Editor’s Note: As Steve reveals in today’s piece, the retirement crisis will take a full 38% of retirees by surprise purely because they have neglected to calculate how much they will need to sustain 22 years without working income.
In order to calculate where you stand in your retirement planning, try using our free Retirement Readiness Calculator.
Many Americans have been able to overcome the odds and maintain a comfortable retirement lifestyle. To join them, start planning now and don’t let this crisis catch you with your head in the sand.
– Mable Buchanan, Assistant Managing Editor
Here’s your quarterly retirement funding update. I usually do this in Friday’s “Slap in the Face” Award and add a bit of a sardonic twist to it, but the numbers for the boomers have gotten so bad I feel like I have to use a more serious tone this time.
The first boomers retired in 2011, and to date, 26 million have crossed over into retirement. There are still another 50 million to come, and the lump in the snake won’t work its way through until 2029.
To date, 42% of boomers who are still working or who have retired have saved zero for retirement. Just a little bit more than one-third of us have been able to put away $100,000 or less.
If those numbers are correct, that means 80% of boomers are and will be surviving on something in the area of $20,000 per year for an average retirement span of 22 years.
How did I come up with $20,000? The average annual income from Social Security is $16,848. To that, add 4% (4% is an industry standard withdrawal) of the $100,000, and you’re somewhere in the area of $20,800.
Actually, that $20,800 number is high when you consider that only one-third of us have $100,000 in the bank.
Keep in mind, this same group of people is carrying an average of $6,000 in credit card debt into retirement, plus, in an increasing number of cases, mortgages and student debt that we’ve co-signed for our grandchildren.
Almost one-half of boomers surveyed reported they assume they will need something in the area of $45,000 to survive in retirement. That means, if they’re receiving the average Social Security payment, they will need $700,000 in savings to make up the difference.
As depressing as those numbers may seem, only 38% of boomers have even bothered to calculate what retirement will cost them. Essentially, they’re flying blind, and most likely into cliffs.
The solution most people offer to this sad affair is to work as long as they can – but the research indicates only 4% of us who plan to work to the age of 70 or later actually make it that long. A combination of medical problems and rampant age discrimination in the workplace has essentially eliminated that possibility for most of us.
On the bright side, if you can call it that, 79% of those who have sought help from professionals have more than $100,000 put away.
There have been some articles written in the last few years that purport the retirement crisis is not as bad as has been reported. But the numbers used in these articles to calculate average retirement savings by age are skewed by the fact that a very small percentage of boomers have saved an enormous amount of money – millions in some cases.
The fact remains, depending on whose numbers you use, 40% to as many as 80% of boomers will be living near or below the poverty level in retirement.
The retirement tidal wave people have been writing and warning us about since the ’80s is here, and it’s as bad as everyone said it would be.
If you’re part of the 80% who are going to have a tough time in their golden years or the more than 60% who haven’t even calculated what retirement will cost and still have time to contribute to your retirement funding, you’d better get to it.
I haven’t even included the future cost per couple of healthcare that won’t be covered by Medicare. That’s for another time.