Retirement Report Card: Boomers Get an F, And You?

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When Senator (and Baby Boomer) Jim DeMint left the U.S. Senate at age 61, his 2010 net worth was just over $40,000.  It had dropped to less than half what it had been in 2004.  Taking a high-paying job outside government was his way of self-funding his retirement years.  Whether he had taken his eye off his finances, or was simply a lousy investor, this Senator was in the same boat as most Americans when it comes to retirement.

Financial Illiteracy blue squiggle

I know, I know.  You get tired of me talking about retirement.  But every topic I cover touches your money in some way, pushing and prodding—even begging—you to look at your relationship with money.

What’s my purpose?

Regardless of your age, my long-term hope is that I can help you interact with your money in a way that allows you to enjoy a comfortable retirement when the time comes.  Because anything else is intolerable.

Retirement Report Card

Sadly, most Americans give no thought to what their retirement will look like, in detail, and how they’ll fund it.  They see Social Security as their retirement plan, instead of the supplement it’s supposed to be.

There’s still time for many younger Americans to increase their savings and investments.  But for Boomers, too many are already stuck having to figure out how to survive on their Social Security, plus whatever pension or meager savings they might have.

And … what about those younger than the Boomers?  How are they doing?

A recent Wells Fargo report says the report card for all middle-income Americans (with incomes between $25,000 and $100,000) is abysmal.  Here’s what the survey found:

  • “80 is the new 60.”  That’s because 34% of those surveyed realize they’ll have to keep working until they’re 80.  Or until they’re dead.  Whichever comes first.
  • “Most just want to make ends meet.”  That’s because 59% say their main day-to-day concern is paying the monthly bills and it overwhelms them.
  • “Forget saving for retirement.”  That’s because 42% say there’s nothing left to put towards retirement after they pay their bills.  Paying bills is Priority #1.  Saving for retirement is a distant #2.

What is most stressing is that each statistic, each percentage point, may look like just a number.  But it’s not.  It represents real people:  ourselves, our friends, families and neighbors.

Getting the Numbers Wrong

What’s worse, people’s perception of what they’ll need for a comfortable retirement is way off base.  Most people age 40 to 59 thought having $210,000 in savings would be enough.

Let’s look at that.  Back when it was easy to earn 7% interest on investments, that nest egg represented about $15,000 a year to supplement Social Security.  But in today’s low-yield environment, all the traditional “safe” investment instruments are paying closer to 1-2%.  So how far is an extra $2,100-4,200 per year going to take anyone?

In any case, the nest egg needs to be larger.  But people also need to have much more knowledge to be comfortable with the higher risk of other investments.

Having a Plan

Only one third of Americans in the prime savings age range of 40 to 59 say they have a plan.  So if you go to Whole Foods and stand next to any two strangers, only one of you will have a retirement plan.  Why is that important?  Because the one with a plan will have saved about $63,000, versus $20,000 for those without a plan.

Having a written plan boosts your belief in reaching your financial goals:  Seven out of ten of those with a written plan are confident they will have enough saved for their retirement (compared to 44% for those without one).

Why do some people not have a plan?  They say it’s because they have so few assets.  But that’s not a good reason.  Planning is for everyone.  No matter what income levels are, or what amount remains at the end of the month, simply having a plan provides the trigger for consistent savings.

How to Succeed at the Retirement Game

Three things greatly influence being ready for retirement:

  • Having a plan.
  • Saving more.
  • Being comfortable making investments.

That calls for you to know where you stand financially.  It means developing a plan for your financial future, which doesn’t need to be elaborate.  (Even writing down your planned retirement date and how much you need by that date is a start!)  And it means being willing to learn some things.

It doesn’t matter what age you are.  At 30, you have more time to get your nest egg in place.  But, at 55, you can still make a material difference in how you’ll spend your later years.  Would you rather be enjoying a comfortable retirement … or greeting customers at a WalMart when you’re 79?

Let us know in the Comments section below one thing you’ve done so far to prepare for retirement.

And, if you think you’d be interested in working with me in 2014, in a reasonably priced modular system that gets your financial feet solidly under you, drop me an email at sharon at sharonoday dot com.  Tell me what would help you the most.  I want to design a way to end the “money crazies” that keep so many from financial peace.   Warmly, Sharon

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.

  • Diane Massad

    The thoughts, expressed, are reflections of many of the dart-tipped ideas that puncture our own individual cerebellums and cerebrums….as we march, roll or move into the decades numbered six and up. Appreciate your expressed facts and figures, and find the fabricated facts and falsehoods we each find floating within the day’s hours…burdensome and further disturbing. C’est la vie! Warm wishes for the Thanksgiving traditions…to all who savor rituals…toss in some fun and folly…that would be good, too!

    • It may seem easy to be lulled into the “everything will be okay, someone will fix it” mindset when it comes to our later years. Until we get there. They we’ll wish we had made a little more effort here or there. Guaranteed!

