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Most Americans Will Never Be Able to Retire

Last summer, an article on Yahoo Finance compiled information indicating that the “average working-age family has set aside a mere $3,000 for retirement”. Before dismissing that report, consider that it is consistent with a 2011 survey showing that 64% of Americans have less than $1,000 in liquid savings.

$3,000? If it were ten times higher than that, it still wouldn’t be nearly enough to enjoy anything approaching a decent retirement.

There are several factors contributing to this lack of retirement savings – or any kind of savings at all:

  • Downsizing – a person loses a $50,000 job with a 401(k) plan, and is forced to replace it with a $30,000 job with no retirement provision (this change will not be reflected in any unemployment figures).
  • Chronic under-employment.
  • High personal debt levels, as people try to compensate for lost income with credit.
  • A cost of living that’s rising much faster than the oft-quoted Consumer Price Index.
  • Increases in the most unavoidable expenses, including healthcare/insurance, education, utilities, and food.

Most Americans Will Never Be Able to Retire
Most Americans Will Never Be Able to Retire
Many people retire at their designated “normal retirement age”, only to return to the workforce two or three years later, painfully aware that retirement isn’t doable in their world.

The reality of retirement in America today is that it’s little more than a pipe dream for most people, even if most of us consider it to be some sort of inherent right.

Here’s what retirement is shaping up to be for the average person – and what might be done to improve the situation.

The life of blissful nothingness is gone

Unless you’re already rich, this whole concept is – and always has been – a complete fantasy. For the most part, the people who have retired to beaches and golf communities were already well off before retiring. The life they’re living now in retirement is an extension of their prosperous working lives.

If you aren’t already rich, you should not expect your retirement to be any more opulent than your life has been so far. This is an important realization too – guarding yourself against unrealistic retirement expectations will be crucial in helping you to prepare for the real thing.

We can blame TV and the media in general for creating these inflated expectations, but we must guard against them nonetheless.

After living a lifetime of indebtedness, people are now retiring in debt

People are carrying all kinds of debt into retirement – car loans, credit cards, their children’s student loans, and even six figure mortgage balances. If you’re carrying large debts, you probably shouldn’t even be thinking about retiring. It isn’t a workable concept.

More realistically, paying off debt is one of the single best steps to at least make your retirement years more comfortable.

Your retirement portfolio may be more of a large emergency fund than an income source

I know, I know – Joe Blow, CFP, at CNN, or an article on WeCanAllBeRich.com said that all you need to do to retire to a life of luxury is to faithfully invest 10% of your income in stocks each year, reliably returning 15% each and every year, beginning at age 25, and you’ll have $10 million in your retirement portfolio by the time you’re 65.

And on paper, they’d be completely right. The problem is that real life doesn’t cooperate with paper theories and equations, no matter how sweet they may seem. It does however generate reader interest. After all, who doesn’t want to be rich, especially if it can be done fairly easily. John and Jane Q. Public drink that stuff up like soda pop.

But let’s get back to the real world. Here on the Planet Earth, there are periodic stock market crashes, stocks don’t return anything like 15% consistently, and you may lose your job and need to tap your retirement savings for survival. And that’s to say nothing about what inflation can do to a retirement portfolio, even a very large one.

Keep funding your retirement plan – more is always better when it comes to retirement savings. Just don’t be surprised if it turns out to be little more than a very large emergency fund – and accept that that isn’t necessarily a bad thing in itself.

Retirement income is no longer enough – or it won’t be eventually

We’re all familiar with the potential threats to Social Security. While I don’t believe that Social Security will ever go bankrupt (at least not in the traditional sense), it’s becoming increasingly clear that it’s little more than an income supplement, and nothing like a true retirement plan.

Add to that the fact that defined benefit retirement plans are largely non-existent – or facing serious funding issues where they still exist – and it’s clear that pensions are an open question, at best.

Newsflash: you will need to maintain active income sources until the day you die

I fully recognize that that statement sounds harsh, but reality usually is. And it’s only as harsh as it is because we’ve been spoon-fed on the fantasy version of retirement, not the much more likely one that awaits the majority of us.

Like it or not, most of us will do little better than semi-retirement. Some think of this as non-retirement, as though it’s a threat to the whole retirement concept, but I disagree. You’ve probably been working in some capacity to earn a living for most of your adult life, and there’s no reason to expect that to change when you reach retirement age (unless of course you’re already wealthy).

The best hope for most of us is retirement income balance from multiple sources. That can include what ever Social Security will pay, supplemented by investment income, retirement plan distributions (as much as they will be), and some form of earned income.

The upside though is that the earned income doesn’t necessarily have to be the job or work you’ve done all your life. You can move into a softer occupation that will be less taxing than your current one. This places a premium on doing work that you like. If you do, semi-retirement can be one of the best times of your life. You’ll be blazing new paths, rather than spending money to fill the hours that represent the rest of your mortal life.

It was for this very reason that I’ve pursued a career as a freelance blog writer. I had a career crisis about five years ago, and realized that I had to do something completely new. I love to write, and realized that it’s something I could do – in one capacity or another – for the rest of my life, retirement be damned. It’s working for me; you can do something similar – and you should. It’s one of the very best “retirement” moves you can make.

Start that retirement career now, and you’ll be ready when the time comes. I’m no where near retirement, but it’s not a time that I dread anymore.

No matter what you may think all is not lost!

Many will argue that the current prospects (the real ones) for retirement are bleak – I disagree. This is our time – our lives – and it will be for as long as we’re alive. We need to abandon the notion that we’ll enter some state of magical Nirvana upon reaching an arbitrary retirement age, or that we even need to.

Our lives will be what they’ve always been – a combination of triumphs and tragedies, joys and disappointments, successes and struggles. Get ready for it. Set your mind to the more likely outcome. Tune out the perfect world assumptions. Ignore the “requirements” set by others, and follow your own. Your world and your life won’t self-destruct because you haven’t fulfilled the “right ways” to plan for retirement. Make alternative plans – based on your individual reality – and follow through on them.

And remember, planning for retirement isn’t all about money. It’s also about maintaining your health, developing strong relationships with family and friends, achieving spiritual fulfillment (which for me is a relationship with Jesus Christ), and continuing to follow your passions – where ever they may lead.

Do you think we’re seeing a complete redefinition of retirement, especially for the middle class? If so, are you simply hoping for the best – or making other plans?

( Photo by Philip Taylor PT )


4 Responses to Most Americans Will Never Be Able to Retire

  1. Hi Holly – I think you’re on track with real estate, if it’s rental/income property. That’s an excellent semi-active income source and perfect for retirement. Rents tend to rise over the years as the mortgage is amortized into non-existence. At that point you’re looking at a healthy positive cash flow. It’s actually more of a business venture than an investment when you buy it for cashflow. And then you can sell it for a large windfall if you decide you’re tired of managing it.

  2. Kevin, you had me at ‘Most Americans will never be able to retire”. How true, I read that article too, and it’s hard to even fathom that the average working person has only set aside $3000. Heck in 20 years that will only get you a double latte from Starbucks and maybe a movie ticket!

  3. Hi Jim – Yeah, but I don’t think it’s as bleak as it sounds. People will find a way to cope, though it won’t be as comfortable as many hope. We’re all more resilient than we think, but we need to put that resilience to work. That’s why I suggested alternative plans. If people react at least a few years before retirement age, it’ll probably turn out OK. Personally, I think that inflation is such a major variable that even people who have large retirement portfolios could end up getting blindsided. We really need to each develop our own portfolio of income sources, and not just assume that investments will do the job.

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