The reason I chose to start blogging about this particular topic…

Some days you run across an article or see a news clip that really resonates with you on a deep, personal level.  Yesterday I saw an article on cnbc.com that addressed just how woefully underfunded many pre-retiree’s retirement accounts really are.  According to the article, a government study found that 29% of Americans age 55 or older have nothing saved for retirement.  Nothing.  I began to think about this fact.  Nothing.  Saved.

After thinking about this study for a few moments, I began to ponder on what the future would likely hold for such a wide segment of this age group.  The only retirement income they have will be Social Security.  As I mentioned in a previous blog post, Social Security provides an average monthly benefit of just over $1,300 in 2015.  I would have to assume many of this 29% with no retirement savings will receive a benefit that would be around the average monthly benefit.  What will they do for their income needs beyond what Social Security provides.  The only answers I can arrive at are: continue to work (this ties in to one of my posts – What does it take to retire – age or money?), rely on government assistance, and/or rely on the generosity of family members or friends.

What I find so concerning about this study is the long-term ramifications this may have on our economy.  Consumer spending is by far the largest contributor to our broad economy (the broadest measure of the economy is contained in a report released on a quarterly basis known as GDP – Gross Domestic Product).  If a worker is age 55 or older and they have $0 saved for retirement, that leads me to believe they use all of their income to meet their current financial obligations.  Well, that is fine for now, but what happens if they cannot work?  How do they pay for basic living expenses if that situation arises?  Here is a quote from the cnbc.com article that highlights my point:

“There hasn’t been a significant increase in wages, people have student loans and other debt, and many are continuing to struggle financially,” said Charles Jeszeck, the GAO’s director of education, workforce and income security, which analyzed the Federal Reserve‘s 2013 Survey of Consumer Finances to come up with its estimates. “We aren’t surprised that people have not saved a lot for retirement.” 

The line that I find most concerning is where he points out that many workers are still struggling financially.  The reason I find that line most concerning is we are not talking about 20 – 25 year olds, the context is still ages 55 & up.  In theory, they have been working throughout their adult life and should have already entered the period of time known as “peak earnings”.  They should be more prepared and on a much more solid foundation from a financial perspective.  They should have something saved for retirement, anything saved for retirement.  However, the sad reality is they have NOTHING.

By the way, the article goes on to discuss how much those who have amassed at least some retirement savings and the news, while obviously better than those with no savings at all, is still concerning:

“Even among those who do have retirement savings, their nest eggs are small. The agency found the median amount of those savings is about $104,000 for households with members between 55 and 64 years old and $148,000 for households with members 65 to 74 years old. That’s equivalent to an inflation-protected annuity of $310 and $649 per month, respectively, according to the GAO.”

The reason I chose to start blogging about this particular topic is we are seeing a real retirement savings crisis in the U.S., and while it gets some press and political coverage (especially around election time), each passing year the numbers continue to deteriorate.  It is high time Americans get serious about saving for retirement, or plan to work until they die.  Yes, that is a blunt choice, but I do not see any other alternatives.  The moral – save early, save often!

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