Retirement Nightmare: Yes I Am Trying To Scare You

Retirement Nightmare: Yes I Am Trying To Scare You

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Audio Retirement Nightmare

The retirement nightmare is looming large.  Can you avoid it?

Imagine:  Baby Boomers (anyone 49 to 67 years old) will spend almost as much time in retirement as they will spend working:  about 30 years.  (The average retirement age in the U.S. is 61 and 10% of us will live past 90.)

And most of them have a frightening solution to how they’ll finance their retirement:

  • Live on Social Security alone
  • Work forever
  • Inherit from an unknown rich uncle

Actually, all three are fantasy.

Social Security: Have you checked with Social Security to find out what you’d collect if you continued earning as you are today?  Here is their Retirement Estimator.  Go ahead:  check it out.  Can you live on that?  And what if the government allows inflation to eat away at what’s due you, by holding back cost-of-living increases, as a way to put off Social Security running out of money?

Working Forever:  You can’t.  While we extrapolate forward from how we feel today, and think we’ll be vibrant forever, even with an online business I doubt you’ll be keeping up with technology and the “young ‘uns” at 85.  And Walmart only needs so many greeters.

Rich Uncles:  Along with winning the lottery, this is where we go when we’re in denial.  Stop it.

How Bad Is The Coming Retirement Nightmare?

Here’s how bad it is:  According to the latest Retirement Confidence Survey, almost 70% hope to work beyond 65 to help finance their retirement, yet only 14% find they can, whether for health reasons or no jobs.  Only 57% of workers are actively saving for retirement, down 8% since 2009, because they are having trouble just making ends meet, forget saving.

One third of Americans (and one quarter of Baby Boomers) have no retirement savings at all.  Many blew through savings to weather the 2008 crisis and haven’t put the money back.  Half of workers have less than $25,000 saved.  Over a quarter of workers have less than $1,000 saved.  And only 11% of workers have saved more than $250,000.

My Own Denial

I know how hard it is to convince ourselves that we need to do something about retirement; it feels so far away.  I reached 53 saying to myself that all I needed was “one more big deal and I’ll fund my retirement.”  Meanwhile, I maintained my lifestyle with expensive mortgages, cars, toys and travel.  Ever the optimist.  Besides, aren’t entrepreneurs optimistic by nature?

I wish I knew how to sneak this information into your brain.  I wish someone had been able to do that for me.  Instead, I lost everything at 53.  Fortunately … because that’s what finally got my attention!

After that, not only did I make saving and investing a priority in my planning, but I also radically reduced my cost of living so I could play catch-up.  And I’ve chosen to hold that simple lifestyle ever since because I know how fast you can spend money if you don’t.  I want to live my own version of “The Bucket List” in retirement where I can stay as relevant and active as I choose.  For as long as I choose.

What Can You Do To Avoid the Retirement Nightmare?

  1. No matter how young you are, the longer you wait to start saving, the tougher the numbers become.  So stop living in La-La-Land and decide what you’re going to save.  I don’t care if you start with $25 a week.
  2. Live within your means so you’re not paying off credit cards for meals, trips and other niceties that are probably already faded memories before you’re finished paying for them.
  3. Talk to your friends about what you’re doing and convince as many as you can to do the same.  It will take the spending pressure off if everyone has the same goal.  Besides, a good time doesn’t have to cost a fortune.
  4. If you own your own business, get up an hour early and push that much harder for extra income you can set aside.  If your spouse has a new or side business, be doubly supportive instead of poo-pooing the effort.  But be sure any new business is real, has made money and can be scaled up.  No room for fantasy here.
  5. Invest in a book or two (or read some “Investment for Dummies” websites) to start learning what your investment options are.

In short, do something.

The summer’s over, the year is winding down and soon the holidays will throw another spending curve ball our way.  Think about how you can get started taking control of your future now.  Sorry, but yes, I am trying to scare you … because the alternative is devastating.

