Saving For Retirement
It’s been literally years of waiting for the economy to improve and things to finally get better. Now that they are at least to some extent, it’s ironic that those workers, who have lived through and managed to survive the lows, now have something else to worry about.
The dream of retiring while still young enough and healthy enough to enjoy it is rapidly turning into nothing more than a pipe dream for many. That’s because there is simply not enough money to both make ends meet and to save for retirement.
And despite the upturn in the economy and financial markets, it’s only getting worse for practically everyone, whether or not they are nearing retirement age.
As recently as 2008, a little less than half of US workers surveyed had managed to put aside $25,000 or less in savings and investments, not counting their homes. Today that figure has climbed to 57%.
In the scheme of funding retirement, that amount of money is like a drop in the bucket and yet even that much has proven to be unattainable for the majority of workers.
The same survey revealed the disturbing result that 28% of Americans think they will not be able to put enough money aside to retire comfortably when the time comes. That’s the highest percentage ever to share these pessimistic thoughts.
The generous corporate pensions that used to be quite common are likely a thing of the past. Because life expectancy is increasing, people are drawing money from pension funds for much longer and businesses just can’t afford to keep bankrolling these pension funds.
The other factor is interest rates. When interest rates are low, there is less money to fund the future retirement of those who are paying into the fund right now.
Today’s declining interest rates paid on investments has created an untenable situation for even large corporations.
In fact, defined-pension plans which are those funded by business, covered only 3 percent of private sector workers in 2011. In 1979, this number was at 28 percent.
The writing is definitely on the wall to indicate that the funding for retirement is going to be up each individual, for the most part in the future. And individuals face many of the same challenges as corporations, albeit on a smaller scale.
Chances are they will live longer so they’ll need more money set aside to take care of their needs. And that’s not good news because even those who contributed on a regular basis to personal retirement plans in the past are finding it more difficult to do so now, as money simply doesn’t go as far as it used to.
Household expenses are up, while wage increases for workers and profit margins for those operating small businesses are down. Statistics from a survey conducted by the Employee Benefit Research Institute back this up. They state that only 66% of people surveyed in 2009 are finding it possible to save for retirement on their own. That’s down from 75% in earlier years.
Many of these are the workers who previously could depend on a company pension to help when they retired. There’s a huge difference when a company matches or at least helps to fund your retirement compared to having to do it all yourself.
In a time when money is tighter than ever for the average worker and companies are backing out of funding pensions for their employees, the result is that savings are not going to last as long as projected. What’s the average person to do when they thought they had enough money to care for themselves for say thirty years, but find out that it’s going to run out in only twenty?
While things are bad enough for those who are already retired, the outlook for those who are still years away from retirement is even worse.
This may be the first time in our nation’s history where parents don’t believe that their children will be better off financially then they themselves were. The realization is that unless they can help their children out financially, there is little chance that they will be in a position to create their own nest age for the future.
The saving for retirement crisis is real and it’s happening right now. The question is, how can you avoid it.