Most Americans Can't Retire...

[Live Free]

I know there are threads about this and it has been discussed a lot. But in looking at this latest report, well, I guess I never really absorbed how bad it is going to be for a lot of our fellow Americans.

45% of all working households have no retirement plans at all and half of those are headed by someone 45 to 65 years old! That is a hard situation to fix.

From the report:

"Account ownership rates are closely correlated with income and wealth. Nearly 40 million working-age households (45 percent) do not own any retirement account assets, whether in an employer-sponsored 401(k) type plan or an IRA. Half of these households with no retirement savings are headed by someone between age 45 and 65, and may have too few year to catch up.

The average working household has virtually no retirement savings. When all households are included— not just households with retirement accounts—the median retirement account balance is $2,500 for all working-age households and $14,500 for near-retirement households. Furthermore, 62 percent of working households age 55-64 have retirement savings less than one times their annual income, which is far below what they will need to maintain their standard of living in retirement."

Link to report: http://www.nirsonline.org/storage/nirs/documents/RSC%202015/final_rsc_2015.pdf

I know that many on here will say that it is their own fault for not saving for retirement. But I have to agree with this report that public policy must change to make it easier for Americans to save.

Given that half of workers that could contribute to a retirement plan DON"T contribute, I wonder if we have to go to something mandatory - like SS contributions. I don't have all the answers, but this is so sad.

 

[ExFlyBoy5]

I won't read the report because they will glean numbers that will support their hypothesis.


It's pretty tough to go out and NOT spend money when there is NOTHING but a constant barrage of advertisements telling you to GO BUY THIS NOW!!! KEEP UP WITH THE JONES'!!!" It starts younger and younger and never stops. When the message is always to SPEND, SPEND, SPEND...then there will be no savings. We are seeing that now.


As far as mandatory contributions, well, that's what SS is for. [mod edit]

 

[daylatedollarshort]

Delayed gratification as the most important factor for success? Here is a reboot of the marshmallow experiment. Two out of three always eat the marshmallow.

Advertisers understand how to exploit this.

 

[Dog]

Major lifestyle creep.


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[2B]

When I was growing up, my parents raised 5 kids in a nominal 1500 ft2 house with 1 1/2 bathrooms and 3 bedrooms. Now if you put 2 kids in the same room, it's almost considered child abuse.

Culturally, we've raised everyone's expectations; but even with both parents working, there is always "more" needed.

 

[timo2]

Everyone will get to the point where they can no longer work, ready or not.

 

[Lakewood90712]

Everyone will get to the point where they can no longer work, ready or not.

My dad would have worked full time till death , if he was still able. Some chose to as a purpose for life , Grandfather was of the same mindset.

 

[pb4uski]

.....Given that half of workers that could contribute to a retirement plan DON"T contribute, I wonder if we have to go to something mandatory - like SS contributions. ....

If you are suggesting this, perhaps you need to revisit your screen name.

I struggle with this as well, but IMO if we value freedom then we need to allow people to screw up their lives if they decide to do so. At least they will have SS as a safety net.

I think/hope that subsequent generations will see how ill prepared many are for retirement and will start saving.

 

[Walt34]

I know there are threads about this and it has been discussed a lot. But in looking at this latest report, well, I guess I never really absorbed how bad it is going to be for a lot of our fellow Americans.

While I have little doubt that many will have to take a serious hit on their standard of living I wonder how many will be really living under bridges given all the other social services available. Besides, there are only so many bridges available.

And "retirement" as we understand it now is a historical aberration except for the truly very wealthy so I expect to see more of what was done in the past - multiple generations under one roof, the return of a "use it up, wear it out, or do without" lifestyle, a lot more home cooking and veggie gardens and not because they want to, and the like. Not a return to the 1930's Depression lifestyle but one taking a lot of the lessons learned during that time.

One SIL and BIL are having to deal with going from a 200+k/year income to ~$60k/year income in retirement. They are not adjusting well and did not plan well, but they'll hardly starve.

And it is possible to live on SS. Not comfortably, but possible. Obviously if one lives in San Fransisco when that happens a move is quickly approaching.

 

[mpeirce]

National Institute on Retirement Security - Wikipedia, the free encyclopedia

"NIRS seeks to "contribute to informed policy making in the area of retirement security by fostering a deep understanding of the value of traditional pension systems to employees..."