Let us know in the Comments section below if you’ve gotten serious about saving for retirement, and share any tricks you’ve used to make that happen.

xxxxxxx

Bio: Sharon O’Day fixes financial lives. She is a tell-it-like-it-is money expert with a successful career in global finance, plus an MBA from the Wharton School. Today she specializes in getting entrepreneurial women over 50 back on their game so they can have more money, less stress and more joy. With her “Over Fifty and Financially Free” strategies, they take actions that lead to their ultimate goal: financial peace of mind.

  • robindavidman

    Scary indeed, Sharon, reading the savings statistics. This is a well-written wake up call for anyone approaching retirement. Great advice!

    • Given a choice, Robin, I’d prefer to get this information to register long before someone is approaching retirement, but younger people have an almost impenetrable wall around them when it comes to this topic … (as did I).

  • Susan Schiller

    Yesterday I chatted with a friend who had already lost everything many years ago and she and her husband had just (this year) recovered economically from that disaster. They were nearly debt-free and had a good savings. Then a double blood clot in his lungs forced her husband to stop working for a time. He almost died, in fact. His employer couldn’t hold his job any longer, so at age 65 he is forced to find a new job, having recovered from the blood clots. But he’s having a tough time finding a job… they believe that 9 out 10 jobs he was qualified for but didn’t get were because of his age.

    My friend was devastated… because it’s the second time they’ve lost everything… and being in their 60’s, it’s a lot harder to recuperate from the loss. At the same time, she is care-taking her 86-year old mother who suffers from Alzheimer’s.

    We never know what curve balls will be thrown at us…. your wisdom is all the more valuable, Sharon! I like your advice of taking baby steps, if that is all we can take…. thanks for sharing good, practical knowledge of how to prepare!

    • Some days as I write, Sue, I think maybe I’m being a little pessimistic because there ARE people who are sitting comfortably. Then I read something like what you wrote and I realize that, unless we have heavy-duty, ironclad financial protection, we’re still vulnerable to curve balls … linked primarily to health issues and income generation. It’s also why I push for people to get their monthly “nut” as low as they can, so they can survive any downturns better. But from what you said, your friends had done that. The ideal solution would be if we could take what we know in our 50s and 60s (especially the feeling of vulnerability) and transmit it to the 20- and 30-year-olds! When you start paying attention to finances back that far, you’re so much better off …

  • Scary and sad to see that so many cannot save anything for their retirement as they have to use their money to cover their daily needs.
    In Switzerland social security was introduced in the late 1940ies, decades later a second pension scheme was added as social security would not cover costs and now we have a three column system …
    I used to invest money in shares and play the stock market. After 2008 I would not recommend it. Lucky if you can buy real estate, live “rent free” (except for mortgages) and rent out part of it. Solid value after all. But the real estate market is different in Europe again.

    • Barbara, the average Social Security paid out to a US worker in early 2012 was a little over $1,200 a month. The maximum for an individual is around $2,350, based on salary, contribution, number of years contributed and at what age they choose to start collecting. (For a couple, it’s higher.) So you can see how critical it is to have other savings or income. Many have done well with the run-up of our stock market since 2010; unfortunately, many of the people who most need to increase savings are those with the least knowledge of the markets. The ideal is a mortgage-free place to live, minimum fixed costs and some income-generating savings to supplement Social Security.

      • Social Security is about the same in Switzerland, both in parameters and amount, a couple will have 150 % together (a sore point for many who have contributed for a lifetime). Real estate is different from the USA, higher purchase prices (we built for eternity! and are a tiny country), low mortgage interests (I have three long term mortgages around 1 – 1.5 %) and tax deductible.
        I really appreciate learning more about the differences and yet we are sitting in the same boat! Have a great day, Sharon!

  • Gertraud Walters

    You’re no longer scaring me Sharon, as I am living this nightmare since 2008. You are so right in what you’re saying and I just wish that many of us would realize that we need to invest before we hit our 50’s. I also agree that a simple Lifestyle is much less stressful and enjoyable. What to do. As for my Husband and myself, we’re selling our Homes in order to downsize and hopefully live Mortgage and Debt Free. Still a journey to complete.

