Retirement crisis: Impoverished seniors on horizon
An annual survey confirms that Americans are living longer and that they do not have nearly enough saved for retirement.
The Employee Benefit Research Institute has published its annual Retirement Confidence Survey, which confirms what virtually all such surveys have concluded: that Americans are living longer and that they do not have anywhere near enough saved for retirement.
The sad truth is that Americans do almost no thinking about what kind of retirement they want. They mistakenly assume that Social Security is a retirement program, when in fact it is a supplemental retirement program. The three legs of the retirement "stool" -- Social Security, a pension, and private savings -- have all seen some shrinkage in the past few years.
For Social Security, all baby boomers know the truth: We are going to be working longer, into our 70s, paying more and getting less. Pensions are going away: IBM stopped providing pensions to new employees a couple years ago, and many are facing reductions in their benefits.
And private savings? Let me quote from the survey: 57 report having less than $25,000 in household savings and investments (excluding their home and pension benefits). This is for all workers, so older workers would have more money, but other surveys show the results are equally paltry.
This is just the tip of the iceberg. American households are so strapped that only half could come up with $2,000 in cash if an unexpected need arose in the next month.
You would think that savings levels would increase, but no. The percentage reporting saving anything for retirement is at 66 percent, down from 75 percent in 2009.
People are also living much longer than their parents. A male reaching retirement age in 2013 is expected to live to an average of 85, a woman to 87.
What this means: A retirement crisis is looming. In a little more than a decade, there will be a lot of older people who will run out of money. There will be stories written in 2025 about Joe Smith, 82, a retired autoworker, living in a flophouse on $2,100 a month in Social Security after his pension was cut off and his personal savings ran out, while his children, in their 60s themselves, moved 2,000 miles away.
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Our economy is built on consumption and not saving money for retirement. You must start early and be consistent throughout your working life, but you must also have a rainy day fund, stay away from credit card debt, having car payments all the time and generally living on less than you make - which may mean "LOOKING LIKE" you do not live the life your friends and neighbors seem to be living, but probably are not in reality.
I just purchased the first automobile in 14 years on Dec. 28, 2012 since I purchased a 1992 Honda Accord in October 1998 with 52.5K miles. In December 2012 it had 288K plus miles. I did not purchase a new automobile, but a 2008 Toyota Avalon XLS with 33.8K miles. Less than $20K. So the original purchaser paid for the bulk of the depreciation and since it is a 2008 the insurance is less. The vehicle still has a year warranty left it looks brand new. Best of all I paid cash.
Credit cards have enabled people to live a higher life style then they actually can afford.
I have never made a six figure yearly income, but have lived below my means, saved first and spent what was left. I have my father to thank for this learned behavior and I am happy I have stayed the course.
I'm in my early thirties. It is obvious to me that I will be means tested out of social security because I have been saving for retirement for over ten years. I feel sorry for those who are going to "live" on social security, but it is the price they are going to pay for not saving.
I know people will say they paid into the system and they should get the benefits, but remember the government defined your contribution as a tax. It's a tax to me, and the sooner people realize the government is out of money the better. I still hold out hope that the folks in DC can get together and solve the long term financial issues the country faces. I will however continue to prepare for the worst while hoping for the best.
Ah yes, the 3-legged stool. Alias, 3 ways to crap on you:
1.) The legislators stole your money from the SS fund.
2.) All pensions were reduced or eliminated.
3.) You're no longer 'entitled' to the money you contributed to SS.
Reasoning: The gubmint needed more money. Corporations needed more money.
You don't need no more stinkin' money!
"The sad truth is that Americans do almost no thinking about what kind of retirement they want. They mistakenly assume that Social Security is a retirement program, when in fact it is a supplemental retirement program."
I've seen similar stats elsewhere, but I just don't get this. Do people old enough to be reaching retirement age really think this way? I understand kids in their teens and 20s not really 'getting it', but I'm amazed that older adults are so clueless. I'm not talking about those who've lost jobs or had emergencies that wiped out some/much of their savings, but those who actually think they'll just quit working one day and let social security fund the rest of their lives.
We 'woke up' a few years ago when we were in our late 40s and suddenly realized that the day was actually coming when we could retire. Realizing we were not heading, financially, in the right direction, we put our focus on funding retirement plans, and though we still have a ways to go, we will have had about 20 years of retirement savings, and no debt outside our mortgage. Certainly, we are counting on SS to supplement our retirement, but by no means are we seeing that as supporting our way of life.
Exactly, how are American suppose to save for retirement?
My wife and I have been contributing to 401K each years, we have 1 daughter in College (we help as much as we can), and two more daughters in grade school. In the past several years, our bills have increased, taxes , housing, insurance co pays etc...out pacing our annual pay increases. The 401-k is a joke the maintence costs eat up a portion of proceeds.. Considering the two of us have been making slightly over 100k a year for the past several years that mean on average we will contribute (employer and employee contributions) about 13-K this year to Social Security. I estimate over our lifetime we will have contributed (between employer and employee) roughly $ 350- 400K If we had access to that amount in dividend stocks (Blue Chips such as-- KO, PEP, MO, PG PFE etc..) it would work out nicely for us combine that with our 401-k and small pension option. we could retire comfortably.
Somehow, Social Security will penalize us for helping our kids with college, our decision to fund a 401k's and small pension . We go would out things to fund this, maybe I should blow all my money on fancy vacations, drinking, new cars, elaborate weekends, lottery tickets and put my hand out.
I know I will work in my retirement so I am not bored, but I feel that the honest Joe is getting a snow job. Social Security pays to those who choose not to help themselves but laze off of others.
Unless economy grows, there is a problem.
Reserve bank has not helped. With zero interest many retire what ever little saving they may have is earning no interest and income from that, that can add and that can really count on small base.
there is a false belief that people pay less and get 3 times. They do not count appreciation of currency and total value of installment payments. If I paid 500 dollars to social security in 1960 that will be in today's terms about 2000 dollars and interest amortized will surpass 10000 in current dollars.
Then there is a cultural problem about letting one die rather than give ineffective , unnecessary hospital services at high cost that keep you in vegetable state in a bed at tremendous cost. We need to lead a strong campaign that says it is better to die at certain stage of health and quality of life.
When kids are multimillionaire, they should undertake care of their parents and grandparents. This is also cultural thing and will have to deal with on worldwide basis. It is OK to have three generation living together. It gives a higher quality of life to everyone at substantial savings. The days 18 and our and it is Government's job to take care of old people is passe. If we continue that we will destroy economic viability of society and quality of future citizens.
We need strong national dialogue where we talk win win for all by defining what kind of social compact we need across generation and what are our values that are practical and conductive to a greater total happiness.
Is it easy to save for retirement? Not really; it takes a conscious effort. But it can be nearly impossible to save for retirement if you've had to deal with long term unemployment, under-employment, and/or massive medical bills or any of life's other unexpected "surprises".
Government and WS can go to he11.
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