Many financial experts are suggesting that it be a requirement for all U.S. employers to put aside money to go towards retirement for their employees. Australia has a similar plan called the superannuation system where all employers contribute 9% or more of their part-time and full-time employees income saved into a separate account for the employee. The head of the world’s largest asset manager, Laurence D. Fink said, “the current system is not working and we need a comprehensive approach that includes some form of mandatory savings in addition to social security.” More here
Working during retirement has become extremely common over the last decade. Many retirees are searching for ways to make a larger yearly income while avoiding the typical 9-5 job. Some have developed an interest in starting and managing their own business. Although this may sound like a good idea, experts are advising that those pursing entrepreneurship during their retirement years be particularly careful when making any financial decisions. A business mentor for Score, Nancy Strojny said, “When it comes to finances, be conservative, we don’t recommend doing anything with retirement savings lightly.” There are a few nationwide organizations that offer free financial advice before, during and after the business creation process. More here
A recent poll conducted by Harris Interactive found that 75 percent of Americans described their retirement preparations as being based on some sort of a guess compared to 22 percent who said their plan was based on calculations. The numbers offer further evidence that Americans are in need of better education and financial preparation leading up to their retirement. For example, participants estimated their out-of-pocket healthcare costs in retirement would total $47,000, far below the $260,000 calculated by the Center for Retirement Research. Also, the number of respondents who said they aren’t confident they will have saved enough to live comfortably in retirement rose from 42 percent in 2011 to 53 percent this year. The poll was conducted via telephone and interviewed 1,000 middle-class Americans between the ages of 25 and 75. More here.
A new poll of 2,508 adults conducted by the Pew Research Center has found an increasing amount of anxiety over retirement savings but a shift in which Americans are expressing the most concern. In 2009, baby boomers were the most worried about funding their retirement but now adults in their late 30s and 40s are the least confident in their income and savings. Among adults between the ages of 36 and 40, more than half say they are not confident their assets will last through retirement, while only 34 percent of people ages 60 to 64 said the same. Overall, the number of Americans who express anxiety about financing their retirement has risen since 2009. According to Pew, the share of adults who aren’t confident in their ability to afford a comfortable retirement has risen from 25 percent in 2009 to 38 percent in the latest poll. More here.
A collection of retirement research compiled by Business Insider paints an alarming picture of the nation’s retirement readiness. For example, 30 percent of workers in 2012 said they had less than $1,000 in savings and only 14 percent said they were confident they’d have enough money to live comfortably in retirement. But a lack of adequate savings isn’t just a problem for Americans currently in the workforce. Retirees also expressed a lack of sufficient funds. Among current retirees, nearly 75 percent said they hadn’t saved enough and, if they could do it all over, would save more. Also, half of current retirees said they left their job due to health problems, disability, or being laid off, underscoring the importance of being properly financially prepared. More here.
New data from the Center for Retirement Research at Boston College shows the pattern of wealth accumulation has remained virtually the same since 1983. That means, though expenses and life expectancies have gone up, people have approximately the same assets going into retirement that they had in 1983. In addition, the most recent recession has taken a staggering toll on the preparedness of baby boomers heading into retirement. Losses experienced in the real estate and stock markets were compounded by the need to dip into retirement savings to make up for the financial burden. These changes to the wealth-to-income ratio, which is a good predictor of how much income someone can replace once they retire, suggest that Americans have become increasingly less prepared for retirement over the past 30 years. More here and here.
Among baby boomers approaching retirement, housing ranks among the top monthly expenses. In fact, baby boomers are paying more for home mortgages and healthcare than previous generations have. Healthcare costs have risen 30 percent for people between the ages of 45 and 54 and 21 percent among 55 to 64 year olds. Housing, on the other hand, is typically the top monthly expense. The rising age of first-time homebuyers means more people are entering their pre-retirement years still paying off their mortgage. That means, boomers struggling to save for retirement have to contend with ever increasing costs without similarly increasing incomes. Despite this, retirement-savings contributions have nearly doubled between 1990 and 2010, according to the Consumer Expenditure Survey. More here.
Between 2005 and 2010, median household net worth dropped 35 percent, according to figures released by the Census Bureau. The decrease, due largely to the loss of housing and stock values during the recent recession, hit older Americans particularly hard. Median net worth for householders 65 and older, dropped from $195,890 in 2005 to $170,128 in 2010. The loss, in absolute terms, was greater than any other age group and among the reasons for an uptick in delayed retirement plans. However, when measured by percentage of total net worth, seniors experienced a 13 percent drop in net worth while individuals under the age of 35 lost 37 percent and people between the ages of 35 and 44 lost 59 percent of their net worth. Excluding home equity, median household net worth increased 8.0 percent between 2009 and 2010. More here.
According to an analysis of data from the University of Michigan done by the Employee Benefit Research Institute, poverty rates have increased every year since 2005 for older Americans and are worst among the oldest of the elderly. In 2009, 15 percent of Americans over the age of 85 were living in poverty and 6.0 percent of them fell into poverty after turning 85. The data suggests people are spending their retirement savings too quickly and falling into poverty as they grow older. Sudipto Banerjee, EBRI research associate and author of the report, said, as people age, their personal savings and pension account balances are depleted and their medical expenses increase. The study found that people living in poverty were far more likely to be suffering from health conditions such as heart disease, cancer, or diabetes than people living above the poverty line. The odds of suffering a health condition of some sort goes up 45 to 55 percent for Americans living in poverty. More here and here.