Retirement and American Society
The signs are that there will be many Americans struggling with retirement in the years to come. Those who have already passed retirement age seem to be doing quite well by and large but the figures by age group published by Go Banking Rates indicate that all is not well in most of the age groups from those starting out on their careers to those within a few years of retirement. The average balance in retirement funds across the board is just $63,000. That breaks down as follows:
- Those in their 20s – average of $16,000
- 30 year olds - $45,000
- 40 year olds - $63,000
- 50 year olds - $117,000
- Those over 60 - $172,000
You might think that figures in excess of $100,000 are fairly good but there are many people expecting to live 20 years after retirement. Suddenly the figures aren't so good are they? If you accept a commonly held view that you should only withdraw 4% per annum those in their 60s would have less than $7,000 for the year. Even when you add average Social Security benefits the annual expected income remains below $20,000 with all the bills to pay. Those wanting to maintain their current lifestyle after retirement probably need something like 80% of their final annual employment income once they have retired. There are some things that you will no longer be paying out, basic things such as daily transport costs but the figure struggles to get much lower than the 80%. Those whose current lifestyle is based on income of $50,000 per annum will need $40,000 after they have retired and that does not really take full account of the potential medical bills that most face at some time or other once they have retired.
It Is Well Known
The strange thing is that it is widely acknowledged that people need as much as $1 million in their fund to have a long and comfortable retirement. Some have significant equity in their real estate but selling up does mean finding somewhere else to live and the costs involved in that, either paying cash to downsize or renting.
On the surface it is a mystery as to why more people don't take the need for saving for retirement more seriously. There is even the chance that the Social Security System will be less reliable in the future; funds are dwindling. There are fewer people contributing and more people claiming for longer. Estimates suggest that the level of benefits will have to fall by as much as 25% by 2030 without a major injection of funds. That can only come from increased taxation and with both houses in Congress having a Republican majority there is little support for increased taxation.
The US Government Accountability Office estimates that 50% of retired people are relying primarily on Social Security and with 25% of all over 45 admitting to having no retirement savings it looks unlikely that the picture is going to change. No one is being duped here; Social Security was never intended to fully support anyone and that has been widely publicized over the years. Citizens are expected to have over twice as much income from their own sources as Social Security will provide but it simply isn't happening. Instead of people having 80% of their working income after they retire it seems that it is more like 40%. Once the rent is paid, and average rents appear to be just short of $1,000, that does not leave a great deal for living.
As a matter of urgency people should start to take action immediately. You are allowed to set aside extra money once you are 50 in IRAs and 401(k)s but you will have to adjust your finances to do that. The first thing you may have to do is to clear any debts. The level of credit card debt in the USA is as disturbing as the lack of retirement savings.
Credit Card companies charge a high rate of interest on outstanding balances; it is how they make their money. They don't care about your finances as long as you are making the minimum payment each month. You should care and look to pay off any balance in the cheapest possible way. That is probably by getting a personal consolidation loan and settling in full so insure the real effects of $5000 cash for bad credit people . If you are in regular full-time employment and you can demonstrate your income companies are likely to approve a realistic application that asks for an affordable advance. As long as you have the self-discipline to avoid building up a balance again your credit card will be paid off in full and you will have instalment payments for the agreed term of the loan.
Tomorrow does come despite what you might think. Retirement is supposed to be a time for relaxation and comfort not worry and stress. Those still in their 20s still have plenty of time but they should resolve to put something away each month. In middle age it is more difficult especially if you appear to need all your income to pay your bills. Nearer to retirement it becomes even more difficult to put money aside but something has to give. If it is saving then retirement is not going to be much fun at all.