Although many individuals work well into what was once typical retirement age, and some, simply, can never envision themselves without a job, the inevitability of one day not having a paycheck should be a motivating factor for the rest of us to ensure we have the financial means to enjoy, or at least survive, our golden years. That, however, is not the case for a surprising number of Americans.
According to a recent study by the National Institute for Retirement Security, the following three stats paint a bleak picture:
- When working-age households (not individuals) are considered, 45%, or approximately 38 million, do not own any retirement account assets, whether in an employer-sponsored 401(k) type plan or an IRA.
- When all households are included (not just households with retirement accounts,) the median retirement account balance is $3,000 for all working-age households and $12,000 for near-retirement households.
- The collective retirement savings gap among working households age 25-64 ranges from $6.8 to $14 trillion, depending on the financial measure. When retirement accounts are considered alone, 92% of working households fail to meet targets. When retirement plus defined benefit programs are considered, 90% fall short. If total assets alone are considered, the number that fall short is 84%, and if net worth is the measuring standard, 65% fall short.
And although Social Security is available for the vast majority of American workers, the next three statistics do little to boost confidence in that historic program:
- 21% of married couples and 44% of seniors who are single rely on Social Security for 90% of their income, and the average monthly benefit payment is around $1400.
- According to a survey by the Gallup Poll, 57% of seniors depend on Social Security for the majority of their income.
- Some commentators are predicting benefits will exceed the programs costs in 2020, and the Social Security trust fund will run out of money in 2035, unless drastic measures are taken.
- Savings for retirement need not be painful or come at the cost of sacrifice during working years. For example, using a compound interest calculator to project the numbers, if you were to start saving at age 30, put just $500 a month in an account that compounds annually, earn an average of 7% and do that for 37 years, the account balance would be over $950,000.
Retirement planning need not be an all or nothing proposition. Yes, it’s better to start early, remain disciplined and have a plan that will work for the long term, but any individual, at any age will benefit from any contribution to a retirement account. Spinnaker Investment Group is here to help investors with all of their investment needs.