The Retirement Crisis Is Real. Here’s Why.
For years, we have seen a lot of back and forth on whether or not we face a retirement savings crisis in America. Some think that fears of a retirement crisis are severely overblown due to the fact that some surveys have shown that many of those who are in retirement are largely happy and comfortable.
This, of course, only takes into account people who were fortunate enough to be able to retire in the first place.
Conversely, we have seen reports that detail alarming numbers of Americans who do not have any kind of a defined benefit or defined contribution plan. Building on this, there is research that shows that roughly 40% of Americans cannot come up with $400 for an unexpected expense. So, who is right about the future of retirement in America?
The retirement savings crisis is something that I feel very strongly about. Based on what I have seen from clients, experts in the industry, what I’ve read and observed regarding government policy and what I am seeing in my own research, I believe there is most definitely a retirement savings crisis in America. But what may not be so evident to some are the root factors involved.
There are a few realities that need to be considered. Let’s start with the most obvious – when surveys ask retirees if they are facing a retirement savings crisis, the answers are quite obviously skewed. Those who are enjoying their golden years are not concerned with a crisis because they already have reached retirement and have their savings. If they felt they did not have enough money, they would likely still be working – and thus, not in retirement.
More important than survey semantics, however, is one significant reality: increased lifespan. Americans today are living much longer than they thought they would when they were in their prime working years. Many folks saved enough for a handful of years of retirement because that’s all that they thought they would need.
While it’s amazing that more and more people are living into their 80s and 90s, there is a great deal of people in that age group who did not expect to need that much savings when they retired nearly 20 or 30 years ago.
Secondly, longer lifespans also affect more than just you. We hear reports all the time about Baby Boomers who need to delay retirement because they need to care for their aging parents who have now run out of money. Younger Americans who may also be asked to help care for elderly relatives are already facing rising debt loads from higher costs of living, more expensive housing and increased student loan responsibilities.
With these considerations, it’s not hard to realize that even the most diligent of savers likely need to be saving even more than they think. This reality is the result of a combination of our current economic environment and a shift in demographics. How long will we live after we reach retirement? What will America’s economic landscape look like, especially with the uncertainty of the future of Social Security?
The challenges we face today are real and pressing. This is why it’s more important than ever to take saving for retirement seriously and start planning sooner rather than later.
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The material in this blog is presented for informational purposes only. Millennium Trust Company performs the duties of a directed custodian, and as such does not sell investments or provide investment, legal or tax advice.