Despite Resources, Americans Still Unprepared for Retirement

May 30, 2018

Last week, a new client came to see us to discuss the possibilities of her cutting back on her professional work schedule and transitioning toward full retirement.  Although an analysis may show that her savings and Social Security income are sufficient to achieve her objectives, there would be a few uncomfortable options if there were severe shortfalls, mostly because she is almost at her retirement age.

Earlier this month, Northwestern Mutual published new research and data that indicates most American adults are (rightly) concerned about their prospects for attaining the retirement they would like. In the study, fully ¾ of those surveyed are at least “somewhat concerned” about affording their envisioned lifestyle and two-thirds believe they will likely outlive their retirement savings.

Additionally, the study emphasized several disturbing conclusions, based on the data gathered:

1) 21% of Americans have no retirement savings whatsoever.

2) 33% of those aged 54 – 72 (the Baby Boomers) have less than $25,000 in savings.

3) Half of American adults “have taken no steps to prepare for the likelihood that they could outlive their savings”.

These findings are even more troubling when one considers the following real-time issues that many retirees will face in the future:

1) While small steps are being taken to shore up the Social Security income system, senior healthcare (Medicare) and poverty-based medical assistance (Medicaid) programs are woefully underfunded and the situation is expected to get worse.

2) Most government and municipal pension plans are severely underfunded.  Corporate pensions are becoming a benefit of the past and roughly 40% of major corporate pension plans are less than 80% funded (2017).

3) Medical costs and health insurance premiums continue to escalate at a rate higher than aggregate inflation levels, a rate only exceeded by rising college costs.

4) Long-term (custodial) care insurance premiums are almost unaffordable by many households for both senior spouses and the prospects for needed such care in one’s last years are increasing as people continue to live longer.

What this means is that no one should be waiting until their sixties or age 70 to figure out where they stand regarding affording their retirement.  Even having a rough idea of how much in savings will be needed alongside Social Security to finance an expected retirement lifestyle is better than no plan at all.  Whether or not you retain a professional to guide you through this process or you use the myriad of online retirement tools to create your own plan, now that we’re well into another year, start now to prepare.  Don’t be like the 50% that haven’t a clue about their financial future.