The picture is confusing. It seems that 13% of Americans are saving at least 20% of their monthly income towards their future retirement. At the same time a considerable number of people, 55 or over admit to having little in the way of savings. Many of them have more credit card debt than money put aside. With the Social Security System looking increasingly vulnerable the picture is fairly gloomy. The situation is not improved by the current stance of Congress that is opposed to increasing taxes to help boost the funds in the Social Security System.
The point about saving for retirement is the age at which you start to do it. If you begin in your 20s then even a small but regular amount grows because of compound interest. Time is your friend in contrast to someone within a few years of retirement. Even putting away a sizeable sum each month will not produce a fund that can support a comfortable lifestyle in retirement. A working career is generally a little over 40 years. People are living much longer and healthy people can reasonably expect a minimum of 15 years retirement; some may even get well beyond twenty years. This is a period that has to be funded. There is a strong argument that 20% saving is not sufficient for those that begin providing for retirement in their middle age. In the mid-50s it should probably be 10 points more.
It may seem hopeless. You may be tempted to rely on high return investments yet there are inherent risks. The closer you are to retirement the more you should avoid risk. Fidelity Investment’s findings are above; 13% are saving 20% and amongst the younger generation a fifth appear to be putting away 15%. Often this is via a 401K where the deduction is made from the gross pay check thereby saving on tax to be deducted. It is a way to almost forget that it is money available to you because of it being deducted at source. Perhaps the figure can be slightly increased each year; suddenly it is 20%?
By no stretch of the imagination is it too much unless you have saved from the early years of your career. While it varies from person to person, it is estimated that people still need 70% of the income they were receiving before retirement. A recent Wells Fargo survey stated that people over 60 had on average just $50,000 in savings and many adults currently have nothing at all and will at this stage be totally reliant on the Social Security System which is already under extreme pressure with more claimants, fewer contributors and a dwindling fund.
Take the example of someone earning $50,000 annually, hardly a huge or unreasonable amount. That would mean needing $35,000 to maintain their lifestyle. The average monthly pay check multiplied by 12 will only provide $16,000! Clearly lifestyle changes would be essential but they would hardly be living a life of luxury anyway.
It will be possible to reduce monthly living expenses for those that decide they can live in a smaller house or apartment. If they own real estate that can be sold and any surplus if a mortgage is still outstanding can be banked but there is still the issue of somewhere to live and rent to pay. A few things may have to go; cable TV, the smart phone or health club membership. They are not necessities though it will seem like a sacrifice.
Whatever your age you must take the time to think about your finances. The list of your expenditure may make depressing reading. The exercise of looking at your regular outgoings is a start. You may be paying too much for your utilities, insurance and mobile network. There are comparative websites that will do much of the initial research for you. If you are carrying credit card debt then you are paying significantly high interest on any outstanding balances. As a matter of urgency you should look to pay that off. One excellent way to do that is to take out a cheaper personal loan repayable by instalments. If your application looks affordable, today’s realistic loans lenders are likely to agree quickly and transfer the funds in hours. If you are in regular employment you should do that.
No one is taught money management at school. Plenty of people learn the hard way and there is no doubt that a huge number of people in the USA are experiencing that now. There is always something that those with income can do to improve things though some of the decisions may be hard and in the worst cases there is little doubt that major sacrifices will be involved. Some Americans are saving significant amounts; others have little. Whatever your personal situation, identify your position and act if you are in trouble.