Transcript of Podcast Episode 288
Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, a new study confirms that 20 percent of Americans over age 50 have no retirement savings at all.[1]
This study conducted by AARP confirms what many people have long suspected: Retirement insecurity is real. The study, which included more than 8,000 American adults, had some startling findings.[2]Among them:
- 20 percent of adults ages 50 and over have no retirement savings at all.
- 61 percent are worried they will not have enough money to support themselves in retirement.
- Perhaps most startling, only 40 percent of men who are regularly saving for retirement believe they are saving enough. For women the number is 30 percent.
- 42 percent of males describe their financial situation as “fair” or “poor.” This is up from 34 percent two years ago.
The stark reality often carries over into retirement. According to recent statistics, more than half of Americans over 65 are living on incomes of $30,000 or less a year.[3]
Retirement analysts often start with one basic assumption: People wish to maintain the same standard of living in retirement as they had during their working years.[4] This is simply impossible for many.
Congress is currently looking at several pieces of legislation that they hope will improve retirement security. One of them, the Automatic IRA Act of 2024, was introduced in February 2024. Under the proposed legislation, employers with 10 or more employees would be required to sign workers up for individual retirement accounts or provide their own retirement plans. The bill’s prospects are uncertain, but some industry, trade and lobbying groups have spoken in favor of it.[5]
Like anything else, the longer you wait to fix a problem, the more difficult it becomes to solve. And saving for retirement is a prime example. Simply put, the earlier you start, the better. If you’re over age 50 and have nothing saved for retirement, the situation could be grim. Sadly, your only alternative might be to keep working longer than you’d like.
And Social Security can only help so much. According to the Social Security Administration, “Social Security is not meant to be your only source of income in retirement. On average, Social Security will replace about 40% of your annual pre-retirement earnings, although this can vary based on each person’s circ*mstances.”[6]
If you’re younger, you still have time, but you probably need to move as quickly as you can. One way to encourage younger workers would be an automatic enrollment system for an IRA or 401(k) plan. Legislation proposed in Congress earlier this year would mandate such a plan for employers with more than 10 employees.[7] This type of “forced” savings can help you to build up your account before you have the urge to spend the money.
[1] AARP. “New AARP Survey: 1 in 5 Americans Ages 50+ Have No Retirement Savings and Over Half Worry They Will Not Have Enough to Last in Retirement.” prnewswire.com. https://www.prnewswire.com/news-releases/new-aarp-survey-1-in-5-americans-ages-50-have-no-retirement-savings-and-over-half-worry-they-will-not-have-enough-to-last-in-retirement-302126467.html (accessed May 7, 2024).
[2] AARP. “New AARP Survey: 1 in 5 Americans Ages 50+ Have No Retirement Savings and Over Half Worry They Will Not Have Enough to Last in Retirement.” prnewswire.com. https://www.prnewswire.com/news-releases/new-aarp-survey-1-in-5-americans-ages-50-have-no-retirement-savings-and-over-half-worry-they-will-not-have-enough-to-last-in-retirement-302126467.html (accessed May 7, 2024).
[3] Kaplan, Juliana. “Just over half of Americans over the age of 65 are earning under $30,000 a year, and it shows how stark the retirement crisis is.” businessinsider.com. https://www.businessinsider.com/retirement-crisis-social-security-poverty-older-americans-savings-inequality-2024-3?op=1 (accessed May 23, 2024).
[4] Iftikhar, Sheraz. “Retirement 101: Keep These Factors In Mind As You Plan.” Forbes. https://www.forbes.com/sites/forbesfinancecouncil/2021/11/22/retirement-101-keep-these-factors-in-mind-as-you-plan/ (accessed June 21, 2024).
[5] Hallez, Emile. “Congress takes another shot at federal auto IRA.” Investment News. https://www.investmentnews.com/retirement/news/congress-takes-another-shot-at-federal-auto-ira-249102 (accessed May 23, 2024).
[6] Social Security Administration “Retirement Ready Fact Sheet For Workers Ages 61-69.” ssa.gov. https://www.ssa.gov/myaccount/assets/materials/workers-61-69.pdf (accessed May 23, 2024).
[7] Hallez, Emile. “Congress takes another shot at federal auto IRA.” Investment News. https://www.investmentnews.com/retirement/news/congress-takes-another-shot-at-federal-auto-ira-249102 (accessed May 23, 2024).
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