"Long-standing members include the AARP/NRTA and a number of the country’s largest state and local public employee pension plans."
​

Just so you know who financed the study - the folks who want to kill off 401(k)s and any alternative to traditional pensions...

 

[mathjak107]

americans are retiring and have been . that is bull. everyone finds a way to make do with what they have.

 

[Earl E Retyre]

I believe part of the answer (as a long term/future solution) is that schools should teach children about finances including and stressing the value of LBYM starting at a young age. I am not a teacher and know little about the school systems, so maybe this is a naïve concept. But I do not understand why there are not fun programs that focus on this throughout a child's education (elementary through high school).

 

[pb4uski]

Agree. Here is a place to start. Feed the Pig

 

[athena53]

Years ago a local newspaper financial columnist was asked by a reader why he kept featuring people who retired with $500K, $1 million and more, and didn't write instead about those like him who were "blessed to have $50,000 or $100,000 for retirement". His response to the reader: "Keep working".


I think people figure SS will cover everything and they'll take a little out of savings every year and when reality hits (needing to replace the car, hearing aids not covered by Medicare, high prescription co-pays) that's when they realize they needed more savings. One of my HS classmates, a retired nurse, posted a reference to "our meager savings" on FB and I wanted to ask her why she didn't go back to work. (She would have been 61 when she posted that.) Then she posts asking questions about how her ihone works and what kind of case to get for her new iPad. Sigh.

 

[donheff]

I'm with Walt on this one. As Mathjack's chart shows people continue to retire at about 62 despite the downturn and the lack of savings. They either burn out, can't find work, or have physical problems limiting work. They find a way to get by. It is true that there are many fewer retirees now who can maintain their pre-retirement living style due to the decline in defined benefit pensions but that just dumps them into the dire circumstances that significant portions of the population have always been in. It does seem to me that this situation is a good reason to maintain social security at its present or higher levels so the increasing numbers of the unprepared can have at least a marginal floor.

 

[EastWest Gal]

I believe part of the answer (as a long term/future solution) is that schools should teach children about finances including and stressing the value of LBYM starting at a young age. I am not a teacher and know little about the school systems, so maybe this is a naïve concept. But I do not understand why there are not fun programs that focus on this throughout a child's education (elementary through high school).

An often discussed topic between me and my son. School teachers don't know much about this topic either and are not educated to do this. But just showing LBYM and the power of compounding would be helpful. Interest rates have been low for such a long time it's hard to talk about them in a meaningful way.


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[Mo Money]

I'm with Earl, pb4 and EWG on this one. While PF habits should be taught at an early age, the emphasis should be particularly at the HS and college level. In my day, we were taught how to cook (home ec), build stuff (shop) and in college I had to prove I could swim (or be forced to take a swimming class). Why on earth were we all not taught to cook up a savings plan, build a future, and keep our financial heads above water?

 

[audreyh1]

I know the US society is a very consumerist society.

But I never had any trouble ignoring the ads.

You'd think most folks would become inured to them.

 

[audreyh1]

americans are retiring and have been . that is bull. everyone finds a way to make do with what they have.

The top line is not surprising as it sort of corresponds to the expected Social Security FRA for workers which has gone up a year.

People born in 1937 (would have been 65 in 2002) reached FRA in 2002, and qualified for 80% of benefits when they reached 62.

By 2009, everyone under 66 (born in 1943 or later) had a SS FRA of 66 and didn't reach 80% of benefits until 63. I expect by then many folks were aware that 66 was the SS full retirement age, not 65.

But it is notable that fewer expected to take SS benefits early. And apparently there has been a drop in people taking benefits at age 62. Of course the benefit itself has dropped to 75% from 80% of FRA benefits.

The bottom line is a bit surprising. It's trending up recently, yet well after the 2008 financial crisis.

