Retirement is one of the most crucial aspects of the American Dream. Unfortunately for many, a dream is what it is turning into. With unexpectedness of the market and the standards of living both improving (for example medically, hence our lifespans are increasing – along with our medical bills) and declining (with cost of basic needs consistently rising – while the wages still remain low), retirement will soon become a privilege only a few will get to experience.
A key to a successful retirement lies in how well you save towards it. While we want to live our lives to a full potential and enjoy our “now”, we should strive to make savvy decisions regarding our future. When thinking of retirement, think how much you would save if appropriate decisions were made regarding the type of car you purchase, the number of kids you (can afford to) have, the house you live in; all these things put a significant dent in your savings and can be dry when you need it most.
Check out these facts about retirement. We hope this encourages you to make proper decisions regarding your potential successful retirement.
1. About 1/3 of Americans don’t have retirement savings – even with retirement plans like 401(K)
The report conducted by the Federal Reserve, entitled, Report on the Economic Well-Being of U.S. Households, states that even with retirement plans in place, “Thirty-one percent of non-retired respondents reported having no retirement savings or pension, including 19 percent of those [between] ages 55 to 64.” The report also concluded that about 25% had only given a little bit of thought into saving for retirement while another 25% had given no thought at all.
2. You need 70-80% of your income to live comfortably
Once you hit retirement, the money you will get back from years of working will not equate to the amount you once earned. Depending on how you planned for retirement, this amount can be excruciatingly low – leaving you in a burden. Luckily, programs like social security help provide some relief. “Financial planners recommend that a person needs between 70-80% of their income to live comfortably throughout their golden years but the average worker social security only replaces 40% of their income” – Jo Anne Barnhart, Commissioner of Social Security, and Dallas L. Salisbury, chairman of the American Savings Education Council (ASEC). So what about the other 30-40%? The rest of the amount will have come from your pension plan(s) and personal savings.
The bottom line: relying solely on social security as a means of income post-retirement will only create a burdensome scenario.
3. Most people are not retiring at 60 anymore.
60 is the number that comes to mind when most people think they’ll retire. However, the recession changed this ideology amongst many. In the US, the social security retirement benefits do not start until the age of 62. According to Social Security’s official website, the full retirement age for people born after 1960 is 67; “in the case of early retirement, a benefit is reduced 5/9 of one percent for each month before normal retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month.” You are reducing your benefit by 30% when you retire at 62 instead of retiring at 67.
With advancement in medicine and with awareness of proper living, most people can easily continue to work till 67 healthily if they choose to. However, you can still retire in advance – granted you properly planed for retirement in advance.
4. The average retirement account balance for those nearing 65 is $12,000 (National Institute on Retirement Security)
While the number is $12,000 for those nearing retirement, it is about $3,000 for average working-age households. It is highly encouraged that people consider saving for retirement into their budget plans as it is one of the most crucial aspects of a successful – burden free – retirement.
5. For many, retirement is only a dream
While this fact really only effects the baby-boomers as of now, this may turn into a possible trend if proper precautions aren’t taken towards a secured retirement. A survey done by AARP stated that about 35% of the baby boomers return to work after retirement of which 3/10 plans on retiring at 70 while about 40% “plan to work until [they] drop.”