Why Your Retirement Should Worry You, and How to Fix it

Recent statistics in relationship to retirement aren’t encouraging.

In fact, they’re downright frightening.

Yes, Halloween is on the horizon, but no costume, creature or haunted house can shrike fear in the hearts of the masses more so than the bottom line as far as how much the average person has saved for retirement.

The overall consensus suggests that retirement is going to be nearly impossible for most of us.

A study showed that 21 percent of Americans have zero dollars saved for retirement, while about one third of that same 2,000 persons poll said they have about $5,000.^[1]

That $5,000 won’t last for a month, maybe two or three at most, and that is a decent amount of individuals and households alike that simply aren’t preparing for retirement, and even the ones who have assured themselves they’re ready might not quite be, given the rate of spending after you’re retired and if you have enough to keep up.

The big concern that abounds is outliving your money, which is becoming commonplace based on life expectancy continuing to grow each year.

Nearly 80 percent of the population says they’re worried about retirement and how much they have saved, and 66 percent of that same poll said they’ll most likely outlive retirement; even more alarming is nearly 50 percent of those polled say they have yet to take any steps toward saving for retirement at all.^[2]

So why such a lazy attitude toward retirement? Perhaps some assume they’ll work well into their 70s and won’t need much in the way of money saved. While that notion might seem somewhat sensible given the life expectancy piece, you could also easily argue from the opposite side of the spectrum that we simply aren’t making it a priority and saving money for your “golden years” takes the proverbial back seat to spending and having things.

When you’re ready and able to retire, you need to have about nine to 11 times your salary in retirement savings, and that isn’t quite where we are, no matter the age group.^[3]

When you hit 25, as an example, you should have about 25 percent of your gross pay saved for retirement, while those who are 30 should have a full year’s worth of salary saved, and 35 means you should take that full year and double it.^[4]

How did you do?

Probably not so good, but even if you’re not saving when you’re young, the truth is it isn’t much sunnier on the other side of 40, either. When you’re 40 and every five years after, you should be adding another year of salary, per that same study.

Once again, how are you doing?

If the answer is one that isn’t even worth mentioning, you are in a retirement state of influx, and you need to start thinking about your plan more than you have been.

And even those who have retired or are close to it, you have to continue having some sort of vision of what you want retirement to look and feel like, most importantly, too, how you spend.

Being worried about retiring makes sense, but where you go from concern to creating opportunity rests on how restful and relaxed you’ll be when you retire.

Here’s what you should be doing and thinking about, retirement wise:

Understand how important preretirement savings is, especially in 2018

You can’t treat a retirement account as something you’re not being aggressive with or monitoring more so than just picking a contribution amount and hoping for the best, without ever revisiting it.

More importantly, if your company offers a 401K, participating in it is non-negotiable.

Under 10 percent of workers in their 50s, are afforded the opportunity to have a pension, and that is much less than the 25 percent who had one 30 years ago, not to mention a staggering 46 percent who don’t take advantage of retirement plans offered at work, and with cuts expected to happen by 2034 on social security to the tune of 21 percent, you can see how paramount saving money is before you retire.^[5]

Here’s another statistic that might ring true to a lot of people: some Americans don’t have access to a 401K plan, anyway.

Roughly 35 percent of workers in the United States don’t have access to a 401K as they’re not offered by their place of business, while Baby Boomers are at 30 percent in that arena, Millennials at 41 and Gen X at 35 percent.^[6]

So you can’t necessarily depend on a 401K or pension, and even social security is up in the air.

That’s why as you’re budgeting day to day, month to month expenses and income, you can’t overlook that you might be on your own for retirement more so than you think, especially in 2018 and beyond.

That includes having a household budget that matters, sticking to it and making sure even though rate of savings aren’t yielding much in the way of interest, you’re padding your nest egg on your own, minus the would-be help from anyone from the federal government to your place of employment.

In total, you should be saving about 16 percent of your salary each year on retirement.^[7]

That figure is a safe bet across the board from early 20s to nearing retirement age.

