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. Given that number, it’s clear that most Americans will never be able to retire.

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 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 seven 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 )

16 Responses to Most Americans Will Never Be Able to Retire

  1. That’s a whole lot of depressing news, Kevin~ I feel fortunate that we starting saving for retirement fairly early and made some good investments in real estate!

  2. 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.

  3. 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!

  4. 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.

  5. Later this year my hubby and I will celebrate 10 years of retirement. Woohoo! When we were working, we had 3 priorities for our money. Pay off mortgage before retirement, put son through college debt free and retire at hubby’s age 55. We succeeded on all three because together we were committed to that goal. We really didn’t have to sacrifice much to accomplish what we did. Maybe travel and eating out. We are fortunate that my husband has a government pension that is {hopefully} secure and when I left government employment for the private sector I transferred my pension to a brokerage account which has flourished. My social security kicks in this month which will add just a small amount but it is going directly into another brokerage account so it too can be invested. Selfishly, when I hear about people not planning to retire, I think that is good because it means they keep paying into the system to benefit us.

  6. Hi Kathy – It really sounds like you and your family have lived a fairly conservative life, which enabled all that you’ve accomplished. Government employment doesn’t hurt either since it still provides a defined benefit pension – most people don’t have those any more, which is why I don’t think most people will be able to retire. You’ve wisely invested your retirement funds, and now you can reap the rewards. I think that most people underestimate what retirement will involve, at least the full blown version.

  7. Hi Kevin – It’s very interesting this article.I live in Mexico, for economic reasons I couldn’t finish the university, I’m 24 years old; but I’m autodidact and really interested of the retirement. I’m tired of the people saying that I’LL never be anything in life (Did I say it right?)
    For those reasons I’m learning english and I learned a little about many thanks a internet and youtube. My apologies if my english doesn’t sound good, I still need the help of google translate in parts.

  8. Hi Leonel – I’m thinking that if you learn English, you can work in so many jobs that require bilingual skills. That alone would be a chance to do “something” in your life. And with so many Spanish speaking people in the US, you could find work here somewhere. A lot of job ads require that applicants are bilingual English/Spanish.

  9. Thanks for you advice Kevin, where I can searching more information about employment in USA? Here in Mexico the salaries for the bilingual jobs they’re $550.00 USD monthly, my payment is less with that; It’s very difficult to life with that even in Mexico.

  10. Try It has jobs listed from all of the major job boards and even from local newspapers. Good luck Leonel.

  11. It won’t matter one bit how much you save unless you are rich–once you hit 50 you are an easy mark to be terminated and never work again.

  12. Hi Susan – I completely agree, and that’s one of the flaws in current retirement thinking/planning. Once you hit 50, you’re vulnerable to staff reductions, and that means retirement plans will be interrupted. One of the reasons people over 50 are more likely to be laid off is due to health. Since health insurance is already ridiculously expensive, and people over 50 are more prone to have large claims, an employer can reduce plan-wide costs by keeping the number of 50+ people on staff to a minimum.

    This is also why it’s hard to get a job when you’re over 50. Potential employers don’t want to hire you for the same reasons the last employer let you go. My own thought is to be self-employed, and plan on working for as long as possible. At least that way you can’t be downsized out of a job, and then you can blend self-employment with semi-retirement, on the way to full retirement.

  13. My husband and I planned everything and still feel we will have to work part time in retirement because of the costs of health insurance co pays and premiums. Savings being fairer than most but not good enough, with still owing on new vehicles. 8 years until 65 and watching the cost of living increase every day. Won’t be in debt but won’t be rich. No pensions and no company 401K. I am going to look into the retirement career now instead of later. Also frugal living helps you save if you live now like you are already on Social Security.

  14. Hi Deborah – It sounds like you’re doing everything right! I do agree though, that you should go with semi-retirement rather than the full blown version. It sounds like you’re in your 50s, which means you’ve decades to provide for. The cost spiral doesn’t allow anyone by the truly rich to fully retire. I admire that you’re doing it with no pensions or company 401k. You must be doing it old school, but just having a lot of savings and investments, and not getting fancy.

  15. Kevin, I am working part time in education. I would like to return to teaching at least part time (I am doing classified work for much less money) and work until well into my seventies and build up a pension. Private sector work is out for that reason. I have a pension in another state, but it is very, very small, plus I am getting early Social Security (had to do it). I was illegally fired at age 53, and it has taken me many years just to get started on getting back on my feet again.

  16. Hi Susan – Your situation makes the point that I’ve made over and over, that the plans of a lot of people are derailed by events beyond their control, and often after age 50. All things are possible when you have a steady, healthy paycheck and full benefits without interruption. But that’s the problem, a lot of people’s careers are being disrupted at a time in life when they should be making those last leg plans for retirement. Instead you’re forced to drain resources early, as if you’re being forced into early retirement.

    I commend you for having a plan to survive. Please don’t give up. Good things happen when you keep moving forward, even if you can’t see what’s up ahead. I’ve experienced many times in my life that God meets me with a plan when I move forward in faith. The same will be true for you. In the meantime, please don’t give into the horror poverty stories you’ll undoubtedly hear and read. We’re all capable of so much more than we think.

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