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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?
- 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.
- 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.
- 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.
- 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.
- 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.
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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.