Many Americans May Struggle In Retirement

That was the headline in the business section this morning.  No shock there, most Americans struggle in non-retirement as well.  I guess they mean financially.

So let's look at the article.  It says a 'study' reports that "almost one in two American families are headed toward years of financial struggle in retirement."  OK.  You could probably find one in two American families that say right now life is a financial struggle.  But anyway, the 'study' goes on to say that "workers are unprepared for cuts in pension and Social Security income."  I think it would be hard to find people that are not unprepared for cuts in anything.

"The Boston College study presumes that most people need to replace 65 percent to 85 percent of their annual income to stay secure in retirement.   But 43 percent of US households will fall at least 10% short of that goal."  Note:  Most retirement books and web sites assume you have to replace 80% of your preretirement income.  A recent Forbes article put the real number at less than 70%. 

But so what?  We all seem to be doomed to a retirement of tuna fish and Ramen noodles. 

Maybe not.  But first more bad news because the article goes on to say that "Baby boomers born between 1946 and 1964 are generally in better shape than members of Generation X, born between 1965 and 1972...That's primarily because younger workers face diminished Social Security income and fewer will have pensions." 

Generation X?  Who cares about them?  If they're going to get screwed, it can only be worse for you guys.  Because the report goes on to say--

"The Boston College report said the grim outlook is being driven by a variety of factors.

1) Social Security will replace a smaller share of people's pre-retirement income in the future.

2) Companies have abandoned costly traditional pensions, which guarantee monthly income for life, in favor of contributions to individual 401(k) plans overseen by the employees, which yield less.

3) People save too little.  Most of the working-age population saves virtually nothing outside of their employer sponsored pension plan, according to the report."

What a way to start a morning. 

First, I take exception to point 2.  A 401(k) that has grown untouched for 25 to 35 years will yield a lot, probably a lot more than a pension.  I do agree with the conclusion--unless you work for the government, pensions ain't going to be around. 

The report does hold out one glimmer of hope.  And here it is "Saving more can help a person's long-term outlook, particularly IF THE ADDED SAVINGS START WHEN A WORKER IS YOUNG.  If workers consistently set aside 6% of their paychecks (with a 3% employer match) invest prudently, and leave the money alone, they should have enough."

So we have to go through all that angst to get to the bottom line--save 6% and you will be ok. 

And they are right.  For more go to Category 12 Investments--All You Need To Know. 

But get going.  The clock is ticking.

Comments

[GEORGE HUIZINGA]

BEEN RETIRED FOR A LITTLE OVER 2 YEARS.$800.00 PENSION PLUS $12OO. FROM SOC SEC.1000 SQ FOOT HOUSE WE BUILT 5 YEARS AGO IS PAID FOR.WE MOVED OUT OF THE CITY HIGH TAX AND CRIME AND MOVED TO MOUNT AIRY NORTH CAROLINA,A SMALL TOWN IN THE MOUNTAINS.WE NEED VERY LITTLE TO LIVE A VERY NICE LIVING.WE GAVE UP THE COUNTRY CLUB BOAT BIG HOUSE AND HIGH LIVING.WE HAVE NO SAVINGS WE SPENT THAT ON THE SMALL HOUSE. WE HAVE MEDICARE FOR OUR HEALTH NEEDS AND A $200 DOLLAR A MONTH INS POLICY TO COVER OUR DRUGS.I CAN'T UNDERSTAND WHY PEOPLE SAY YOU CAN NOT LIVE HAPPY ON A LOW INCOME.WE LOVE IT