Tag Archive | "middle class may never be able to retire"

Retirement Is A Dream For Most Americans

Pension plans are – for most of us – a thing of the past. 401(k) plans are a disaster. The Federal government is making nasty noises about cuts to Medicare and Social Security. Sometimes is seems like government and big business are conspiring so that retirement is a dream for most Americans.

Retirement is a dream for most Americans.

Retirement is a dream for most Americans

With pension plans a distant memory, most of us — if we have any retirement savings at all — have money in a 401(k). But there’s a big problem with that and it’s virtually ensuring that most Americans will never have enough to retire.

The fact is, that it’s easy to take money out of your 401(k). Sure, there’s a penalty and you have to pay taxes on the money you withdraw, but when you need it, you need it and your 401(k) is a handy stash.

A large and growing share of American workers are tapping their retirement savings accounts for nonretirement needs, raising broad questions about the effectiveness of one of the most important savings vehicles for old age.

More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses, new data show. The withdrawals, cash-outs, and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year, undermining already shaky retirement security for millions of Americans.

And now, as the Federal government attempts to get its fiscal house in order, we hear rumors of cuts to Medicare and Social Security.

With policy makers eyeing cuts to Social Security benefits and Medicare to rein in the soaring federal deficit, and traditional pensions in long decline, retirement savings experts say the drain from the accounts has dire implications for future retirees.

‘‘We’re going from bad to worse,’’ said Diane Oakley, executive director of the National Institute on Retirement Security. ‘‘Already, fewer private-sector workers have access to stable pension plans. And the savings in individual retirement savings accounts like 401(k) plans — which already are severely underfunded — continue to leak out at a high rate.’’

The fact is that the interests of working Americans have never been truly served — with very few exceptions — by big business or government and now it looks as though retirement is a dream for most Americans.

Click here to read more about why retirement is a dream for most Americans.

Posted in Creating a Personalized Retirement Plan, Planning for Your Retirement, Saving for Retirement, The EconomyComments (0)

Working Longer May Not Save Your Retirement

Working longer is a frequently-sited strategy for ensuring a financially secure retirement and it offers many benefits such as more years of employment to save and maximizing your Social Security benefits. But just working longer may not save your retirement.

Working longer may not save your retirement, but it may help make your  golden years more fun, interesting — and rewarding.

Working longer may not save your retirement

There are many other factors that come into play when you consider postponing your retirement. How much you’re earning now is critical.

As you might expect, projections for the lowest pre-retirement income quartile are the most sobering. This group would need to defer retirement to age 84 before 90 percent of them would have even a 50 percent probability of achieving comparable pre-retirement living standards.

You’ll have to really love what you do to make working until you’re 84 seem attractive. The future looks brighter for those earning more, but not much.

The results improve with income levels, but even among those in the highest income quartile, 90 percent have only a 50 percent chance of having enough to retire by 70.

Even if you’re relatively young and plan to work longer, the projections are still grim.

When broken out by age, the news isn’t much better: For one-third of households in which the people were between ages 30 and 59 as of 2007, working until age 70 won’t provide adequate income in retirement.

One way to look at this and make the picture seem a little brighter is to broaden your definition of “work.” Even if you hate your current job and want to get out of it as soon as possible, your skills and experience may have many applications that will allow you to work less, generate income to offset your retirement expenses, and actually enjoy what you’re doing.

Working longer may not save your retirement, but it may help make your  golden years more fun, interesting — and rewarding.

Click here to learn why working longer may not save your retirement.

Posted in Planning for Your Retirement, Retirement Plan Challenges, Saving for Retirement, The EconomyComments (0)

Middle Class Americans are on the Edge of a Retirement Cliff

Nearly all Americans are pessimistic about their retirement years — and with good reason. A recent survey of 1,000 people conducted by Harris Interactive for Wells Fargo quantified the bad news, revealing that middle class Americans are on the edge of a retirement cliff.

Middle Class Americans are on the Edge of a Retirement Cliff

According to the survey:

  • 53% are not confident they will have enough money saved for the retirement lifestyle they want.
  • 30% expect they will have to work until at least 80 to have a comfortable retirement lifestyle.
  • 73% believe their employers do not want them to work in their 80s.
  • 70% of middle class Americans expect to work during retirement.
  • 39% believe they will have to work out of financial necessity.

By any objective standard, it’s clear the American Dream, whatever you believe that to be, has been replaced by the Retirement Nightmare.

Joe Ready, director of Wells Fargo Institutional Retirement and Trust observed:

It is so tough for Americans to save for retirement, and we feel it is very important to keep shining the light on this issue. People say they’ll work longer, but how possible will this be for millions of Americans? Preparing for retirement can’t be kicked down the road because the other picture that is emerging is how many people will live very close to the poverty line in retirement. We’ve got to marshal our resources as a country, an industry and as individuals to deal with the issues creating this cliff.

An ironic statement, given that financial institutions like Wells Fargo are, in a large part, responsible for the devastating economic crisis that faces us and are perpetuating the situation by promoting retirement plans and investments that siphon money out of the middle class and into those institutions’ bottom line profits.

Middle class Americans say they will need a median of $300,000 to support them in retirement, but to date, have only saved $25,000 (median). When asked what percentage of their nest egg they expect to withdraw annually in retirement, the median withdrawal predicted by middle class Americans is 10%. Many experts say withdrawals should be maintained at three to four percent.

That’s a huge gap to cover, especially if you’re already in your 50s — or even worse, 60s. Savings accounts and CDs return almost nothing and result — at best — in a slower, safer loss of your money. 401(k) plans are proving to be disastrous for many reasons. Middle class Americans are on the edge of a retirement cliff. Now what are we going to do about it?

Click here to read the Wells Fargo press release presenting their findings


Posted in Planning for Your Retirement, Retirement Plan ChallengesComments (0)

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