Home About Archives RSS Feed

The Independent Investor: Are Americans Saving Enough for Retirement?

By Bill Schmick
iBerkshires columnist
If you simply read the headlines, you would assume that over half of Americans aged 55 and over, have no savings as they approach retirement. That's a dramatic statement, but is it true?
 
Most statisticians derive that data by adding up those who have an IRA or similar tax-deferred savings account such as a 401(k). The latest data compiled by the Federal Reserve Bank's Survey of Consumer Finance indicated that 53 percent of households, age 55 to 64, had some savings in those tax-deferred accounts. So, yes, by that standard, almost half of all Americans fail the savings test.
 
But what about all the people who work for the government? There are 22 million workers toiling away within the ranks of federal, state and local government, and all of them have traditional defined benefit pensions.  
 
That's 14 percent of the labor force! Those pensions have amassed 
anywhere from hundred thousand (maybe less) to $1 million or more.
 
While corporate pension funds have been seen a multi-decade decline among workers, there are around 13 percent of private sector workers who are participating in defined benefit pension plans. In fact, roughly 40 percent of all workers between 55 and 64 years of age are expected to receive a traditional pension benefit in retirement.
 
When you add all those segments together, the outcome is entirely different. Almost 75 percent of workers in the U.S. either have a tax deferred savings account or a pension account. That still leaves a goodly portion of Americans coming up short. However, all is not as bleak as it looks for those people.
 
Let's talk about the low-wage earners making around $10,000 per year over their lifetime. When they retire, they will receive Social Security benefits. Those benefits could equal as much as 84 percent of their yearly salary. Almost 19 percent of Americans fit within that category, according to the Social Security Administration,
 
Can some one in retirement live on $10,000 a year? Not likely. Remember that Social Security was never intended to be a retirement account. It was simply unemployment insurance that could help a worker feed his family until he found a new job during the Great Depression. Today, given that we now have unemployment insurance in addition to Social Security, the population has come to think of it as a retirement benefit.
 
As you can see, most Americans have and are saving for their retirement. That's not the question. How much you are saving is the critical variable in this equation. How much should I save, you might ask, to see me through my golden years? My answer is, whatever you might think, most of us are not saving enough.
 
The way to begin answering this question accurately is to find out how much you and your family are spending per year. For every household who can answer that, I see at least 20 families who have no idea what their yearly expenses are. It should be obvious that without knowing your expenses, there is no way you can know how much you might need once you retire.
 
My advice is to find out now, while you are young or at least middle-aged, and set up an appointment with a Certified Financial Planner. Few people have the ability and financial education to create a lifetime play of savings all alone. Make sure that the CFP is a fiduciary and spend the money.
 
Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.
0 Comments
     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Pittsfield Council Approves New Water and Sewer Rates
North Adams Council Restores Fire, Police Chief Titles
Pittsfield Firefighters Donate Christmas Gifts to DCF
1Berkshire Annual Meeting Remembers Klefos, Looks to Year Ahead
North Adams Movieplex Holds 'Five For Free' Food Drive
BHS Expands Rheumatology Services With New Doctor
What Is Smarter: Paying Off Debts or Investing?
Tyer Meets With Herberg's Future Leaders
Pittsfield to Continue With Wastewater Treatment Project Plan
North Adams Council Approves Tax Incentive for Tog Manufacturing

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (275)
Independent Investor (376)
Archives:
December 2018 (1)
December 2017 (5)
November 2018 (9)
October 2018 (5)
September 2018 (4)
August 2018 (9)
July 2018 (2)
June 2018 (8)
May 2018 (8)
April 2018 (7)
March 2018 (6)
February 2018 (7)
January 2018 (7)
Tags:
Recession Housing Pullback Stocks Energy Taxes Selloff Interest Rates Banks Markets Japan Retirement Deficit Euro Stimulus Crisis Election Debt Ceiling Greece Commodities Rally Economy Metals Debt Europe Congress Wall Street Oil Currency Jobs Fiscal Cliff Bailout Stock Market Federal Reserve Europe
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
The Independent Investor: Will Our Country's Military Win the Next War?
@theMarket: Markets Hope for Trade Breakthrough
The Independent Investor: Sustainability Investing and Millennials
@theMarket: It Is a Black Friday on Wall Street
The Independent Investor: The Origin of Black Friday
@theMarket: Markets Need to Hold Here
The Independent Investor: The Apple of Our Eyes
@theMarket: Stocks Take a Breather
The Independent Investor: Mid-Term Results Take Investor Focus Off Washington
The Independent Investor: Time to Check Your Risk Tolerance