1/3 Baby Boomers Only Have $0 to $25k in Retirement

In testimony before the House Financial Services Committee new Federal Reserve Chair, Jerome Powell declared that his “personal  outlook for the economy  has strengthened since December”, according to the Wall Street Journal, February 27, 2018.  Perhaps with a fine government pension in his future Mr. Powell is looking at his own situation.

New research shows declining confidence in Social Security with Americans needing to work longer.  Americans feel underprepared for the financial realities of retirement, according to new data from Northwestern Mutual study released on May 8, 2018.  “Nearly eight in 10 (78%) Americans are "extremely" or "somewhat" concerned about affording a comfortable retirement while two thirds believe there is some likelihood of outliving retirement savings.

These fears are substantiated by further data highlighting dramatic savings shortfalls and ebbing confidence in social safety nets.

• One in five Americans (21%) have NO retirement savings at all.
• One in three Baby Boomers (33%), the generation closest to retirement age, only have between $0-$25,000 in retirement savings.
• Three-quarters of Americans believe it is "not at all likely" (24%) or only "somewhat likely" (51%) that Social Security will be available when they retire.
• Nearly half (46%) of adults have taken no steps to prepare for the likelihood that they could outlive their savings.”

Rebekah Barsch, vice president of planning at Northwestern Mutual put it this way, “As financial implications of retirement become increasingly complex, inertia just isn’t an option. The good news is that it’s rarely too late to start.  In fact, we often compare financial and physical fitness because the hardest part is taking the first step.  However, once people commit to a strategy and start seeing positive results, they’re motivated to meet and even exceed their goals. ”

The study also showed that Americans have great concerns about their financial security in retirement, which leads to people working longer.  More Americans anticipate retiring at 70 or older.  About 55% of Americans believe they must work past 65 due to necessity, with 73% citing ‘not enough money to retire comfortably’ as a primary driver.  Other reasons include, 66% believe Social Security won’t be sufficient to meet their needs and 52% concerned about rising health care costs.

Let’s put some light on the subject.

Since you don’t want to run out of money before you run out of time, take 10 minutes to fill in the planning blanks below.  We’ll start with a Case Study on the left.  Please fill in the blanks with your numbers on the right. The first question is, in 2018 dollars how much money do you need to make work optional?

In archery it is highly unlikely you can hit the target you cannot see.  The same is true when it comes to planning your financial success.  We can agree that hope is not a strategy, so start by setting the target in today’s dollars then you can apply your inflation assumption and time frame to see what your personal goal is in the future.  Review annually so you can arrive relaxed and on time knowing exactly what your financial future looks like . 

Your second step is to visit www.ssa.gov to see what your Social Security benefits look like.  Do notice that every year that Social Security is delayed, the expected income is increased by 8%. 

Only 23% of Americans have pensions, according to www.pensionrights.org, January 18, 2018.  With longevity the very real wild card, one option might be to look at developing your own personal pension with the use of good annuities. 

Annuities are neither 100% bad or good.

Last month over lunch in Woodland Hills, 60 of my peers and my staff were introduced to economist, author, and retirement expert Tom Hegna.   He went to great lengths to call out Ken Fisher who is well known for saying, “I HATE annuities and you should too!”  Hegna pointed out the ads frustrate many financial advisors and can cause investors to have a negative perspective on why annuities can serve a very important purpose in your retirement planning.  There are a number of high profile people who pass out misleading and often incorrect information to investors.  Hegna went on to say, “I am 100% positive that Ken Fisher LOVES annuities. Let me tell you why.  While he does run an absolute brilliantly simple marketing campaign, annuities are an easy target.  They do have higher fees than many other investment products. So when Fisher looked across the landscape he chose to call attention to a product that was widely owned with higher fees than he charges.  See, the dirty little secret of Ken Fisher is that he has high fees too!  He can’t pick on Vanguard or Fidelity because their fees are probably lower than his.  There are a lot of products with high fees, real estate, options, futures, gold, and commodities, but Fisher took aim at the perfect target of low hanging fruit.” 

Just as you take the time to plan your vacation, not some else’s, take the time to plan your financial success.  It’s like going to the gym.  The first step is the most difficult, but with practice the job becomes easier and enjoyable.  Take the time to start today, because the job won’t get any easier.  Take the easy steps here to plan your financial success.

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