  • My site’s Disqus was down last week, so I apologize that we couldn’t have our regular “comment conversation” … but I’m back! 😉

  • Love your sense of humour, Sharon: “greeting customers at Walmart when you are 79” but you do get your point home well!
    Impressive figures and stats, they are about the same here in Switzerland. Not very encouraging but looking at it from a personal perspective and making the most of today’s situation: I love working and I never thought I’d stop at retirement age. Ok I had visions of a rural life in Tuscany, the crisis took care of those. But I am healthy and so I will continue doing what I love and earn some money, the rural life will be for holidays.

    • Most of us have awakened to the reality that the old formula of retiring at 65 to a place in the sun is not guaranteed. And many intend to work far beyond 65. The key is to be setting something aside all along for when our bodies simply sit down and say, “enough!” 😉

  • Carmen

    Wow. The numbers are shocking. Thank you for sharing this information.

    • You’re welcome, Carmen. Yes, they’re eye-opening! The question is whether they are also “purse-closing” … 😉

  • Terri Lind Davis

    I applaud your mission to encourage people it is never too early to start saving for retirement. I wish I had paid more attention when I was younger and not relied so much on what I thought I would have to work with.

    • Terri, we (almost) ALL wish we had started earlier. I don’t know what it is about that message, but it seems strangely foreign to us until far too late!

  • Scott Glaze

    Wonderful awareness post! I need to work on this.

    • With such a lovely family, Scott, you really do. As entrepreneurs we tend to think reinvesting in our businesses is the best investment, but it’s not always …

  • Wingate Wyndham Sulphur

    Another fabulous straight forward post! Each day I get a little closer to putting a little aside each month for retirement. Thank you so much for your articles as they are the main source of my encouragement.

    • Take the leap, Heather! “Getting a little closer” doesn’t count! 😉 Drop me a note next month to tell me you’ve opened an online account somewhere and have made your first contribution … 😉

  • Alexandra McAllister

    You are so encouraging, Sharon. It’s true, it’s never too late to start saving for retirement. All this info would have helped me when I was younger. I’m sure it will help many who are planning for theirs. Happy Thanksgiving. Blessings.

    • This would have helped us ALL when we were younger, Alexandra. But we all considered ourselves invincible. Once it becomes important enough, the key is to look at how we’re earning money and make the changes necessary to be spinning off at least something we can set aside. I know it sounds tough, but it HAS to be our goal …

  • Veronica Solomon

    Being self employed makes it a bit more difficult for some because there’s no company matched 401k. I do need a plan!

    • Without the matching plan, Veronica, what you’re missing out on is the “free money” that comes from the employer. But there’s still every motivation to contribute to a 401k or other vehicle to get the tax benefit … and the peace of mind. As for having the discipline? Start by defining a small amount you want to contribute monthly and pay yourself that FIRST. Once the habit is created, see if you can increase it …

  • fredmcmurray

    I retired from corporate america 7 yrs ago when I started my 1st small business. So I will die before I retire from doing what I love.

    • Many of us can’t imagine NOT working at what we love, Fred. But the truth is that our energy levels decline with age, so our work may eventually not be as effective at generating what we need …

  • Norma Doiron

    Love how you’re straight to the point, and explain difficult things so simply. You always give plenty to chew on… Thanks!

    • In the end, Norma, these things aren’t complicated. There are just certain financial sectors that benefit from convincing people that they ARE complicated!

  • This is excellent information.

  • Get post, always leave with more to contemplate thanks

  • Robin Pedrero

    Excellent advice!!

  • Kung Phoo

    Great advice… i do not think i can ever retire..

  • Cindy Taylor

    Great advice! I have a plan…now I just need to work it!! Thanks for this good information we all need!

    • Hmmm … a little detail, Cindy! 😉 But you’re a step ahead of many; at least you HAVE a plan. What about starting 2014 by putting it into action?

  • robindavidman

    Excellent advice as always, Sharon. It’s important to take advantage of programs offered by your employer, if applicable, and to also have a plan in addition to that if feasible. I think having the plan and sticking to it goes a long way toward some peace of mind in regard to retirement.

    • What it comes down to, Robin, is finding ways to save as much as possible in as many vehicles as possible. Sacrificing a little today to let that money go to work for you and be available when you’ll most need it.

  • Susan Schiller

    I’m glad you keep nudging us to consider a retirement plan, Sharon. My mom, at age 80, just lost her second husband. She’s fortunate to be one of the ones to have a pretty good Social Security + pension + investments… but even so, it causes a certain level of stress. Change is hard at any age, but especially in the 80’s. So I’m glad you’re nudging us…. I need it 🙂

    • Happy to be there to nudge you, Sue! Change IS hard at any age … but it’s inevitable. That’s why I push as hard as I do for women to get as much in place as fast as they can. It doesn’t get any easier with time …