1/24/2013 3:45 PM ET|
5 hard facts on retirement
These sobering truths about the cost of retirement make it clear that when it comes to saving for your golden years, sooner is better than later.
Saving for retirement is a monumental task. Unfortunately, today's chronically low savings rates suggest that too many Americans don't take it seriously enough.
The better people understand the challenge of saving for retirement today, the more likely they are to focus on it. Below are five hard facts on retirement that illustrate the challenge.
No. 1: Americans live for an average of 18.7 years after age 65
In other words, retirement is not just a few years tacked on at the end of your career. Likely, it will represent 20% to 25% of your entire life, which is a long time to live off of savings. What’s more, roughly half the population lives longer than the average life expectancy. So you may need replacement income for more than just that 18.7-year average.
No. 2: Inflation cuts the value of your money in half every 22 years
Over nearly the past 100 years, U.S. inflation (as measured by the Consumer Price Index) has gone up at an average rate of 3.21% a year. At that rate, prices double every 22 years. Therefore, if you are 21 years old, you are likely to see prices double twice by the time you reach the retirement age of 65. Because of the compounding effect, this means things will be roughly four times as expensive at that point (i.e., a $1 item would double to $2 in the first 22 years, then that $2 would double to $4 in the second 22 years).
So, if you are 21 now and think that $25,000 would be a reasonable amount of income in today's dollars, you had better plan to save enough to provide $100,000 a year. Of course, given the average life span discussed above, you can also expect to see prices nearly double yet again during your retirement years.
No. 3: Bank accounts produce a fraction of the income they used to generate
Prices may be rising inexorably, but interest rates on certificates of deposit and savings accounts have been heading in the opposite direction. According to figures from the Federal Reserve, a $100,000 short-term CD would have generated $4,780 in annual income five years ago. By late 2012, that same CD would generate only $190 in annual income. With rates so low, you have to save more to produce sufficient retirement income.
No. 4: The average Social Security retirement payment is just $1,220 a month
If you think Social Security will provide for you in retirement, you had better plan on a very low standard of living. The average retirement benefit comes to less than $15,000 a year. That money can be an important piece of your overall retirement puzzle, but if you don't supplement it with some retirement savings of your own, you'll find Social Security is a pretty meager means of support.
No. 5: The average cost of an assisted living facility is close to $40,000 a year
You can just about double that for a nursing home. The mismatch between these figures and the typical retirement benefit from Social Security underscores why personal retirement savings are so essential.
Coping with these challenges takes an early start and a consistent and meaningful effort. The above realities won't just go away if you ignore them -- they'll simply wait to blindside you when you retire.
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Some good info here from people like goose lady. I'm 15-18 yrs away so my opinion is this:
1.) Have another income other than SS for your golden years. Either a 401K plan (start early invest as much as you can), or a pension plan or two. That includes your spouse if possible.
2.) Pay off your mortgage (s) before your retirement age. It's a big chunk of income that you will definitely need to have this go away.
3.) Move to a smaller house or a one or two level living house. Also do you really need 2.5 acres? You're not going to like extra weeding, mowing etc. when your 70 IMO. Save that money by downsizing to a smaller home & yard if possible.
4.) Downsizing means no kids or 'less pets'. Your 30yr+ old kid has to go out on his/her own - which is big drain on your income as well as the 4 dogs and 3 cats you have.
5.) Take advantage of all goverment plans that aid the 60-65+ set as well as dining out discounts, travel discounts etc. Hell might as well take the price cuts for lasting as long as you did!
My SS check (estimate) is around $1880 a month (67 yrs). So the $1220 might be a little low for you depending on what you have donated to the government.
The government has raped the retirement generation and beyond with this stupid artificially low
interest rates and their incessant quest for more money//////// Let's get a handle on spending
and what we are spending it on and then worry about getting more money out of a dry turnip///////////////
I'm 66 but I have very little savings. I have a great family. I raised three wonderful sons and I'm still their safety net. My oldest is a physician in training, my middle one is an electrical engineer, and my youngest is a teacher/musician who now wants to be a physical therapist. I don't mind working into my old age to help them. I enjoy my work and I'm fortunate to have a good job that pays pretty well.
My advice: find something you enjoy doing and are good at and won't mind doing when you are older. At 66, I'm finally starting to save for my "old age." My goal is to accumulate at least $500K before I quit. If I can reach my goal, fine, but if not I will still be okay.
I'm on Medicare now, still healthy, and I plan to defer SS until I reach 70. My SS will be about $38K a year. I receive a retirement income of $80K from the long military career I completed, and I'm working on another retirement income that I could start receiving when eligible in about 6 months, or I can continue to work if I feel like it. As a civil service employee there is no age limit to my employment and it's great to have the luxury of choice.
Everyone told me I was dumb for working for the military and the government when I started out. They said I could make much more money by being in business for myself. I spent most of my income as I earned it, but I avoided a lot of debt. Now, with maybe $500K in net worth, I may be relatively poor, but when I stop working I will be receiving about $140K a year, have good medical insurance, and my house will be paid off. Some of the same people who called me dumb when I was young are now jealous and call me a "taker." I prefer to think that I made wise decisions which I take full responsibility for.
I prefer not to give the blame to, or share the credit with, any particular President ;-).
