More than two-fifths of baby boomers are approaching retirement without retirement savings.
If you’re a typical white-collar worker, living in a near-universal retirement plan corporate culture, and encouraged to save $500,000 or more before taking on a gold watch, then that fact is yours. may surprise you.
But many Americans work for smaller companies that don’t offer retirement savings, are self-employed, or live paycheck to paycheck.
Craig Martin, Managing Director of Wealth and Lending Intelligence at JD Power, said:
less than half of working-age Americans have retirement benefits, according to 2020 Census data. The savings rate increases with age, but only to a certain extent. Boomers aged 55 to her 64, 58% of Americans have a retirement account.
And that’s the problem. A retiree who has just turned 65 can, on average, expect to live another 20 years. Social security forecast.
Without a retirement account, most retirees rely on Social Security.Average Monthly Social Security Checks for Retired Workers about $1,800Average household spending for Americans 65 and older $4,000+ per month.
Still, “many people leave thinking Social Security will provide it,” says Josh Hodges, chief customer officer for the National Council on Aging.
A gulf of wishful thinking separates America’s retirement goals from retirement reality.
A rule of thumb is that workers should aim to save 10 times their annual income by age 67: $375,000 Individualand $708,000 household usebased on median income.
Americans assume they need something when the goal is to retire in relative comfort nearly $1.1 millionaccording to a study by asset manager Schroeder.
But the average retirement account held is just over $100,000 By the end of 2022, according to Fidelity Analysis.
The median for baby boomer households is not as good. $134,000 retirement savings 2019, latest federal data. about a third average That age group has $408,420 in retirement savings, which is inflated by the ultra-rich.
And most retired nest eggs are much smaller than they were a year ago. Fidelity estimates that the average retirement account is lost a fifth of its value By 2022, it will decrease from $135,600 to $104,000.
“There were a lot of downsides last year,” said Courtney Alleb, consumer finance advocate at Credit Karma. It shows a reason.”
Average retiree savings account size Diminished From $192,000 to $171,000 by 2022, according to Clever Real Estate research. The percentage of retirees with no savings jumped from 30% to 37%.
Early generations of retirees relied on Social Security and employer-paid pensions for a steady income.
Social security is shrinking as a source of income year by year, and pensions are on the decline. More than ever, Americans who want a “comfortable” retirement have to put money into retirement accounts.
But nearly half of private sector employees, 57 million Americans, do not have the option of saving for retirement at work.
according to AARP analysisthe majority of Americans lack access to employer-sponsored retirement plans: 78% of workers in businesses with fewer than 10 employees, 76 of workers without a high school diploma %, and 64% of Hispanic employees in the United States.
“When you have fewer than 100 employees, the chances of a plan really go down,” says Craig Copeland, director of asset benefit research at the Employee Benefits Institute. “So these people end up trying to run an IRA themselves. There is a high possibility that
Anyone can start a retirement plan. But for low-income Americans, this is easier said than done.
Since the 1980s, inflation-adjusted wages have stagnated for all but the wealthiest Americans.
To make ends meet, more Americans are continuing to work into their 70s. The percentage of people over her 75 in the working population is to reach 11% by 2026up from 5% in 1996.
However, even if the number of years earning wages is added, the poverty rate of the elderly is reached 10.3% Census data show that 2021 will see the highest percentage in 20 years.
“If you didn’t have Social Security, it would have been well over 40%,” said Richard Fiesta, executive director of the Alliance of Retired Americans.
Due to a lack of savings, many older people cannot afford the medical costs associated with old age.
More than half of Americans will eventually need long-term care, paid by those who turn 65 today Future long-term care costs $120,900on average, with one estimate.
However, an analysis by the National Council on Aging found that 60% of older people cannot afford two years of long-term home care.
“People don’t want to admit it’s going to be necessary,” Hodges said. “The idea of needing help going to the bathroom or getting out of bed is a concept that people don’t want to deal with.”
The good news is that older Americans with inadequate retirement plans still have plenty of options, according to retirement experts.
One is to keep working.
AARP Senior Strategic Policy Advisor David John said: Older workers, in addition to making money, may “want social connections to get out of the house and do something worthwhile.”
Increased tenure presents another opportunity to increase your retirement savings rather than drain them.
Retirees may consider deferring Social Security benefits. You can claim at age 62, but monthly checks nearly doubled If you wait until you’re 70, a federal analysis shows.
Homeowners should consider leveraging home equity to fill the retirement savings gap. Home equity makes up most of the typical retired homeowner’s net worth. However, many older people hesitate. reverse mortgage, a loan against home equity that yields tax-free income. A loan ends when the borrower dies, moves out, or sells the property.
Reverse mortgages have a mixed reputation, but “there are good, reputable companies that can provide a decent amount of income,” Copeland says.
As a long-term policy fix, many retiree advocates point to a growing list of states offering universal retirement savings.
Adopted by more than a dozen states retirement savings plan For workers in companies that do not provide them. Many other states are considering “auto-IRA” programs. The ultimate goal, according to advocates, is to reach out to all of her 57 million Americans who can’t save for retirement at work.
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