American adults, as a group, have shockingly little saved for retirement. Northwestern Mutual’s 2018 Planning & Progress Study surveyed over 2,000 adults and found that 21% of Americans have nothing saved at all for their golden years.
Another 10% have only $1 to $4,999 saved for retirement. That means nearly one-third of Americans have between $0 and $4,999 saved for their retirement. To put that into perspective, it means that 31% of US adults could last only a few months, if that, on their savings if they had to retire tomorrow.
This explains why a rapidly increasing number of Americans say they’ll have no choice but to rely on Social Security payouts to live in retirement. It is unknown what percentage of these people realize just how low Social Security benefits are. The average monthly Social Security payment this year is only $1,404. That’s an average annual income of only $16,848.
Could you live on that? I don’t think so! But this is what almost a third of Americans are facing.
Here’s a really interesting stat. Of the 2,000+ adults surveyed by Northwestern Mutual recently, only 24% said it is very likely that Social Security will still be solvent by the time they retire. Wow! Yet millions of Americans will have no choice but to hope that it is.
Let’s look at the latest retirement savings across a broader spectrum.
According to the Northwestern Mutual survey, the average amount Americans have socked away for retirement is a surprising $84,821, but that number is skewed significantly higher by the 25% who have saved $200,000 or more and the 8% who have saved $125,000 to $199,000 (another one-third).
Even if the average of $84,821 is true, it is still a fraction of the $1 million typically recommended by experts to supplement Social Security, pensions and any other sources of funding retirees may have.
Additionally, 78% of Americans say they’re ‘extremely’ or ‘somewhat’ concerned about not having enough money for retirement, and 66% believe that they’ll outlive their retirement savings.
For those reasons, many people will be forced to stay in the workforce longer than they had planned. Over half of the survey respondents believe they’ll have to continue to work past the typical retirement age out of necessity. This is not good news for younger Americans. With older people working longer, that means fewer jobs for young people.
50% of Americans Over 75 Are Still Deep in Debt
This is a stat I hadn’t seen before. Nearly 50% of seniors aged 75 and over have outstanding debt, according to the Employee Benefit Research Institute. That’s up from just 25% back in 1992. Worse yet, the most notable debt outstanding is held by lower-income seniors who need to rely on credit cards to make ends meet.
Now the good news is that most of the debt carried by seniors 75 and older is of the mortgage variety, and that’s the best kind to have. But many retirees carry outstanding credit card balances, and some still even have student loan debt hanging over their heads.
All told, the median debt level among seniors 75 and over is $20,900, and while that may not seem like a lot, the problem is that folks on a fixed income have limited options for paying it off — especially when we consider that the typical Social Security recipient today collects just under $17,000 a year in benefits.
If you’re approaching retirement with debt, you should make every effort to get rid of it before bringing your career to a close. Otherwise, you risk not only struggling financially but carrying that debt with you to the grave.
Let’s imagine a senior looking at a monthly income of $2,000 between savings and Social Security. If they have a nagging debt payment that leaves them on the hook for $500 a month, that’s a quarter of their income already spent. And then what happens when they have a month when their medical bills come in higher than expected, or they’re hit with another large expense? Without wiggle room to pay the new bills, they’re likely to — you guessed it — take on more debt.
That’s why seniors are much better off entering retirement debt-free, even if they happen to be going in with a healthy level of savings. You never know what costs you might encounter once you stop working. To be sure, kicking off your golden years with a clean slate can help alleviate much of the financial stress so many of today’s seniors face.
I trust that most of my older readers are in that position. Congratulations to those who are!
Finally, a recording of this week’s webinar on the ZEGA Buffered Index Growth (ZBIG) Strategy is now available. This strategy gives you the potential to participate in the market gains, while limiting your downside risks. You really should take a look at the performance numbers. As always, keep in mind there are no guarantees with this or any other investments.
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