Sunday, August 2, 2015

Why Today's Working Americans and Tomorrow's Retirees Must Better Prepare for Their Retirement Years

More than half of Americans aren't saving and investing adequately to provide for their families' financial security during the retirement years.

When my generation began working in the late 1960s, guaranteed pension benefits were the norm.

Over time that all has changed, at least in the private sector. And change will be coming to public sector employees as well.

And when we entered the workforce, the now retired baby boomers were just starting to work. Of course, that is all changing now too.

And at that time our country's financial status was the envy of the world. That's no longer the case.

And back in the now gone 'good old days,' burdensome debt levels weren't a big issue for our nation, individuals and American families. Student loans weren't a problem, and neither were credit card balances nor underwater home mortgages. Regrettably, that's no longer the case.

And finally, when my age cohort began our working careers, we didn't have a clue that the years would go by 'faster than a speeding bullet' and how quickly retirement would come. Now we know.

Those are just a few of the many reasons why there's a critical need for today's young people to develop the necessary habit of saving and investing consistently and properly during the working years.

We're Living Longer, and Other Reasons to Worry About Americans' Retirement Outlook describes the current situation in the following way:

"Americans are increasingly unprepared for retirement.

That’s a key finding in a new paper . . . about contemporary retirement finances. . . . the key is this: Americans are living longer. The average American woman who reaches age 65 this year has a better than one-in-three chance of seeing her 90th birthday, up from a one-in-four chance 50 years ago. . . .

 Below are a few highlights of the report.

Anxious Outlook

Only about half of adults who aren’t yet retired expect to have enough money to live comfortably once they stop working, While that’s an improvement over the outlook that prevailed in the aftermath of the recession, it’s still lower than early in the last decade.

Lower Net Worth for Many Households

According to the Hamilton researchers, that worry stems largely from the fact that the net worth of roughly half the income distribution of those ages 55 to 64 is lower than it was in 1989. The differences (amount) to gaps of several tens of thousands of dollars, with many of the households in this range in 2013 having between one-half to two-thirds the wealth of equivalent households in 1989. . . .
The End of Defined-Benefit Pensions

A few decades ago, when many employers still offered traditional pensions, a household’s savings were perhaps a less important indicator of its readiness for retirement. Today, however, with the slow demise of defined-benefit retirement plans guaranteeing a stream of income, Americans are more reliant on their own savings.

Since 1978 . . . the share of savings made up by defined-benefit plans and individual retirement accounts has changed dramatically. Last year, people relied on public and private defined-benefit pension plans for 34% of their savings, roughly half the level in 1978. By contrast, their reliance on individual retirement accounts or 401(k) plans soared from 20% to 58%, placing more of the investment risk on households.
Fewer Workers Supporting More Retirees

At the same time, Social Security is going to come under pressure as the baby-boomer generation retires with fewer working-age adults to take its place. . . . In 1960, there were nine workers supporting every retiree. In 2013, there were only 4.3 and the ratio is expected to fall even further in the decades ahead.

That decline will strain Social Security’s finances and put pressure on Congress.

“Because individuals are living longer but generally retire and start claiming benefits at a similar age as previous generations did, a greater share of federal resources has shifted toward supporting the elderly, with the share of the federal budget spent on Social Security rising from 13.4% in 1962 to 23.5% in 2014,” the authors write."

Summing Up 

Facts are stubborn things.

But they must not be ignored.

So do the right thing for yourself and your family by taking the necessary steps to prepare for  retirement while you're still young and have the opportunity and means to do so.

That's my take. 

Thanks. Bob.

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