We all want a secure retirement where we don’t have to worry about making ends meet. After spending 30 or more years in the workforce, its time to kick back and enjoy our golden years. Unfortunately, many people don’t plan for retirement and just assume that their company pension, 401(k) or Social Security will take care of them. That’s a dangerous assumption and a recipe for disaster.
Here are some eye-opening statistics from saperston.com:
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The latest census figures indicate that only one in every ten Americans today is financially prepared to retire when they reach age 65. Here are a few other facts on retirement gathered from a variety of sources.
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Forty-seven percent of U.S. households are not covered by either a defined benefit or defined contribution plan (The WEFA Group). Twenty-five percent of employees who qualify for 401(k) plans do not contribute to them (an estimate from Buck Consultants).
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At the end of WWII, there were 42 workers paying into Social Security for each person receiving benefits. Today, barely three people contribute for each recipient. Projections are that by 2030, when most baby boomers will have retired, just two working people will contribute for each person receiving benefits (Social Security Administration, Trust Funds Report, 1992).
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Social Security benefits will replace only 16% of the income of married couples earning $50,000 to $100,000 and only 9.5% of the income of married couples earning $100,000 and only 9.5% of the income of married couples earning $100,000-plus (Office of Research and Economic Analysis, Pension and Welfare Administration).
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Sixty-nine percent of American adults aged 25 to 44 expect to retire in the “traditional” sense of spending retirement in leisure. But reality hits home as they near retirement-63% of 45- to 54-year-olds expect a retirement of leisure, and only 49% of those 55 or older say the same (Aetna Life Insurance and Annuity Co.).
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Working people tend to think their retirement lifestyle will be better than their current lifestyle, but retirees report their standard of living has declined. Example: Twenty-six percent of workers say they are “just making ends meet,” but only 16% think they will live this way in retirement. Of retirees, 20% are “just making ends meet,” while 16% describe their pre-retirement lifestyle this way (Employee Benefit Research Institute).
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A Baby Boom Retirement Savings Index, published each year by Merrill Lynch, shows that as of November ’94, baby boomers were saving only 38.2% of what they will need to maintain growth-adjusted living standards in retirement. The index is basically unchanged in the three years the index has been published (Merrill Lynch Strategic Planning).
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