I have a friend who jokingly over-uses the word “doomed”, particularly when playing the awesome game: The Settlers of Catan. I always laugh because very few things really lead towards the true meaning of doom. There may be some small things that make your life difficult today, but often they resolve themselves and doom is thankfully averted.
USA Today put out this article a couple of days ago: “Retirement: A third have less than $1,000 put away” That’s worthy of doom, but I found this even worse… “60% of workers have less than $25,000.”
By most measures the amount necessary to fund a retirement is in the hundreds of thousands, even topping two million depending on some opinion and lifestyles. While it makes sense to differentiate between those who have $1,000 or $25,000 saved, either is what I consider, woefully inadequate. I find it much more alarming that 60% of workers have woefully inadequate retirement savings. I can almost ignore the 36% number who really haven’t even gotten started saving.
Then there’s this from the survey: “Debt is weighing heavily on many people, with 58% of workers and 44% of retirees saying they have a problem with their level of debt.”
I can’t imagine retiring with any level of debt. I just can’t see how to make that math work. I hope the Social Security checks are sufficient, but I fear they are not.
This is real doom. Not in the losing a game of Settlers way, but losing in the game of life way. This isn’t wake-up tomorrow and the problem is gone. This is a permanent thing unless you do something about it.
I realize that it is a tough economy. I know that everyone has expenses to pay today. I still a lot of luxury cars on the roads though. I still see a lot of people with $100+ cell phone plans. I think there a lot of people living in denial.
What else can you do? Plan. The article has this alarming statistic: “Only 44% say they or their spouses have tried to calculate how much money they’ll need to save by the time they retire so that they can live comfortably in their golden years.”
It doesn’t cost anything to get together, talk, and calculate how much you’ll need to retire. You can even put that fancy phone with the $100 plan to work and get a nice calculator app. Yes, it may be depressing, especially if you have no real savings. However, have the talk and make a plan… and if you need to follow it up with a cheap bottle of wine.
Is planning a sure-fire recipe for success? No, but it is a start in the right direction.
The problem with this article is that I’m probably preaching to the choir. If you are reading this site, you most likely have had the conversation, and set forth the plan. Most of you are probably in that other 40% like myself. If not, you are probably well on your way there.
Final thought, where was this article a couple of weeks ago during my retirement week set of posts? Grrr…
Interesting, if you exclude their assets and their defined benefit plans only then do you get 36% of people have less than a grand.
In Canada during a quick google I found that somewhere near 4.5 million people have DB plans. Not sure how reliable the info is, but I’m going with it anyway.
The population of Canada who are over 20 is about 28 million, so 4.5 of that, which makes it 16% of that 36% probably don’t have retirement savings other than the DB plan so they get to be included in the doom stats.
Then you probably should include their home since a good chunk of retirees will downsize or live off their equity in their home in some way. I’m not sure how to find how many of the remaining 20% don’t have any equity in a home . . . but if you take the general population it’s slightly over 65% own a home. So that brings that 20% down to 7% now . . .
Suddenly it goes from “zOMG We’re all going to die of starvation!” to “Wow, only 7% will have essentially nothing?”
You know what would be better, if they did the survey and excluded all assets. Wow, 100% of people are going to starve to death in retirement if they don’t use any of their assets or government benefits to eat… I can see the headlines now.
Lazy Man says
I thought of doing some kind of deeper analysis like that. The thing that immediately stuck out to me is that it means less if someone under 25 doesn’t have retirement savings than someone over 55. It’s almost expected of the person under 25.
It imagine it is hard to do a comprehensive survey including things like equity in their home and likelihood of downsizing that to fund retirement. Since it seemed a significant amount didn’t even discuss retirement, I’m not sure they’ve done the math to figure out the equity in their home.
Taylor Gordon says
You hit the nail on the head… Depressing. I find a lot of people are depressed and don’t think retirement figures are attainable. So they throw in the towel and live for now. It’s really sad. I’m a planner by nature and just the thought of having an uncertain future gives me anxiety.
Lazy Man says
That’s a great point that I hadn’t really considered. I can see how the idea of saving all that money can seem daunting.
You also have to keep in mind that some people avoid using things like RRSPs as a saving for retirement vehicle. Considering money coming out of an RRSP/RRIF counts as income it will reduce the amount of benefits you receive in retirement.
This means that if you have a below average income it might be better just to sink money in to your home, use a TFSA, use a regular taxable account, or even hide your money away in physical commodities than use an RRSP and give up your GIS at 50 cents on the dollar.
All this study shows is that you can make statistics say pretty much anything you want depending on what data you include and exclude. It has very little to do with reality and way more to do with selling products/marketing.