    • Gertraud, what you describe is exactly the journey I undertook at 53: downsizing so I could be (and stay) mortgage free and debt free. That’s the marvelous peace of mind I want to share with other women, but it does require commitment and strong will, as you well know. 😉

  • Diane Baker

    Great piece. We have been saving for a few years now, but it is hard in the current climate. I can’t stand the thought that we will be still working after our retirement age 🙁

    • Diane, I’ve found that the only way to play catch-up if we start late (for whatever reasons life throws at us!) is to cut fixed expenses as hard as we can (without making life boring or unpleasant) and saving as much as we can. Either that, or find that unknown rich uncle who’s ready to leave you a couple million … 😉

      • Diane Baker

        No rich uncles here unfortunately so its save save save !

  • What you are teaching is something so very important. When my parents divorced, my mom was left with no retirement. She had always assumed that she would be married forever and share my dad’s retirement. This happened when I was 19, so I saw first hand what happens when you’re not preparing for retirement. I realized at a young age that preparing for retirement is a must. Social Security, if it’s still around, can be my “play” money, but it certainly won’t be my main money.

    • Good for you, Keri! We react in two ways to what we see around us: either we emulate it or we do a complete 180 and do the opposite. I see you’ve reacted by doing the opposite! And by starting at a young age, what you save now will grow exponentially and you’ll take the tremendous pressure off your 50s and early 60s when others are trying madly to play catch-up. Congratulations!

  • Roz

    14 years ago I remarried. It was a 2nd marriage for each of us. He had a great pension & when I finally retired I had a moderate one. I didn’t really like his home but agreed that if we stayed there we would be able to enjoy our life. Over these past few years, we travel, enjoy our hobbies & help some of our kids. We live a comfortable style for us, not rich but not poor. Some of our kids are more financially set than others but all are open to conversation. Your blogs are fabulous. Such important information.

    • Roz, the kind of compromise you made, staying in a home you weren’t crazy about, may in some cases be what makes the numbers work in the long term. And the question is: which is more important? I have stayed in my “drastic downscale” house after losing everything for two reasons: (1) it lets me put so much more aside if I don’t have a mortgage to worry about and … (2) because of what it meant to me during hard times, I love it!

  • Cheryl

    I hear you! And thank you! This has been my focus for the past 3 years and can also tell you that I am going to be 65 yrs in 10 mol My retirement plan still holds exactly what I invested 12 years ago, and in this climate that is considered remarkable.(however, I had planned on it growing)….but retired due to physical reasons and am now trying to earn another stream of income to supplement what I have. I too left a marriage 3 years ago and never thought I would worry about retirement. So, planning is important for me because I do not want to have to worry or scramble…. but I definitely need to be more frugal ! Really appreciate reading about this from your points of view! Thank you 🙂

    • Cheryl, I hope you’ll stick around as a reader as I poke and prod women each week to do what they need to do to be as secure as possible–whatever their story is. So many are picking up after divorces, loss of partners, bankruptcies, foreclosures, job losses; the list is endless. And as you mentioned, if frugality is what it takes to get to that secure place, frugality it is! 😉

  • Sue Glashower

    Great tips Sharon! My dad taught me to invest and save early on and I am so glad he did. I love your advice to live within your means – I think that is really lacking in our world today!

    • Thanks, Sue. Unfortunately, your dad’s good advice is competing with all the media push to spend more, have more, be more … which means people end up exposed later on. Keep up the good work!

  • Great tips as usual as yes people need to find out the facts before thinking they are secure in their finances with the government alone.

    • The statistics are really astounding, Carly. It’s one thing to look them as “x” percent or “y” percent … it’s another to think of the individuals that comprise that percentage …

  • Carmen

    Great tips. A few years ago I had a real scare that sucked up all of my savings, including my 401K. I’m healthy now and trying to get back on track. Thank you. Xx

    • I know how hard it is to rebuild, Carmen, regardless how you lost it. I also know how committed you are to getting your whole life in a healthy place, including your finances!

  • Ernestine King

    Good tips. I see with my own friends who are have reached reitrement age who didn’t save enough, got divorced, how tough it is for them to try to exist on social security.

