Sometimes I read reports and try to wring a few statistics out of them for use in client presentations or marketing events. Each year, the EBRI does a survey The Retirement Confidence Survey, and while I’ve heard of this report, I’ve never sat down and read it. Today’s post is me recanting some of these numbers and percentages – unbelievable numbers and percentages – which really makes my head spin.
Did you know…
- 46% of all workers have saved less than $10,000 for retirement;
- Of those age 55 and older, 36% have less than $10,000 saved;
- Only 12% of surveyed workers have over $250,000 saved;
Is it really possible that people actually think this is acceptable? Give me a break – over one third of workers over age 55 have saved less than $10,000. This is insane.
What do you do if you’re part of that group? Get off your butt and do something about it. I know it can seem like “it’s too late,” but there’s no time like the present. You may have to tear the bandaid off, cut out cable, dining out, sell the cars and the fancy china, but doing nothing isn’t a plan either. Get real.
Did you know…
- 53% of workers have never done a calculation to determine how much they need for retirement;
- 45% of people “guess” at how much money they’ll need
- 18% did their own calculation
I feel like the guys from ESPN Monday Night Football…”C’mon, man!” This isn’t even hard work! All you need is a calculator and a few minutes! “But, O.G., I don’t know how to do pressent value / future value calculations on my calculator…” Well, I guess you should just throw your hands up in the air then, because either you’re born with the ability to use a HP 12C or your not.
Or…you can Google “Retirement Calculator” and see what happens.
45% of people guess. I love that.
Did you know…
- 30% of all workers think a retirement balance of $250,000 is adequate for a lifestyle-sustaining income in retirement;
- Only 14% of 55 and older workers think that number is over $1 million;
Two-hundred and fifty thousand dollars is what the average retiree will spend…on healthcare costs during retirement. Not including all the other expenses! Quiz question: At what age will the second death occur, statistically, for a couple, age 65, who retires today?
92.
That means today’s retirees have a 30 year retirement ahead of them – that’s about how long they’ve been working – and somehow $250,000 is enough?
Financial advisors preach the “4% rule” which simply states that you have a high likelihood of success if, when you retire, you withdrawal 4% of the balance of your account in year 1, and then increase that with inflation each year thereafter.
One million dollars equates to a $40,000 distribution this year. But we forgot something…inflation between now and when you retire. If you’re 40 years old, a simple 3% inflation rate devalues the $40,000 by nearly half by the time you retire.
For what it’s worth $1 million isn’t even close for most people.
Did you know…
- 23% of workers have engaged a professional advisor to help them plan;
- less than 1/3 of those people followed the advice from the advisor;
Let me get this straight: Most people don’t do the calculation to determine how much they need to save where to save it or even what their goal is. Thankfully, some people (a whopping 23%) have engaged a professional – but then don’t follow his or her advice.
This is simply astounding. If you’re not going to sit down and do it yourself, then for cryin’ out loud hire someone to help… and just do whatever they tell you to do! I know that there are rotten pros out there…but doing something is a hell of a lot better than sitting around hoping things will get better.
We can’t just bury our heads in the sand and assume things will work out.
For more information on this report by the EBRI, please visit their website. They have all sorts of data and research available, but this is simply the most amazing thing they do.
Great points, Joe. It’s scary when you look at the statistics, and I’m worried not only for the generation nearing retirement but my own generation. Many are straddled in debt and an uncertain economy and in a sense our culture has made people delay careers and certainly delay saving for retirement. With subsidized health care our country is taking on a HUGE debt burden that I am praying we are able to pay off…though looking at Washington these days for financial responsibility is even more depressing.
Woops, realized it was “TheOtherGuy” and not Joe who wrote this post!
I saw this study and was saddened when seeing the numbers. It’s no wonder why people cannot afford to retire. People are under false assumptions thinking that Social Security will cover their expenses or don’t realize how long they are going to live.
If anything can be learned from this study it is to start saving now!
I think what gets me is when people say things like, “Oh, I’ve saved more than the average person!” and think that’s good enough. When the bar to be “average” is so low, just beating the average could still leave you utterly screwed!
