Retirement crisis ahead for boomers and Gen Xers
With most workers having less than $25,000 in total savings, Americans are headed for a dismal old age. And many 'have their heads in the sand.'
It's often said that getting old isn't for sissies, but baby boomers and Gen Xers may find that's an understatement.
Americans aren't saving enough to retire, with 57% of U.S. workers reporting less than $25,000 in total household savings and investments, excluding their homes, according to a new report from the Employee Benefit Research Institute.
Even worse, the study found fewer workers are actually putting money aside for retirement, with only 57% saying they're currently saving, down from 65% in 2009, the study found.
It's not something that workers are unconcerned about, however, as 28% said they have no confidence they'll be able to retire comfortably, up from 23% just last year.
"With baby boomers and Gen Xers, 44% of them will run short of money in retirement," Jack VanDerhei, the research director at EBRI, told MSN Money. "Forty-one percent of people in the lowest income quartile will run short of money within the first decade of retirement."
Workers between 25 and 34 years old are actually saving the least, with only 56% of them saying they have set aside money. As my colleague Kim Peterson wrote on Monday, younger people are also struggling to save money to buy houses or make other investments.
Those are bleak findings, but VanDerhei said something else in this year's study surprised him even more.
After conducting the survey for 23 years, EBRI this year asked workers whether they know how much they should be setting aside, VanDerhei said, noting that a common assumption is that workers don't know the basics of retirement funding.
He says he was shocked to find that workers actually know they should be putting aside as much as 20% of their income, in some cases. So why aren't Americans stashing more for their old age?
Immediate financial demands are among the reasons -- paying down debt and rising cost-of-living expenses. But some wishful thinking is also going on. "There is still a significant percentage who have their head in the sand and don't want to pay attention because they don't want to be unsettled," VanDerhei noted.
Workers "get the fact they aren't saving as much as they should. That's not translating into increased savings. It's translating into, 'I'll just push back my retirement age,'" VanDerhei added.
That's a dangerous plan, he cautioned, because nearly half of retirees say they stopped working sooner than they had planned, most often due to problems such as poor health or a disability.
"It's a risky proposition to defer the pain until a later date," VanDerhei noted.
What about retiring on Social Security? Sure, if you're looking forward to scrimping and enjoying a low quality of life in your old age. "Based on any type of minimum expenditures needed to keep a decent standard of living," VanDerhei said, "Social Security will not be enough."
| Tags: | InvestingSocial Security |
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Poor decisions are killing the average americans finances. I see people who make much less than me with the latest smart phone, flat screen TV's, expensive cars, and elaborate vacations. They look down their nose at my flip phone, and 5 year old car. I read this article and now know how they fund that stuff. I have paid off my home and have plenty for retirement. I buy new cars and finance them for 24 months. If Americans keep buying this junk and blowing all their cash, they better enjoy the taste of alpo.
I understand that people spend crazy, but honestly how many 23yos have a nickel left over after the end of the week. and it is not a chioce of paying yourself first and then living off the rest. most young people I know can barely get by! they are not focusing on retireemnt...they are focused on survival!
I do not plan on getting anything from Social Security when I retire in 18 years. By then the system will be out of money and cuts in benefits will be required. Funny how the government can think of ways to benefits and services on those of us who contribute to the system but they can't agree to cut government waste. It is both Democrats and Republicans. Yet they never cut their benefits.
My wife and I have just started saving for retirement. We have made a plan as to how much we need to save, assuming a modest 5% annual return on investments. Hopefully we will experience great returns then 5%. We are very determined to make the spending and life style cuts needed to achieve our goal.
Here is to the good life of doing the things we all dream of doing.
The top 20% of the populace controls 89% of the wealth. Of that amount, the top 0.01% control 37%. The bottom 80% only control 11%. This shift of wealth to the elite has decimated the middle class.
It's no wonder the congress is hesitant to tax the top 2%, since individually they are in this group. Our constitutional republic has evolved into a plutocracy thanks to over four decades of poor governance due to greed and corruption by our elected reps.
In answer to the question, a balance of power.
The financial community needs to stop crying the ceiling is falling. They just continue to scare people. Especially when they try and say you need to be saving a certain % of your pay or need millions. Most people cannot relate to that analysis.
Instead they should be telling people to save whatever they can so at least people will start. Once they start, they tend to increase it over time. But if they never start, they tend to feel like it is a hopeless case.
And then factor in student loans which are crippling people. The government needs to stop offering loans to these online schools that charge a ridiculous rate per class. And then people do not graduate on top of it.
The government should be offering loans only to community colleges. Lower cost and potential risk for everyone involved.
"Workers between 25 and 34 years old are actually saving the least, with only 56% of them saying they have set aside money."
The GenX generation is those that were born roughly between 1961 and 1980. Some would argue as late as 1982. If you do the math, this statement really is not representative and leads the reader astray. A better comparison would ages 30-39.
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