    • It’s not impossible to exist on Social Security, if there are other support systems (including family) that supplement it. But it’s not a place anyone wants to be …

  • Robert Manea

    I feel that allot of people live their lives outside their means and then it becomes a real problem for them. We try our best to stay within, sometimes venturing out.

    • Rob, if you think of the phrase “outside their means,” you have to wonder how long people think they can do it! It all depends on what they want their later life to look like, if they even think about it. It sounds like you get it …

  • Alexandra McAllister

    Excellent tips, Sharon. So many folks live beyond their means. I’m learning that as I’ve recently lost everything and had to start over. Thank you.

    • I know you’re starting over, Alexandra. When that happened to me, I decided it also gave me the opportunity to totally reinvent myself … in a far healthier way. I think I’m hearing that about you, too!

  • Beautiful, Sharon. We lost everything 18 years ago and had to rebuild. A very painful learning experience but we’re grateful for lessons learned.

    • Those lessons are so reassuring, aren’t they, Leslie? As we look forward we know what it took to get where we are … and what it will take to get where we want to go. Huge life lesson!

  • Oh boy – are you talking to me or what! I don’t live beyond my means but I don’t live under them either. I need to or else my future will be very uncomfortable! Excellent, thought-provoking, and well-written post.

    • The important thing, Mindy, is to realize that you have that “future” totally in your hands, each time you make a decision to spend money. It’s an easy calculation: will this expenditure take me closer to my financial future? If not, is it so important to me that I’m willing to push off that secure future a bit? (Because some things really ARE; life still has to be enjoyable!)

  • Gary Hyman

    The nightmare! The reality! Many of us living way beyond our means & the reality of how to fund the retirement is a daunting prospect. People do need to move out of la-la land. Thanks for sharing your perspective on this Sharon.

    • If I can just get people to think about it, Gary, it’s a start. I know how easy it is to stay in denial … and one day … ta-rah! You’re 60 with nothing saved. Not a place I want to see anyone get to!

  • I wish I could choose every single tip as my favorite; but the one that stands out the most is #4 – “If you own your own business, get up an hour early and push that much
    harder for extra income you can set aside. If your spouse has a new or
    side business, be doubly supportive instead of poo-pooing the effort.
    But be sure any new business is real, has made money and can be scaled up. No room for fantasy here”.

    As a business owner and woman who is redefining success in spite of many obstacles it’s vital for the support of our spouse or significant other. The blame game has no place in business or finances for that matter. Many boomers have found themselves displaced and forced into early retirement without having reached their financial goals.

    Thank goodness we had invested because we had to fall back on those funds in the hard times we faced unexpectedly. Thank you Sharon for all of the solid advice you share. I sure hope other #womenover50 out there listen and take action sooner than later.

    • Those “fall back funds” funded many families after 2008 when they fell on hard times–for whatever reason, Carla. The critical target is to get back to a place where they can start replenishing them … while they’re still fully of that “fiery grandma” energy! 😉

  • Ceci Mejia

    I have to say the same as Robin, Scary indeed, Sharon, reading the savings statistics. This is a well-written wake up call for anyone approaching retirement. Great advice!

    • Ceci, it’s actually for people long before they’re approaching retirement … or the task of catching up is just too great. Speaking of statistics, if you see how a small regular contribution to a savings account grows over 20-30 years, you’ll wonder why everyone doesn’t do it! It’s painless … and powerful!

  • Maureen

    Great tips & advice! Many of us don’t want to think about retirement and live in the moment which is great for some things but not for financial security. I’m glad that I started young at saving for my retirement thanks to my wonderful parents.

    • You are so fortunate to have parents that instilled that in you, Maureen. Those parents are definitely out there, but far too few and far between. What’s sadder is that the ones that don’t prepare their kids are just passing on what they learned growing up, so it’s a generational thing. (A generational thing I will gladly disrupt!)

  • Cindy Taylor

    Thank you, Sharon, for trying to scare us….it is important to not keep our heads in the sand…and do something about it!

  • Norma Doiron

    This is an eye opener for all of us women over 50 Sharon. The right information leads to the right results, when applied. Thanks for sharing this valuable information to avoid disaster later on…!!!