If you are worried about how you look and the things you have, you will never save enough for retirement. I drive a ten year old truck - that's $400 a month extra that I have been able to put into my 401k and IRA for the last 5 years. The lowered insurance premiums has paid for the upkeep. I know people with 300-400 dollar monthly cell phone bills (every app and internet option), my boring old land line with high-speed internet is $97. With just two simple things, I am about $600-700 ahead per month. Am I sad that I don't get to play angry birds....NO! Am I sad that I don't know how to text...NO!
I have one credit card for online shopping, vactions, and the occasiolnal times I am short on cash, that I pay in full monthly. I don't really know what that saves me, but I know when I had four or five and carried balances on them, I was broke.
I do not live like a miser. I go out to eat quite often, have a few at the tavern several times a week, and always try get the best seats available for concerts and games when I go. The point is I don't waste money on things I don't have to, and when I get a new truck in a year or two, or when ever this one is done, I'll cut back on a few of the other things.
If you make saving a priority, it is easy to live a rich life and save a lot of money too.
1. 65 is an arbitrary age - you don't need to let government dictate when you will retire. Planned correctly (and admittedly with some luck), you can take charge of what age you'll retire. So, at 55, I'll have 28.7 years to plan for.
2. Inflation, at 3.21% can be counterbalanced by reasonable dividend yields. Bonus, qualified dividends still enjoy a tax advantaged status - for the not-so-wealthy, that is - a much better tax rate than interest.
3. With bank interest yield at such low rates, liquid emergency funds should be about the only money kept in banks.
4. With the average social security at $1,220, it should be very clear that saving (and doing it early) within tax advantaged and already taxed accounts for the future is becoming more important - as is keeping yourself out of debt by living well below your means. Fortunate enough to get a raise? Increase your contributions. No one, government included, is going to care about your ability to survive retirement more than you care.
5. With assisted living and nursing care costs rising at such a rate, a look into long term care policies as you prepare to retire would be prudent. But, as I understand it, they are getting quite expensive.
In short, you and you alone will determine when, if and how well you will be able to navigate retirement. I recently checked off a big goal on this road by becoming mortgage free and thus, now totally debt free. It all started by paying myself first and using care to live well below my means. That last day of work is less than a decade away now. I am not aiming to be wealthy, just comfortable and if I happen not to make it the full 28.7 years, the kids will get a small inheritance. That's my story, and so far, I've stuck to it.
By the time I am able to retire, SSI will be history,
because this government will have screwed thing up so badly,
that the only option I will have, will be to go to jail.
Just think, Free room and board, three meals a day
If enough old people went there, It will be just like a retirement home
"Saving for retirement is a monumental task. Unfortunately, today's chronically low savings rates suggest that too many Americans don't take it seriously enough.
The better people understand the challenge of saving for retirement today, the more likely they are to focus on it."
No kidding, Sherlock. Saving - period - is a monumental task, for many. But the rest of the above is BS. "Chronically low savings rates" say NOTHING about how seriously - or not - anyone takes the retirement issue - specially if by "savings" you refer to folks stuffing (giving) money to banks in savings-accounts which don't even pay enough to substantially change the amount in any few years, let alone meet loss of value from inflation. Just put the stuff into a can and bury it in your yard. You'll be doing almost as well and not be giving some clown the freedom to use your's at no recompense to you. And if your house burns down, you'll still have it, unlike when stuffed into your mattress.
Us oldsters (I'm retired within 2 years) either saved "enough" or not - not much we'll be able to do about it, other than keep working, if you can (and need to). The real target for this issue are those who are mostly MUCH younger... and it's YOU to whom I address the following:
YOU, like I, will ONLY get to "retire" if either A) YOU saved some money, and / or B) SOMEONE ELSE pays for it.
And consider what society - mostly propelled loudly by many younger folks - are doing to this model... Here we hear all about trying to "save" Social Security by cutting benefits and pushing SS retirement age out.... Hmmmm. Meaning YOU will need to work longer and SAVE EVEN MORE to get the same level of existence folks get now from SS and their savings.
And we seem to be screaming for more services from gov't - at the cost of ever-higher taxes and more and more shuffling of things into "fees" and tolls and such - more ways to take MORE of YOUR MONEY TODAY, so you'll have ever less to potentially save for later.
Cannot have it both ways. IF you pay more taxes because you want gov to provide things for you today, and you also want to cut future SS, then YOU will find yourself much worse off tomorrow.
So, seems folks want to shuffle more responsibility for your retirement onto your shoulders, while simultaneously taking away your ability to assume (save for) that responsibility.
It's like this: IF you want gov to provide everything now, then you must ALSO arrange for it to provide for you later. "Cradle to Grave'. Democracy is a Great Experiment. "It can last only as long as it takes for the people to vote themselves into the treasury", or something like that. IF you want Democracy, YOU MUST vote yourselves out of the treasury. The alternative model is the Great FAILED Experiment of the 20th Century - communism. I would suggest that folks start talking seriously and openly about what you actually want your government to provide, and get that set in place. Or you had better vote for a state retirement (if you want to be able to retire).
Unfortunately our society's attitude toward money is not what most have expressed here.
Remember when Bush 1 went out to buy socks to stimulate the economy? The message was spend, spend, spend. Buy things that you don't need. Just buy even on credit to help the economy. Well that is not any way to have a decent life or a retirement that isn't in poverty.
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* Annualized returns. Performance as of 1/23/2013 7:00 PM ET
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