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I recently noted that 43% of Americans won’t have enough saved for retirement.
GRS-reader Sabino forwarded an MSNBC article that suggests this number may only continue to rise.
The financial security of American workers is more uncertain than it has been in decades. Once reasonably assured of a comfortable retirement, Americans are now watching private pensions collapse and public pensions come under pressure. And even those…whose retirement security was once all but guaranteed, are now finding they have to fend for themselves.
Because of uncertainty regarding government and corporate pensions, it’s imperative that people pursue personal retirement savings programs. Pay yourself first. But the article warns that even those few who take the initiative to make personal retirement investments face risks.
There is mounting research that most Americans are ill-prepared to cope with the task of creating a nest egg to rely on when they’re too old to continue working. They’re also woefully unaware of the risks they face in retirement investing. And they’re falling further behind in providing for their long-term financial security.
Individual investors are generally ill-informed regarding investment options. Many don’t do anything. Some invest in their employers’ stock. Others make uneducated forays into the stock market. Be proactive. Educate yourself. Act now!
More worrisome is that people don’t understand how much money they’ll need when they stop working.
[A recent study] found that half of current workers expect to get by on 70 percent or less of their pre-retirement income. Yet among people who have already retired, two-thirds say the 70 percent level is inadequate.
This is an excellent article, and an important one. Please read it.
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June 23rd, 2006 at 4:10 pm
I was far less impressed with this article than you were. For example:
For example, a worker who invested $1,000 in stocks in 1964 and retired 35 years later in 1999 would have accumulated more than $60,000, adjusted for inflation, based on the return of the Standard and Poor’s 500 index. But if that same worker started saving just three years later, investing $1,000 in stocks in 1967, that nest egg would be worth about half as much in 35 years — due largely to the heavy back-to-back stock market losses just before retirement. A lot of the success of your retirement plan rests on dumb luck.
That assumes both workers ignored the first rule of planning for retirement, which is to maximize risk early and minimize risk later. If you’re not planning to retire for another 35 years, then by all means, invest in high-risk stocks. But if you’re approaching 60, then you move your money into safer quarters, in which case your hypothetical worker avoids those 2001 crashes.
Schoen paints a bleak picture, and I don’t agree. Planning for retirement is crucial and complicated, but not difficult. It simply isn’t a success that favors dumb luck over hard work.