Monitoring spending shouldn’t change once you retire

The argument can be made that the moment you call it quits for work, you should ready to hit the ground running, meaning you’re ready to start spending on vacations, traveling, new cars and a warm-weather summertime home.

That couldn’t be further from the truth.

Overspending in retirement has become all too common for the majority of people.

Even though the number is up a modest 2 percent, about 50 percent of retirees believe they can maintain their spending habits and ways well into retirement.^[8]

So what do the other 50 percent have planned, aside from drastically cutting expenses?

Statistics from 2016 showed that if you’re 65 and older, you’ll spend about $45,000 per year or just under $4,000 per month in retirement, only about $1,000 less than the monthly average in U.S. as far as households go.^[9]

That being said, you can use that as a barometer but you should also consider 4 percent per year as how much you should be taking from your retirement savings each year.^[10]

One issue that has crept up in recent years, however, is the propensity for the age group of 65 to 74 to spend more on their housing and credit card debt, a disturbing trend when you consider that you aren’t necessarily earning more money but just spending what you have.

The home loan increased from 21 percent in 1989 to 37 percent in 2010, and even the age of 75 and older wasn’t much better: 6 percent to 21 percent, with interest rates in 2012 at 4.3 percent up from 2.7 percent.^[11]

The same study showed that 1989 to 2010 that credit card debt balances jumped from $2,000 to $6,000 in that time period and a non-measurable balance for 75 and older as far as debt is concerned in 1989 went up to nearly $5,000.

It’s one thing to carry debt into retirement and then a completely different misguided approach to adding to it when you’re already supposed to eliminate it altogether. The housing piece suggests that they spent too much or financed too much, either borrowing against or refinancing multiple times, as to why seniors are spending so much on their homes, even at 65 and older.

Learn to play catchup in your 50s, even if your 20s were uneventful retirement wise

Maybe your younger years weren’t really centered on retirement, and honestly that isn’t all that surprising.

About 69 percent of the Millennials aren’t saving for retirement at all, putting very little importance on this financial driven, long-term piece of investing; another 46 percent wouldn’t have money to cover expenses at this moment if just one paycheck was held.^[12]

Both those figures are telling in that most Millennials can barely afford their cost of living today, so retirement isn’t even on the radar.

Saving when you’re young is so important, but even if you’re someone who waited to the last minute, also known as being in your 50s, you still can play catchup with the best of them.

The most you’re permitted to put away in a 401K is $18,500, but if you’re the age of 50 you can add an additional $6,000 on top of that, making it $24,500 per year; the IRA’s aren’t quite as lucrative but limits are at $5,500 but you can put an extra $1,000 when you reach 50.^[13]

The key to saving for retirement really hinges on two very important perspectives: priority and not procrastination.

When you ask someone close to retirement if they can offer any advice to someone who is younger, the answer almost always comes back the same, without fail.

Start saving early and don’t stop, not now, not ever.

Ninety-three percent of those retiring age would tell a younger person to start saving early for retirement, and not wait, while a whopping 84 percent say you should start contributing to a retirement plan at work right away.^[14]

That advice sounds as though they’d wished they had taken it upon themselves to heed their own words long ago, but instead are flummoxed and frustrated by trying to play catch up or simply having to work much longer than they had hoped.

In 1991, more than half of the working population said they had planned on retiring before or at the age of 65, and that number now stands at 23 percent.^[15]

That would suggest anything but optimism but more so how much less we’re saving, even if you factor in how much more things cost in 2018 versus 1991.

Still, it boils down to a plan and saving money, without fail.

If you’re one of the many who are worried about retiring mostly due to the money aspect (not so much missing work that you do), you have plenty of short- and long-term solutions at your fingertips, but nothing really is going to put you down the right path unless you monitor saving money while you’re working and even after you’ve opted to stop.

Where most future retirees get in trouble is spending and not saving when they’re young, and retiring with little saved and even if they have money put aside to the point they feel comfortable, they’re spending it at record rates in retirement.