How do you think you compare to other people when it comes to how much you’ve saved for retirement?
The results of a new survey from the Employee Benefit Research Institute (EBRI) reveal some surprising insights into America’s preparedness for retirement.
Read on for the highlights of the 2016 Retirement Confidence Survey and a 6-Step Action Blueprint to make sure your money lasts as long as you do…
The survey revealed that 54% of all workers report less than $25,000 in household savings and investments, excluding the value of their primary home.
That includes 26% who say they have less than $1,000 in savings.
10% have between $25,000-$49,999 saved, 10% have between $50,000 and $99,999 saved, and 12% have between $100,000-$249,999.
And how many have saved $250,000 or more? Just 14%.
Are people close to retirement any better prepared?
A little, but not enough to give them the retirement lifestyle they want.
The survey revealed that among workers over age 55, 33% still have less than $25,000 saved. And only 30% have $250,000 or more saved.
Would it surprise you to know that 32% of pre-retirees think they will need to accumulate less than $250,000 by the time they retire to be able to live comfortably in retirement?
In recent years, many experts have calculated that retirees should withdraw only 2.8% of their retirement savings each year. Anything more than that significantly increases your chances of running out of money in retirement.
Given that rule, with a nest-egg of $250,000, you could withdraw… just $7,000 per year!
Ugh! What kind of lifestyle do you think that $583 per month is going to give you?
That $583 a month is all you’d have to supplement your Social Security income, which currently averages $1,341 per month.
Even if you manage to sock away $500,000, that’s just $14,000 a year you can safely take from it.
And if you hit the $1 million dollar mark, well now you can take all of $28,000 per year.
Can you see how woefully unprepared most people are?
But it’s actually much worse than that. The study also revealed that only 22% are very confident about their ability to pay for medical expenses in retirement.
You have good reason to be concerned about that. Do you know how much you’ll need to cover out-of-pocket health care costs in retirement?
Studies show a 65-year-old couple retiring now will need $245,000 to cover those expenses – and that assumes you have Medicare.
But we’ve just established that most people don’t have that much in total savings!
And in case you think that staggering number must include possible nursing home and long-term care costs, it doesn’t.
Yet, almost 70% of people over age 65 will require long-term care services at some point, and more than 40% will need nursing home care, according to the U.S. Department of Health and Human Services.
And, based on the average cost of a private nursing home and the average length of stay, you would need about $255,000 to cover a stay. (Medicare does NOT pay your long-term care expenses.)
That’s another cost that exceeds the value of most people’s retirement savings.
So, you’ll need over $500,000 just to cover medical expenses and potential long-term care and nursing home expenses – and that’s on top of the savings you’ll need to cover your basic expenses.
Are you (realistically) on track to have enough saved to truly be able to live comfortably AND have enough savings to cover healthcare and long-term care costs in retirement?
The sad truth is that if you’re like the vast majority of folks, the answer is “no.” And maybe getting to that point seems beyond reach.
So is there a solution?
The Good News is that There IS a Way Out – Here’s a 6-Step Action Blueprint to Protect Yourself…
STEP 1: Acknowledge the Problem
A lot of folks have their heads in the sand. They hope that if they ignore the problem, somehow it will go away.
It won’t. And the longer you wait to get serious about it, the harder it’s going to be, and the more hopeless you’ll feel.
STEP 2: Increase Your Savings by 1% to 2% Every Year
If you do that, you won’t feel the pinch, and you’ll be surprised how much faster your nest-egg will grow. If you can increase your savings by more than that, that’s even better.
Find out how your savings can grow safely and predictably, while getting a much better return than a savings account or CD, and know the guaranteed minimum value of your retirement savings at any point in time. Just request a free Analysis here, if you haven’t already.
STEP 3: Don’t Underestimate How Long You’ll Live
Too many people decide how long they think they’ll live based on how long their parents or grandparents lived or some other arbitrary factor.
According to the Social Security Administration, 25% of people turning 65 today will live past 90, and one out of 10 will live past 95.
What if you’re the lucky one who hangs on until 100 or longer? You don’t know for sure, do you? But just how lucky will you feel if you can’t provide for yourself in those final years?
My 94-year-old mother-in-law lives in an assisted-living facility in Arizona. When her husband died, she got a life insurance settlement and has been receiving a nice pension payout every year.
And, she is one person I never suspected would run out of money before she ran out of life.
But that’s exactly what’s happening. She lives a frugal lifestyle, but the assisted-living facility raises the rent every year, and it’s more than the increases she gets from her pension and Social Security.
We figure her living expenses will exceed her income within a year or two, and we’ll pitch in to help at that point. She’s still going strong and could easily live another decade.
STEP 4: Don’t Underestimate the Impact of Inflation
Even if inflation remains low for the next 30 years (it won’t), the impact can be devastating, for the reasons I mentioned in Step 3.
STEP 5: Don’t Plan on Working Longer to Make Up for Your Savings Shortfall
The EBRI survey found that 65% of workers plan to work for pay in retirement. (Never mind that “working for pay in retirement” is an oxymoron!)
Yet 46% of retirees were forced to leave the workforce earlier than planned, due to health problems, disability, or having to take care of a loved one.
STEP 6: Make it a Priority to Build an Emergency Fund Equal to Two Years of Your Household Income
The typical American has almost nothing in their rainy-day fund, which is why 401(k) loans are up. The standard advice of having 3 to 6 months of expenses socked away won’t cut it.
Life happens, and we should all expect the unexpected. Can you imagine how it would feel to have two full years of your household income in safe and liquid cash reserves?
And though this may sound harsh, you have absolutely no business investing a single penny of your hard-earned money until you have that sizable emergency fund.
But how do you get there?
Refer back to Step 2 (increase your savings by 1-2% every year).
But who wants to sock away all that money in a savings or money market account or CD, where the return is so small you need a magnifying glass to see it?
A Bank On Yourself plan is a terrific alternative, because:
- The growth is significantly higher
- You can use your money and have it continue growing as though you hadn’t touched it
- It can double as a retirement plan alternative that has an unbeatable combination of benefits, which include safety, guarantees, liquidity, control, plus some juicy tax advantages
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It’s not too late to get your retirement plan back on track, but please don’t put it off another day.