Unsettling Retirement Statistics

You may have noticed that the media is starting to pay more and more attention to the average American’s financial situation. Whatever the reason behind the sudden push to increase personal financial awareness, it is a long overdue initiative. A variety of different media outlets and publications are focusing their attention on the lack of personal savings held by the average American. The stories seem to indicate that many people are neglecting to save much, if any, of their income and maintain regular expenses that require most of their monthly income. Any American who has, for any stretch of time, experienced the reality of living paycheck-to-paycheck understands that this can be stressful.


Perhaps even more insidious than the stress of living paycheck-to-paycheck without being able to put any savings aside is that it can become a habit that dulls your sense of urgency towards building up a savings account—let alone a sustainable, long-term financial strategy. While only taking care of your monthly expenses might seem like a tenable short-term situation, the need for a savings and investment strategy becomes apparent when retirement is factored into the equation. In fact, the reason that Americans’ lack of savings is so distressing is precisely because so many people understand the necessity of having money saved for retirement.


Unsettling Facts


Here are some facts and figures that look at savings through the lens of retirement planning. For those who consistently save money, but have not yet developed a sustainable investment or retirement plan, these sobering figures may be all that is necessary to inspire a visit with a Clifton NJ wealth management professional who can help provide the peace of mind that comes with knowing that retirement will not cause financial problems.


How Much Americans Will Need


The average retirement age in America is 63, and the average retirement lasts 18 years. Of course, many retirements last much longer than 18 years, and it is wise to plan accordingly, especially considering medical advances that may further extend the average lifespan. Many financial planners take a conservative approach and advise their clients to plan for a 30-year retirement; not only does this approach account for longer than expected retirements, but it also helps in the event of unexpected expenses. A retiree who wants to draw $5,000 per month for that 30-year retirement span will need to have over one million dollars in savings to do so, under conservative estimates of investment returns and inflation. From this starting point, it is a little easier to ballpark how much you would need to draw more or less than $5,000 per month.


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How Much Americans Have


Given the discussion above, it should be apparent that many Americans do not have a million dollars saved for retirement. In fact, the average 50-year-old has just over $40,000 in savings. Even more striking than this average is the fact that nearly half of Americans have nothing saved for retirement, and many of these individuals are of the Baby Boomer generation that is nearing retirement age. Across the board, the percentages of Americans who invest, actively save for retirement or draw early from 401(k) assets are all problematic.


How Many Are Reliant On Social Security


One likely reason for this dearth of retirement planning is an expected reliance on Social Security income. Over a third of current retirees are completely dependent on Social Security and roughly two-thirds depend on the program for at least some of their expenses. Such dependence on Social Security is not a sound, long-term strategy. While some financial service providers would advise clients not to factor Social Security into their plans at all, many others would agree that it should be seen as a potential income supplement, not as a sole or vital income source. Overall, when it comes to financial issues in retirement, an ounce of prevention is worth a pound of cure and it is never too late to begin saving, investing and planning for the future.


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