How to retire with no savings
Millions of Americans are doing it.
This guest post comes from Pop at Pop Economics.
Have you read the news lately? Soon-to-be retirees have saved almost nothing for retirement. No doubt that means we'll soon have homeless baby boomers begging for change on the subways!
OK, the second part might not happen. But given the press that a recent Employee Benefit Research Institute report (.pdf file) has gotten, you'd be forgiven for thinking so.
Make no mistake, the numbers are terrible. Only 44% of Americans have more than $25,000 in savings. About 54% of workers older than 45 have more than $25k. And of actual retirees, only 46% have more than $25k in savings.
Using the rule of thumb that you can draw down 4% of your nest egg in retirement's first year -- faulty, but it's a starting point -- $25,000 in savings gives you about $1,000 in income. With Social Security, you're probably talking $14,000 per year, which puts you in the ballpark of the incomes in countries like Libya and Panama, depending on how you're making your comparison.
- Calculator:Am I saving enough for retirement?
And yet, these soon-to-be retirees and actual retirees are in the United States. Which begs the question: How are they doing it? And is life really so bad for poor retired people?
The life of a retired non-saver
First, let's look at actual incomes of retirees as clues. A 2005 report (.pdf file) by the U.S. Census found that the median income of someone age 65 and older in 2003 was about $24,000 -- or $29,000 in today's dollars. That's a pretty severe drop-off from the median $49,000 income that people age 55 to 64 had.
Those who are 65-plus are also taking less of an income as they age. The same report found that the median household took about $33,000 in income between 65 and 69, but by age 75 the median household had an income of only $19,000.
About 17% of those 65 and older live in or close to poverty, which is about the same as the population as a whole, but that was skewed by those over age 75. The real old-timers had a near poverty rate of almost 20%.
But on average, their living arrangements were fine, according to the report. Most had furnaces, A/C, a full kitchen, etc.
No, you're not working until you die
You might have heard somebody say something to the effect of "I'm probably going to work until I die." Either that's been a conscious choice (no point in saving!) or it's a "reality" they've come to as 65 neared and they hadn't saved nearly enough. Post continues after video.
Except that's not what actually happens. According to the Labor Department, fewer than one in five workers over age 65 have a job or are looking for work. Once you get to age 75, only 7% or so fit that profile. Slightly sadder, most of that 7% are looking for work but don't actually have a job.
Age discrimination might be part of it. But so could mental or physical disabilities and the generally weak job market right now. Whatever it is, most Americans older than 65 are unable or unwilling to hold down a job as they age.
Quick! Picture your perfect retirement.
Did you imagine a beach scene with white sand and crystal-clear blue water? No? Well, when you ask people to picture a perfect retirement, most people have at least something related to travel.
Unfortunately, retirees aren't actually doing it, at least not any more than the rest of us.
According to the Labor Department, older Americans (65+) spent about 400 hours -- or 16 days -- on average on "Other Leisure" time, which basically includes anything that's not TV, socializing, relaxing and reading. Even if all of that leisure time were devoted to travel, that's not any more than the three weeks of vacation you're probably earning by the age of 30. So much for that round-the-world trip!
So what are they spending time doing? They're watching TV -- about 4.4 hours of it per day. That's quite a bit higher than the 3.3 hours Americans of all ages watch on a weekend day. By comparison, the older Americans spent less than an hour per day on average with friends.
So, let's try that again. Quick! Picture your probable retirement!
Did you imagine a TV screen showing "Monday Night Raw"? You can file that under sad, but true.
It's about how you want to live
Once you hit age 50, your chances of being jobless start to rise rapidly. You don't get to choose when you retire. The job market or your ailing body will decide for you. Many retired Americans are getting by on incomes that you'd probably consider appropriate for the Third World. And even if they wanted to work until they died, they can't.
Social Security allows them to live adequately, but not richly, and certainly not in the ways you dream about.
That's why you're saving for retirement. It's not so you can retire. It's so your retirement looks more like white beaches and blue skies than "Monday Night Raw."
More on Pop Economics and MSN Money:
Once again, misleading title, article of little substance.
Personally, I don't know anyone my age that has much, if any money squirreled away. (I am 55) My husband and I were both forced to retire early due to a series of unfortunate events and health concerns. We survive on SS and SSD and a little bit of income I get from a part time elder care job.
We live below the poverty level and compared to just about anyone in third world or developing nations we have an extremely comfortable life. Even by standards in the US we are doing OK. We are warm and/or cool and have plenty to eat. We even manage to save a little bit on occasion to take a trip to see the family. We drive an older car, actually we just had to buy another last year, paid it off in 10 months. It is not fancy but it is in good shape and serves us well. We do not have a big screen TV, nor an Iphone or IPad, no expensive jewelry or clothing. For entertainment we garden and fish. We watch movies on TV sometimes and read a lot. Occasionally we get together with friends to cook out, drink some beer and talk about the grandkids. We do the work on our house ourselves unless it is beyond our physical capabilities and we talk to each other.
Is it what we had planned for? Nope, we were supposed to be on a beach in Mexico where our retirement money would have more value. But seeing as how Mexico is circling the drain it may have all worked out for the best. Today in America the middle class and the working poor cannot save for retirement. They can try, but are one illness or household disaster from losing much more than just their savings.
These articles are useless to the average working American and this one was more useless than most. The point is that we need to stop believing that the quality of our lives is determined by how much expensive stuff we have. It is amazing how much easier life is if you don't covet what you see in the ads that bombard us day in and day out. There is also the train of thought that if you have it, you should get rid of it. (or at least not replace it with the newer better model), many many less things to worry about.
we live in a country where if you're "old" you need to be out of the picture. The youth of America think "go find a corner & die". Harsh?! Reality! They forget they will one day be old. We do not treasure our senior citizens in this country we look @ them as a burden.
I am 47 yrs old & will have a decent retirement. My daughter tells me she'll take care of me when I'm old! I ask her "how? you don't even WANT to hold down a job for yourself & kids you keep coming to us geezers for $$" We finally told her no more $$ for you. We are looking @ our retirement. She got mad!
So youth of America I say start saving now for YOUR retirement because you're kids will do the same to you! I will NEVER be dependent on my children thank God!
Maybe some people don't wish to retire like most. Who is anyone to define another person's happiness and what gives their life fullness and purpose? Just because a vast majority of people spend their lives killing themselves and racking their brains on how they can save millions doesn't mean everyone wants to swim in that sea.
Some people are more sensible and balance, thrive on the natural pleasures of life and not one that is monetarily costly, wasteful and narcissistic. I love the people who know the difference between true happiness and keeping up with the Joneses...
But them big companies need them tax cuts.
I paid 35 years into SS. It's not an entitlement!! I paid for it. Try to take it away and Baggers will regret it.
When I saw this coming, though, I started to write. I now have two reasonably successful novels in both print and Kindle format and a third that will be published later this summer.
I had to start collecting Social Security as soon as I turned 62 to eake out an income while sales grew to a sustainable level, but as soon as I can I will stop the Social Security payments and get back to paying in.
Needless to say, I am well into writing my fourth novel...
Don't ever quit on yourself.
You say your Social Security is not an entitlement, because you paid for it. That is the actual definition of an entitlement. You paid for it, and therefore, you are entitled to it. An entitlement is the opposite of welfare or a give-away program. If you do something to earn a benefit (such as pay FICA taxes for years), then you are entitled to that benefit.
Somewhere along the lines, the Republicans have managed to make "entitlement" sound evil, and cause people to believe entitlements will cause the downfall of civilization. Not so.
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