As a nation, we’re woefully unprepared for retirement. The tough reality is that you might not be as prepared for retirement as you think. Here are five scary retirement statistics that should help drive home the importance of planning for your future today.
Many People Aren’t Confident They’ll Be Able to Retire
Only 22% of people surveyed by the Employee Benefits Research Institute in 2015 said they were confident of their ability to retire. Roughly half said they either weren’t at all confident or were not too confident in their financial future. Another survey found that 74% of people were worried about having enough money when they retired (Source: CNBC, March 2015).
There’s Good Reason for That Lack of Confidence
Many people simply haven’t saved that much — or in some cases, anything — for the future. Nearly one-third of Americans have nothing saved for retirement, according to data from the Federal Reserve, including over half of individuals under the age of 30. And 23% of people on the cusp of retirement — those between the ages of 40 and 59 — have no retirement savings (Source: “The Reality of the Retirement Crisis,” Center for American Progress, January 2015).
The Reason Many Have Trouble Saving
Most people know they should be saving for retirement, but they find it hard to do so. Perhaps they are among the 77 million Americans who don’t have access to a 401(k), pension, or similar retirement plan at work. In other words, fully half of workers in the U.S. aren’t getting any help from their employer when it comes to retirement (Source: CNBC, July 2015).
While there are savings options if you don’t have a 401(k), like an IRA, they require more work on your part to set up, and the amount you can save is less ($5,500 in an IRA versus $18,000 in a 401(k)
plan). Among those who do have access to a 401(k) plan, 19% don’t take advantage of it.
Retirement Is Going to Cost More Than You Think
Many retirement experts say you should plan on replacing between 70% and 80% of your preretirement income once you stop working. But if you want to travel a lot, indulge in expensive hobbies, or are paying tuition for your children’s or grandchildren’s college education, your replacement rate may be closer to 100%, at least in the early years. The fact that many people enter their golden years with debt only compounds the problem, as many people’s retirement projections assume that they’ll no longer have a mortgage or other debt in retirement. Yet four out of five households that are nearing retirement do have debt, according to statistics from the Social Security Administration, and the average amount owed is $120,871.
Then There’s Healthcare
The average 65-year-old couple retiring today can expect to spend $266,589 on health insurance costs in retirement, assuming they’re covered by Medicare and a supplemental insurance policy. That cost rises to $394,954 if you include copays, dental costs, out-of-pocket expenses, and other bills. Yet those are expenses many haven’t budgeted for. There’s also the matter of long-term care. Many people are living longer today, but they often require some assistance as they age. The average annual cost of a stay in an assisted-living facility is $43,200. The bills are even more burdensome if you end up in a nursing home, which costs an average of $91,250 per year for a private room (Source: Genworth, 2015).
Hopefully, these statistics will serve as a wake-up call. If you have been putting off retirement planning, please call ALMEA Insurance, Inc. today.