Readers of this column may remember that I like to concentrate on the emotional aspects of retirement more than the financial ones, but an article I read recently has made my change focus for today.
According to AdvisorOne, an investment newsletter, Americans are just not saving enough for retirement. What this will mean as more and more people begin living only on their Social Security income will have an impact on all of us. The article, by Danielle Andrus, relates that research by the National Institute for Retirement Security finds that for households nearing retirement, the average savings is merely $12,000. For people nearing retirement with some kind of a retirement account, the average is $100,000. For younger working people, the amount is a lot less, but let’s be realistic. When you are building a career, paying off college loans, buying a house and supporting a family, saving for retirement is not very high on your list.
According to Diana Oakley, executive director for NIRS, “Retirement anxiety is running high and retirement confidence is running low.” Oakley noted that with the defined contribution system, it’s hard for participants to identify how they’re doing in terms of saving for retirement. Also, 48% of Americans have no job-based retirement plan.
More than 38 million Americans, or 45%, have no retirement assets, NIRS found. Among those near retirement, more than 40% have saved nothing. The article also said that 80% of all households have saved a total smaller than their annual income for retirement. Less than 3% of all households have saved four times their income or more. Most benchmarks recommend Americans save between eight and 11 times their income for retirement.
Perhaps it is a given that most people will have to work longer and mandatory age requirements for retirement will have to be studied and changed. Clearly whatever is happening right now is not enough. Should contributions to Social Security be raised, do low wage workers need better access to retirement plans, should IRAs be required of all workers? If we live paycheck to paycheck, how can we save for retirement?
It is easy to talk about saving more, if you have enough to live on. But too many people are just getting by, and once they begin living on social security alone, it is too late to think about saving. Should the government step in? Should IRAs and 401ks be required? What about investment risks? I would love to hear your thoughts on this.