween Special: Frightening Facts about Retirement Savings

These facts will hopefully scare you into action so you can avoid the ghoulish fate of those who do little to nothing in retirement preparation…

1) Only 42% of private sector workers age 25 to 64 have any pension coverage in their current job. That’s lower than the 50% who had pension coverage back in 1979.

2) 30% of workers in a 2012 study reported that they had less than $1,000 in savings and investments.

3) A 65-year-old couple retiring in 2012 is estimated to need $240,000 to cover medical expenses throughout retirement.

4) Just 14% of American workers are very confident they will have enough money to live comfortably in retirement.

5) Half of current retirees surveyed say they left the work force unexpectedly as a result of health problems, disability, or getting laid off. If you think you’ll just “work forever” instead of planning for retirement, you may want to think again.

6) For a low earner retiring at 62 — Social Security replaces 40% of pre-retirement earnings. This is unlikely to provide for a comfortable retirement.

7) Nearly 75% of retirees have not saved enough and said they would save more if they could do it all over again.

8) More than one-third of all households end up with no employee-sponsored retirement plan at all during their entire work lives and others, who move in and out of coverage, end up with inadequate 401(k) balances.

9) At age 65 and above, Social Security benefits provide more income than any other source for over 60% of households, regardless of marital status. With an average monthly benefit of $1,230 for retired workers, this indicates that a lot of retirees must be struggling.

10) One-third of households end up entirely dependent on Social Security; for low earners that portion is 75%.

11) 21% of workers covered by 401(k) plans choose not to participate.

12) A typical worker should accumulate about $363,000 by the time he or she retires. According to the Fed, a typical household approaching retirement had 401(k)/IRA balances of only $120,000 in 2010, far short of the projected amount for the individual.

13) 60% of workers report that their total household savings and investments, excluding the value of their home and any defined benefit pension, is less than $25,000.

money pumpkin

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12 thoughts on “Halloween Special: Frightening Facts about Retirement Savings

  1. This describes my dad I guess, who is age 70 and is still working. In the early 90s, he was laid off his previous job, which provided no pension whatsoever. Following that sort of late in life sudden job career switch, he finally had a pension. Unfortunately he decided to withdraw everything and take a penalty so that we could sell our inner city devalued home and stop having our windows shot out, and get out. He racked up high debts, which my sister made him pay off eventually. Now he virtually has not much by way of savings. To be fair, he’s honestly a bit better off with better income and social security than how the situation was prior. But savings? Pfft. Like most Americans, my parents just ‘make do’. My sister still has her pension of course, but when the markets tanked, that shrank considerably. How does one save for retirement properly, when you’re being bled from all over? Starting young sure.. I guess so. But my sister has been working the same job with the same pension since she reached working age, and these many years later? I’m not confident her ‘ok’-sized pension is enough for her to retire on, when the time comes.

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    • In the past, pensions were dominant and nearly every worker had one. Then they started going away. The 401k retirement savings plan was created as an “assist” to pensions, but corporate maneuvering decided to make it a replacement instead- placing much more of the burden of investment decision making on the individual employee.

      Companies that still offer pensions are becoming the rarity these days, as are the availability of high paying “mass market jobs” like the manufacturing jobs of the past.

      Props to your dad for taking a hit on his pension to take his family out of a dangerous environment.

      The biggest problem is we are not taught the importance of saving/investing as kids and have to learn these things on our own. Then we are bombarded with signals that encourage us to spend like drunken sailors and take on debt. It’s not surprising we have a retirement crisis that will only get worse over time since younger generations won’t have pensions to bail them out.

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  2. Honey? There *IS* no such thing as retirement. A guy Brian works with had a financial goal in order to retire. He and his wife both had worked all their life, at jobs with good benefits, 401Ks, and their incomes compiled was a very impressive sum. Two years ago, they sold their house and ‘retired’ to Florida.

    It was too expensive. He realized that the rate the money was spent, they couldn’t do it, ever. They’re back in a smaller house, and he’s back to working with Brian. He’s also very jaded.

    There’s NO retirement, anymore. There will be no SS in the future, there are no pensions, and people will work until they die, period.

    Brian and I (on a single income, with a household of seven and thirty-two critters) are ahead of your curve per your statistics, but we both know we will never retire. It’s not something people are going to be able to do, in the future. Not if they’re middle (or lower) class. Only the rich will have that luxury.

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    • The prospects of saving for retirement are getting more challenging, but they aren’t that bleak as to rule it out altogether yet, haha. 🙂

      The key equation to solving the retirement riddle is managing expenses and income. The less one needs to dish out, the lower one needs to earn in retirement. The guy your hubby works with that “retired” should have done the math beforehand to see if they were ready.

      It’s always been not so much how much one earns as it is how much one spends. I know couple with dual six figure incomes who still wind up bouncing checks.

      There are also too many cases of people who win millions in the lottery, only to wind up broke again.

      Of course with the availability of high paying jobs becoming more and more scare with continued outsourcing combined with the trend of pensions going away. The task of saving and investing to reach a level that will allow for retirement is becoming increasingly difficult.

      The best option left for many is the “family plan” where one has a few kids and hope they will take care of one financially during one’s golden years, but that’s a roulette wheel too.

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    • How’s the retirement climate in Canada? You folks have the advantage of more social programs help like socialized health insurance, which can be one of the more expensive things for Americans to consider when contemplating retirement.

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      • I guess having health coverage helps a lot especially when your old. With some savings and pension I never thought retirement would be too much of a problem for people. Maybe it’s just me seeing retired people in their little exclusive gated communities, lake side homes or happily living with their children taking their grand children for walks. I could also be oblivious to the issue because I don’t really see it.

        I find it puzzling how one can in the lottery and wind up broke. I mean don’t people save it, invest it, using it on a home so the money grows further..

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        • Health coverage is a lifesaver for for young and old. The biggest difference is the older you are, the more assets you likely have and therefore the more you have to lose to a medical emergency if not properly insured. For the young, they have the option of declaring bankruptcy unless they have a lot of assets.

          The cost of retirement homes in the states would blow your mind – most in the ballpark of $80K/year and up. Most can’t afford the nice ones and wind up at a state run facility that is far less accommodating.

          Of course I wasn’t really aware of these costs either until I started helping out with researching options for senior citizens. They should probably teach this in school to motivate kids to save and invest early.

          I also find it hard to believe how people can burn though millions in just a short time, but it happens often – especially among sports and movie stars. The problem is they were never taught how to manage money so they spend instead of looking for ways to generate income. They they lose lots to bad investments and false friends/family.
          The common belief is when the money is coming in, they likely think it will last and last since there is so much of it- so they spend and spend and lose track of it until they wind up in the hole.

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