 

[GreenER]

It is truly amazing in our culture that finance is such a taboo subject. You would think it would be a core skill. Even having been raised by financially savvy, serious LBYM, super savers there was no talk about the mechanics of finances in our household growing up.. The one thing they did have us do as kids was to put 10% of all gift money or earnings into a college/big venture fund. They did plenty of modeling of LBYM but it seemed more instinctual (depression fostered) and environmentally driven than done for financial reasons. They are in their mid eighties now and bought their downsized house with cash before selling their previous house. I know they are very comfortably set and are still saving. But to this day they don't talk about it other than to disparage spendthrifts. I guess they still rubbed off on us, as all four of us LBYM and 3 out of four are super savers and will retire in our fifties with well above average networth. The fourth one will be working as long as possible and will likely be the recipient of the majority of my parent's estate. But even she is a saver and is very frugal she has just been marginally employed her whole life and has had several periods of unemployment. Even she will get by okay once she hits social security as she is used to getting by on very little and she still has a pretty decent lifestyle.

 

[mpeirce]

I believe part of the answer (as a long term/future solution) is that schools should teach children about finances...

Just having a school add a class isn't good enough.

My son took a personal financial glass in HS on my suggestion. It was a pretty big waste of time. The teacher didn't know what he was talking about most of the time and they spent way too much time playing computer games (finance games/simulations...).

I was lucky in college that I took a class called "Money and Banking" from a professor that had worked at the Fed. He was great and really did know what he was talking about. I learned a lot.

So basically, adding a class in schools is a start, but it's certainly not sufficient!

 

[athena53]

I know the US society is a very consumerist society.

But I never had any trouble ignoring the ads.

You'd think most folks would become inured to them.

I guess not, since so much is spent on advertising! A couple of days ago I got a FaceBook feed post that was basically an ad for a new shade of Coach bag- a weird neon-y yellow-green. There were 45 comments and ordinariiy I ignore those posts but I'm disgusted at how the quality of Coach bags has deteriorated and at their moving production from NY to China, so I posted a comment to that effect. The other 45 comments were about the bag "Like".."Need"..."Love this color"..."Want"... And that's where the dollars that should be saved for retirement are going.

As for the graph- yeah, I'm one of those points. Planned to retire at 65 (one year before FRA), decided I was fed up and retired at 61. Glad I could do it. Maybe it's because I own only 3 Coach bags and the newest was bought 11 years ago.

 

[Redbugdave]

As mentioned before...there's SS for the ones that paid into it. Many live off the grid and get paid under the table. We all make our own choices. I saved up my marshmallows. I don't feel guilty and in most cases you make your own bed.

 

[BTravlin]

Just having a school add a class isn't good enough.

My son took a personal financial glass in HS on my suggestion. It was a pretty big waste of time. The teacher didn't know what he was talking about most of the time and they spent way too much time playing computer games (finance games/simulations...).

I was lucky in college that I took a class called "Money and Banking" from a professor that had worked at the Fed. He was great and really did know what he was talking about. I learned a lot.

So basically, adding a class in schools is a start, but it's certainly not sufficient!

Better education is the cure for many of societies ills and a good financial education is critical. Just read the following article in the NYT and they talk about the complexities built into our financial/tax/social security system and how those complexities make it so difficult for the average person to save.

"This appears to be a distinctly American condition. While Social Security may well have evolved to its muddled state in part to let more citizens benefit earlier and not suffer from inflation’s effects, our tax system and other arenas are ones where multiple constituencies lobby against decreased complexity and make their livings off everyone else’s confusion."

http://www.nytimes.com/2015/03/14/your-money/the-black-art-of-deciphering-social-security.html?smid=fb-nytimes&smtyp=cur&bicmp=AD&bicmlukp=WT.mc_id&bicmst=1409232722000&bicmet=1419773522000&_r=1

Too many lawyers and lobbyists in DC. Time to simplify the system.

 

[photoguy]

While I have little doubt that many will have to take a serious hit on their standard of living I wonder how many will be really living under bridges given all the other social services available. Besides, there are only so many bridges available.

+1. It's not clear to me that there's really a crisis or that conditions are getting worse for older folks than 10, 20 , 30 years ago. However, if there were hard data showing a homeless problem or other humanitarian issue, I could be convinced otherwise. I suspect the majority of people will retire, just not as comfortably as they would have liked.

I know that many on here will say that it is their own fault for not saving for retirement. But I have to agree with this report that public policy must change to make it easier for Americans to save.

Given that half of workers that could contribute to a retirement plan DON"T contribute, I wonder if we have to go to something mandatory - like SS contributions. I don't have all the answers, but this is so sad.

I wonder if minor tweaks to existing solutions might go a long way. Simple things like making contributing to a 401k the default and eliminating plans with high fees.