Saving for Retirement – What comes to your mind when you hear these words?
“Ummm… I don’t want to think about that right now”
“I’m never going to retire! I’ll work until I fall dead!”
“No need to worry. Isn’t that what Social Security is for?”
“I know I should be saving, but how much??”
Despite what our first response is, survey routinely find that many of us are terrified of running out of money in retirement. Yet most of us have chosen denial because we don’t feel we’ve adequately prepared for it.
I want to share three reasons why you need to start saving for retirement today!
1) We Are Living Longer Than Ever
According to the USC School of Gerontology, the life expectancy in America today is higher than any other period is history due to improvement in healthcare services and investment in medical research. United Nations data report that number of 65 years and older rose from 8% to 12% between 1950 and 2000. This figure is expected to rise to 20% by 2050!
More than a quarter of 65 year old today can expect to reach the age of 90! A unprecedented feat in the history of humanity. Compare that to most individuals born in 1900 did not live past the age of 50.
If we are living longer, we need more money to sustain us through our retirement.
2) We Can’t Work Forever
You might be thinking, “yes I’m living longer, but that means I can also work longer!”
We’ve heard people say, “I’ll never retire” or “I’ll work until I drop.” However, the reality is we might not always get to choose the when and why we stop working. Statistically only 20 percent of individuals past the age of 65 remain employed. Yet most of think we will be the exception. Majority of people who retire leave the workforce much earlier than they planned and this is often brought on by health issues or by family care-giving needs.
Leaving the workforce to provide family care-giving is a scenario my wife and I’ve often speak about. Though our parents are healthy right now, we see care-giving as an inevitable scenario given that they are pushing 60 and 70, . It is highly likely that that the decision to work may not be up to us even if want to continue to work.
3) The Responsibility Falls On You
Some of us believe that our company or our government will ultimately take care of us in retirement, but sadly that is no longer the case.
Outside the public sector, pensions, also known as defined benefits plans are being replaced by 401k – a do it yourself plan. I’m sure we’ve heard of older folks talking about working at a large corporation for 40 years and getting a life time pension. However, such employer paid pensions are a thing of the past. If you want to sustain yourself after retirement you will need to create your own retirement plan.
Social Security is also not the solution. In the 1980s, social security income could cover up to 50% of a retirees pre-retirement salary. Today that number is down to 40% and is continually declining. While Social Security will most likely be around when we retire, it will not have the same income replacement power as it did before.
One of the major financial concerns Americans have is not having enough money for retirement. Are you saving for retirement today? If so is it enough?