10 jaw-dropping facts about America’s retirement system
Americans work hard all their lives and dream of one day when they can retire. But planning for retirement It takes more than dreaming. It requires being strategic and focused on saving cash, among other things. A Gallup poll found that Americans are now retiring at 66 years old, an increase of 60 years in the 1990s. Americans live on average 78.7 years. That gives them 12 to more years to enjoy life after work at a hopefully slower pace.
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According to the U.S. Census, the average income of the 47.8 millions Americans 65 years and older is $38,515. Their average net worth is $170,000. Saving for retirement is difficult when you look at numbers like these. Here are other shocking statistics about the state of retirement in the U.S.
Young people think they’ll retire early… until they’re older
According to a Gallup poll study, when 18- to 29-year-olds were interviewed about retirement, younger people expressed optimism that they’ll be able to retire early, closer to their early 60s. Their optimism fades once they reach 30. Perhaps this is due to the realities of working for a living.
Take our poll: Do You Think You Will Be Able To Retire at Age 65?
Retirement May Be Longer Than Expected
It is difficult to estimate how much money you will need for retirement if your average life expectancy does not reflect reality. Many Americans live well beyond the 78.7-year-old lifespan, living into their 80s and even 90s. The Social Security Administration states that a 65-year old woman with good health has a good chance to live to age 86 and a 65 year-old man can expect to live to age 85. Senior citizens should plan for retirement that can last at least 20 years.
More Americans Plan for a Longer Retirement
Americans seem to be optimistic about the possibility of living longer. A TD Ameritrade survey found that 81% of Americans are shifting their assets to prepare for a longer life. This includes reducing their expenses, purchasing secured life insurance, and maximising their retirement contributions.
Many Americans are able to access their retirement funds earlier than expected
Americans are increasingly looking to their retirement accounts early as a way to save money and plan for a longer, healthier life. According to TD Ameritrade, 44% of Americans aged 40-79 have taken money from a retirement plan. The percentage of people who have taken money out of a retirement plan is 46% for those aged 40 to 49, and 53% for those aged 70 to 79.
The financial penalties for withdrawing money early from a retirement plan are usually severe, so financial professionals advise against it.
Not all Americans have a retirement plan
TransAmerica Center research shows that 77% American workers are saving for retirement using employer-sponsored retirement programs and other options. The median age at which workers start saving for retirement is 27, This leaves 33% of workers with no retirement savings plan.
Americans are losing the ball on saving
77% of Americans have retirement plans. However, many Americans don’t have enough money to save enough for their post-retirement lifestyle at the same level as their working years. In fact, for Americans between ages 55 and 64, the median retirement savings was just over $107,000, according to a 2017 report from the Government Accountability Office (GAO). The GAO notes that this amount, which may sound significant, would only translate into a $310 monthly payment, and only if it was invested in an inflation-protected annuity.
Social Security Is Not Something You Can Count On
Social Security will not guarantee funding for your post-retirement lifestyle. According to Business Insider it is only guaranteed through 2035. It may then be only three-quarters funded. This means that those who have been taking Social Security money may notice a decrease in their payments and that new retirees might not be able to get any money. An increase in older people is a major reason. The number of Americans aged 65 or older will rise from 56 million to more than 78 millions by 2035. As a result, the total fund will see more money being pulled from it, but less people paying into it.
You could be forced into retirement before you’re ready
It’s great to have a retirement plan, but sometimes life throws off your plans. According to a TD Ameritrade study, the top reasons for retiring are job shifts and health. 50 percent of people have retired earlier than they expected, citing layoffs, caregiving responsibilities and unexpected changes in their financial or health situation.
Retirees need more money than you think.
Experts suggest you have between $500,000 to $1 million in savings to help finance your retirement years. This is a substantial amount of change that can take many years to save.
Assisted Living Can Be Very Expensive
According to the U.S. Department of Health and Human Services there’s a 70% chance that a senior citizen will require long-term nursing care. Medicare will not pay for the costs of assisted living facilities. A median monthly cost for an assisted living facility is $4051 while it costs more than twice as much for a nursing home. This does not include any other healthcare costs. This is why so many seniors choose to purchase long-term insurance in their 60s.
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This article first appeared on GOBankingRates.com: 10 Jaw-Dropping Stats About the State of Retirement in America