I just read an article,( in Financial Advisor Magazine, March 2015) that is pretty scary, because it hits close to home (my age bracket). It says that a report by the Center for American Progress has been released that highlights that the median retirement account balance among all households headed by people aged 55-64 (those nearing retirement) was only $14,500 in 2013! It also points out that retirees needs have grown significantly in recent decades. Life expectancy has risen, full social security benefits aren’t paid out until age 67, health care costs have risen substantially, and the decline in interest rates, since 1983, means that the amount of wealth saved produces less retirement income.
More Americans than in past generations, approximately 31%, reported no savings for retirement, and of those nearest retirement (ages 55-64), 19% reported no savings for retirement! That’s one in five Americans near retirement have NO retirement savings! For those near retirement that have saved something the median account balance is $104,000. not enough when you consider we are living longer and Social Security is facing bankruptcy as 10,000 Baby Boomers turn 65 every day. Households nearing retirement are worse off in 2013 that they were in 1989 as the Great Recession is still being felt across the retirement spectrum.
Christian Weller, one of the authors of the report, said that after taking many factors into consideration such as pensions, Social Security and home equity, “The rule of thumb for the wealth to income ratio is about 10 to one, meaning a person making $50,000 for the majority of their career would need about $500,000 to maintain their standard of living in retirement.” These ratios did improve for near-retirement households during the 1990s and early 2000s, but collapsed following the Great Recession.
In response to that recession the government has been printing money, and increased the money supply by 30% in just the last six years of our nations history! While it has kept the wheels turning, it may unleash forces as yet unimagined! You can’t buck classic economics, and that tells us with a growth of money supply we should have inflation. While the reasons it has not shown up yet are numerous (including the recalibration of what counts as inflation), it does not invalidate this eventuality. When it finally does arrive, considering the incredible recent growth in the money supply, it could be worse than we have experienced in the past. And, while we can still have a growing economy with inflation, it will be another difficulty facing those nearing, or in retirement.
Don’t mean to be a downer, but I am putting this information out there in hopes you will take it for what it is, a clarion call to take action! DO something to improve your future! Start saving today, “pay yourself first” as they say, or you will face an old age of dwindling resources, and limited experience. Look for investments that can protect you on the downside while allowing you to grow with the market. If you would like more information, or want to make a plan to move forward you can reach me at www.trowbridgeinsurance.com, or call me at 650-876-9600.