Data Shows How Bad American “Retirement Crisis” Really Is

Are you properly preparing for retirement? If you’re like many Americans, the answer is most likely “no” — and that’s a big problem. As CNBC reports, data shows that the majority of Baby Boomers as well as other generations are woefully ill-prepared for retirement, with savings, pensions, and Social Security benefits all lacking.

Starting with private retirement savings, Vanguard found that the average 401(k) account value for individuals over 65 was $192,877. However, when you look at the median, the figure is a far lower $58,035. That means that, if retirees were to live to 85, they’d only have $3,000 a year from these private accounts. That’s certainly scary, but it is important to note that this might not tell the full story as is it does not include IRAs or account for those who may have multiple 401(k)s from different employers they’ve worked for over the years. Additionally there are still two other “legs of the retirement stool” (as CNBC put it).

The first of the other two “legs” are pensions — a benefit that most employers have famously been scaling back. Among private pensions, the median was found to be just $9,376 a year. Notably these figures are just for private plans;  public plans — including local, state, and federal — were found to be much higher.

Completing the “retirement stool” is Social Security, Thankfully things are a bit rosier here as the average monthly Social Security payment in 2018 was $1,422 a month, That amounts to $17,064 a year, easily making it the largest average annual source of retirement funds of the three.

When you combine the medians and average figures of private accounts, pensions, and Social Security, it comes out to just over $29,000. CNBC notes that this isn’t an impossible sum to live off of but also isn’t as prosperous as one might hope. What’s more concerning is that not all individuals actually have all three of these retirement fund sources. In fact, according to the Federal Reserve Bank of Saint Louis, only one-third of households have a 401(k) or similar plan while just 27% had a pension plan. Looking forward, there are also concerns about the future of Social Security — although that debate could easily be an article unto itself.

Given these figures, it certainly seems that there could indeed be a retirement crisis in America. However there are steps individuals can take to help prevent themselves from reaching retirement age without the proper funds. For one, starting as early as possible with your retirement savings is key but, if that ship has sailed, you may be able to take advantage of catch-up contributions to retirement accounts if you’re over 50 years old. Additionally potential retirees should consider how much they’ll receive from the “three legs of the retirement stool” on an annual basis and make changes now that will allow them to adjust to that income level later. Ultimately there is plenty that must be done to address to this rising crisis but, hopefully, Baby Boomers and younger generations can right the course for themselves before its too late.

Hopefully there will be enough time for those over 50 to cath up with their retirement plan. For those who are younger better start early to avoid this situation.

The retirement crisis for baby boomers is real. Unless younger generations find a better way to save for their retirement this cycle will just continue.

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Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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