Due to the fact that pensions seem to be a thing of the past, workers today are forced to rely on self-directed savings plans for their future retirement funds.
As millions of people are approaching retirement each year, how are forecasts looking for average American worker and their retirement savings accounts?
Among recent articles, one particular piece from the Financial Times (UK) really stood out to me. According to the author, in one New School study of US Census data, people aged 50 to 64 in the bottom three income quartiles, or 75% of all adults in that group, averaged less than $28,000 in total retirement savings as of 2011. And a sizable 77% of those aged 50 to 64 in the bottom income quartile didn’t have a penny of retirement savings. The rest were not much better, with 66% of the second quartile, 41% of the third and even 22% of the highest having zero in retirement account dollars.
Other studies, including a 2013 survey from the Employee Benefit Research Institute, found similarly grave results for soon-to-be retirees, with 43% of workers aged 55 and older reporting they had saved less than $25,000.
The author also points out another issue that continues to sabotage future retirees accounts, is the continual trend of dipping into accounts for loans or early withdrawals. A survey of 4,100 workers from the Transamerica Center for Retirement Studies found nearly a 1/4 had taken cash out of their accounts already, most often paying heavy penalties in the process.
These statistics reflect a sad realization that a high percentage of American workers will be unable to sustain current standards of living in retirement. This is especially true as more people are living longer on average. This will undoubtedly put a heaver strain on Social Security, as their last (or only) resort of income to support themselves.
It’s interesting to see articles come out of the UK related to issues, such as retirement for US workers. It seems to give a more realistic and unbiased perspective, in my opinion. All in all, it’s just another sad reminder that most Americans are not disciplined when it comes to their finances. Most, simply do not plan at all. How many people do you know that don’t want to think about, or even discuss retirement? It’s amazing to see patterns of massive spending, with no real consideration for their future financial standing.
I believe most middle-class people, simply think it will all just work out somehow and they will find a way to get by. Even if that means working in their 70’s or 80’s, if they are lucky enough to have good health (that’s another thing most people don’t even account for, good health).
Obviously this trend can be changed with the right mindset and dedication to financial goals. Let’s not allow ourselves to fall into one of the statistical categories mentioned above! Start saving today, be aggressive and disciplined in your financial goals and don’t be one of the those middle-class folks that are “hoping” things will just work out. Plan accordingly and later in life you will thank yourself!