“I feel like the guys from ESPN Monday Night Football…”C’mon, man!” This isn’t even hard work!” I could not agree more OG, these numbers never cease to make me just shake my head and wonder what many are thinking. The problem is that they’re not thinking and unfortunately will probably pay in the long run. I actually am running an infograph next week that has some of the very same numbers. I, for one, really do not want to be working as a Wal-Mart greeter until the day I drop. 😉
The statistics are scary. I suspect that most people will somehow muddle through retirement with Social Security and what little savings they have. But the reality is that their retirement isn’t going to be anywhere near as exciting and fulfilling as they hoped. And they’re going to probably be working until 70 if not later.
With luck, my savings and investing plan will ensure that the above fate doesn’t befall me.
Very interesting numbers, thanks for sharing these. Great post!
I have seen these numbers before, or something like them. When I first realized this once I got out of credit card debt, I decided to get my head out of the sand. It is easier to not prepare for the future, so that is why people keep hiding from it. I want to be ready and I will do my best to be at that point.
I am glad I have more than 10k saved and am part of the 54%! Of course, I expect to have much much more before I even consider retiring.
This seems like the perfect storm! People will inevitably have to work longer. Even if they did have money, there are no CD’s, or money markets (often considered safe investments) which pay over 1 % The problem is obviously lack of education and too much reliance on medicare and social security which may not be around in 10-15 years.
I’m 10 years from retiring and have saved 15% of my income (or more) since I entered the “real” working world at the age of 28. Spouse and I paid for undergrad and grad school on our own and it took us years to pay that debt off, while raising kids, etc. Spouse just doesn’t think we’re going to need anywhere near the $1.5 – $2M I know we’re going to need. What to do?
Thanks for the note, Jim. I’m actually whipping up a piece about this right now (I think it’ll be on the site in two weeks….), BUT that’s the biggest problem in the financial planning game for married couples. If she’ll believe the non-emotional argument, using one of the projection websites is a good first step. Seeing is believing for some people. For others, it can’t be YOU telling her. My wife doesn’t believe most of the awesomeness that comes out of my mouth. Hire a fee-only financial planner to draw up the numbers for you. Sure, it’ll cost you the fee (a couple hours of time), but you’ll gain a spouse who gets what a mountain you’ve been working on climbing. Congrats on the 15% since 28, btw.
It’s like Jim says, people will work longer, because they need to. The good news is even if you start investing at 50, you still have a 20 year investment window ahead of you. People seem to jump too easily to the conclusion, “Oh, it’s too late — why bother?”
It’s never too late to get started.
“Of those age 55 and older, 36% have less than $10,000 saved”, that’s terrifying to me! $10k wouldn’t even last us one year. I don’t understand how people are surviving if they have no money at retirement. Social Security certainly isn’t enough to live on for most people. Especially if they have rent or don’t have a paid for mortgage (and I’m assuming, maybe wrongfully so, if you have less than $10k saved, you probably don’t own your home outright). A good wake-up call for us all!
Since we are throwing around some figures, I did some research on this topic too.
Did you know that 63% of Americans believe that Social Security will be the most significant source of retirement income. The reality of the matter is that Social Security is covering less than 40% of the actual costs of retirement.
If you want to start financing retirement beyond savings and 401(k)s then look into buying investment properties. The rental income can go a long way to increasing monthly cash flow.
Good point, Simon. Thanks for the stats, too! Once someone learns about many of the investment opportunities available, there are many, many ways to finance a retirement dream.
I saw that study and have seen similar ones. I just think people can’t get beyond today. They either think they will have time later or will just keep working forever or social security will save them. We really need to start teaching money and financial topics in elementary school. Since that isn’t likely to happen, I’ll do my best to teach my daughter about money and hope it sticks. My parents were always savers and are in really good shape. My in-laws are on social security only. It’s a huge contrast in lifestyles between the two. I really worry what will happen when the in-laws get older and need more care. It’s scary to think about.
We all know that Social Security is not enough to live on by itself! Why aren’t people doing something about their retirement? Maybe they are expecting a miracle! I expect there are a lot of children who will have to support these parents.
I have had similar conversations with my in laws who just assume things will work out. It’s very unfortunate because there will come a point where they need one of their children to take them in and I have a hard time being sensitive to their situation when I have told them on numerous occasions they need to plan. But of course their house is their retirement nest egg, blah blah.
WOW, I had no idea that retirement savings numbers were so low! At that rate, they will either never retire, or spend their retirement years in subsidized senior housing eating rice and beans. Not good! Thanks for the eye-opening info!