a Recent Prudential Report A disturbing trend has been uncovered: the average 55-year-old has less than $50,000 in savings, well below the recommended minimum of eight times one’s annual salary by retirement age.
Yahoo Finance reporter Kelly Hannon We take a closer look at this important issue and offer strategies to help those nearing retirement boost their savings, as well as tips for maximizing retirement savings at any age.
For more expert insights and the latest market trends, click here to watch this full episode of Wealth.
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Video Transcript
According to a demographic health report, the median retirement savings for people age 55, just 10 years away from retirement, is less than $50,000.
This is a far cry from the goal of saving eight times one’s annual salary and how to catch up and get younger generations off to a strong start.
Carry from Yahoo Finance, Hannon joins us to talk about Carry: What do we know about how to close the gap between what we need and where we are?
absolutely.
Brad.
I’m happy to be here.
Yes, this study is a bit worrying for 55-year-olds because they have a short time until retirement.
Uh, and it’s notable that this generation has also been shown in the report to be, um, you know, severely deficient when it comes to emergency funds and seems to be dealing with a lot of financial issues.
Inflation is certainly a factor.
But the concern is, if you recall, Jenny is 55 years old, which puts her in the age range of about 44 to 59 this year.
But Brad, here’s the good news: younger generations appear to actually be starting to invest earlier, which bodes very well for their retirement.
Well, another report I saw from Schwab actually showed that Gen Xers haven’t started saving for retirement.
In other words, Generation Z is comprised of people aged between 55 and 31.
So our youngest generation, people in their early 20s to around 27 years old, started at 18, and millennials are around 24.
So there is momentum building among the younger generation to take action early, and the message is getting through.
Well, another thing that I noticed in some of the new reports was really interesting to me about the percentage of people that are actively investing. I was really intrigued to see that Gen Z again, younger people that are just entering the job market, are investing at about a 45% rate.
That’s really encouraging.
That’s one thing.
Meanwhile, Fidelity’s first quarter report has been released and it shows some slightly more optimistic and positive numbers for 55-year-old Gen Xers.
They say Gen Xers have a total savings rate monitored in their retirement plans that exceeds 15%.
And that’s above what they recommend as a good savings rate.
It’s, you know, a combination of personal savings — savings in retirement accounts — and employer contributions.
But here’s the good news again: Gen Z is hustling.
Currently, their total savings rate is 11%.
I think that was pretty good.
I don’t think I would have done that when I was that age.
Yeah.
No, I don’t have one either.
So what actions can people take now to put themselves in a better position?
So yeah, focus, focus, focus is really important.
Let’s go back to the 55-year-old who has saved less than £55,000 for retirement.
You absolutely must prioritize savings.
You have runway left.
However, in reality, many people who intend to retire at 65 end up retiring at 62 for a variety of reasons.
Maybe it was for physical reasons or maybe he was fired.
But they may only have seven years left instead of 10.
So, work hard and really try your best.
And one expert I spoke to said that if you can put 25% of your income towards retirement savings, do it.
That’s really amazing.
The second thing you absolutely must do is refuse to collect Social Security, if possible.
This is a very unpopular proposition.
Most people want to start receiving Social Security as soon as they turn 62 and become eligible.
But the reality is, if I can wait until I’m 70, I know that’s a big ask.
But if someone has the ability to do it, they can receive the maximum salary for the rest of their life, with an 8 percent increase each year from the full retirement age of 67 to 70.
So, if that’s possible, and to delay it, my third tip is to try to stay in work for as long as possible.
Of course, if you have physical or health problems this isn’t possible, but if you continue to work longer, keep your skills up to date and stay in the labour market, you can fight back while still receiving Social Security and really improve your future retirement security.
So I think these are things that people really need to focus on and work hard on.
Now, Carrie Hannon, give us some tips.
Thank you so much for explaining this in detail and sharing your findings as well as practical items that I can actually use.
Thank you so much, Carrie.