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Retirement Will Be a Fantasy for Most Americans

One thing I don’t like to do here at OutOfYourRut is write to the financially blessed. There’s more money in doing that, I’m not going to lie. But there are a lot more people who don’t fit into that category, and that’s always been my target audience. In my everyday life I meet people of ordinary means all the time. And one thing I’m gathering is that retirement will be a fantasy for most Americans.

It seems as though millions are finally coming around to that reality. But if you haven’t – or if you need reinforcement of the point from time to time – that’s a niche I’m trying to fill here. And to tell you that your life won’t be doom and gloom if you never retire, or if you can only semi-retire.

The Retirement Savings Shortfall

So why does it seem that I’m so “down on retirement?” Actually I’m nothing of the sort. But what I am is a huge fan of reality. And reality is pointing in a radically different direction than the conventional wisdom is where retirement is concerned.

Retirement Will Be a Fantasy for Most Americans
Retirement Will Be a Fantasy for Most Americans
Despite the retirement optimism so common on the web, the vast majority of Americans continue to be only minimally prepared. According to a survey conducted by GoBankingRates earlier this year, 33% of Americans have no retirement savings whatsoever. Another 23% have less than $10,000. That means that 56% of Americans have either nothing, or close to nothing, saved for retirement.

At the upper end of the scale, 13% have over $300,000 saved, which would put them in a solid position to enjoy at least a modest retirement, though certainly nothing like the TV version of beaches, palm trees and golf courses.

This is consistent with reports that the wealth of the top 10% of households continues to grow, while the wealth of most of the rest limps along. But what’s interesting – in a sad way – is that nearly everyone in the country continues to look forward to a comfortable retirement. In 21st Century America, as it was in late 20th Century America, retirement is seen as a guaranteed part of the American Dream.

But as I’ve often written, it’s time for a new dream – one that’s more consistent with what’s really happening. I think that this whole retirement crisis – and that’s just what it is – will sort itself out once we do.

The Lack of Retirement Savings Probably Isn’t Your Fault

The retirement cheer leading fraternity will tell you that if you are among those with scant retirement savings that it’s categorically you’re own fault. Sometimes that’s true. But here’s a scary statistic: the median household income income in the US for 2014 was $53,657. That means that half of all households earned more, half earned less. (The 2015 figure will be out by the end of 2016).

When you factor housing, utilities, debt payments, car expenses, and especially medical insurance and out of pocket, that doesn’t leave much available for retirement for at least half the population. And a household income of $53,657 up to $100,000 doesn’t buy what it used to, particularly in high cost metropolitan locations.

Then there’s career instability, a hallmark of this century. One thing that successful retirement saving unequivocally requires is consistency of both income and contributions. That’s hard to come by if you’re facing a job loss every few years. And even when you’re re-employed, it can take years to pay off debts taken on (for survival) in the time that you were out of work.

Many who once had generously funded retirement plans drained them to survive a job loss, to pay uncovered medical expenses (health insurance disappears with a layoff) or to help put their children through college. I saw it all the time in my accounting career.

Another requirement is a steadily increasing income. Not only is a rising income necessary to enable you to keep up with the relentless rise in the cost of living, but you also need it to steadily increase your retirement contributions as you move closer to retirement. In recent years, raises have become paltry, if they’re even given. Some people, who lost jobs, were rehired into new positions at lower pay.

OK, enough of focusing on why people lack retirement savings. What’s infinitely more important is where do we go with this?

Tune Out the Retirement Hype

With the Baby Boom generation now moving rapidly into the traditional retirement years, retirement stress is on the rise. Millions of people who spent decades just trying to survive and pay the bills, now face a retirement crisis. You can’t retire on Social Security alone, and traditional pensions – that continue to fuel the retirements of of the World War II generation – are gone for all but employees of the government.

It’s time to face reality. Yes, the financial media will continue to paint a rosy picture of retirement for everyone. And yes, some on the web will keep beating you up for not being better prepared. But if retirement won’t work out for you, it’s time to change strategies. The reality is that if you are in your well past 50, and you fall into the 56% of Americans who have less than $10,000 in retirement savings, you must pursue a different course.

The first step is to tune out the hype. It’s important for us all to concentrate our efforts on where we’re most likely to succeed. Fighting a battle you can’t win is a waste of time. And the last thing you need is the stress of realizing that you may have missed the retirement train completely. It’s critically important that we learn to let go of what we can’t change.

Get Comfortable With Non-Retirement

Understand this: your life isn’t over because you can’t retire.

The more constructive path is to focus on life without retirement. You should also do your best to avoid those people, places and circumstances that will make you feel inadequate for not being one of the fortunate.

But you’ll have to accept that retirement won’t be part of your life. The sooner you can do that, the easier it will be to prepare for a different course. It may help to realize that you’ve never been retired up until this point, so it will just be a continuation of what you’ve always known.

Does that sound depressing? It doesn’t have to be.

The most basic financial plan is to work, save and invest. That’s what humanity has been doing since the beginning, and what millions continue to do even now during the retirement years. The key is to find ways to do it better, and with less stress.

In the next couple of weeks, I’ll be doing a series of posts on how to live and to even prosper during your retirement years, even if you can’t afford to retire. Please check back.

How do you feel about your own chances of retirement? Are you one of the rising class of people looking for an alternative to retirement?

( Photo Inalaf )

8 Responses to Retirement Will Be a Fantasy for Most Americans

  1. I’m not sure your narrative is entirely realistic. I suppose you have noticed the trend of disposing of ‘older’ workers?

    I read an article yesterday about techies in Silicon Valley being outdated at the age of 40.

    I can’t even tell you how many people I know who were ousted from their jobs in a number of creative ways, before the age of 60. Try finding a new job at that age – doing anything, much less continuing to work in your field.

    ‘Retirement’ isn’t entirely voluntary these days. They just get rid of you, and then what do you do?

    Currently in the US it seems like there is a very narrow window of age desirability for employees, about 25 – 50. That leaves a lot of the workforce high and dry.

    Focusing on some kind of golf course cruise ship retirement ‘dream’ that is rarely attainable, is to miss the fact that many people get retired by their employers long before what is generally considered the age of retirement.

    In America, job retires you.

  2. Hi Marissa – You’re making excellent, excellent points about forced “retirement”. I read the same article you did about 40 year old techies being tossed out of jobs. A friend of mine who works in IT and turned 40 this year said the same thing before that article came out, so I know it to be true.

    I’m not sure what you mean when you write “I’m not sure your narrative is entirely realistic”. I wrote this article for all the reasons you’ve described. It’s now all about finding ways to survive “the retirement years” and not about retiring to the beach. But I do agree that for a lot of people that’s now playing out in their 40s and 50s, and not just from 60 and beyond.

    I believe that the economy is slowly imploding, despite the media presentation of a very different narrative. But we’re all dealing with it on a very individual level, rather than as a society, which is really what’s needed. I don’t even see any kind of political cohesion building behind it. The Trump support seems to be long on anger, but short on workable ideas. The Hillary support is more about “keep my benefits flowing”, which means a continuation of the status quo. All of the strategies I’ve proposed center on finding ways to survive based on what’s really happening, not the fantasy version that continues to dominate in the mainstream.

  3. Kevin – excellent post. As a financial blogger myself, I really (really) struggle with how to reach those who need it most. They’re the ones who need to read and educate themselves, but they’re the ones least likely to read these kinds of posts (I’ve posted on the reality that you probably won’t be able to work as long as you’d like, along the veins of the comment above). Each of us “hobbyists” should make it a habit to forward articles like yours (tactfully) to those who need to hear the message. Good post, now let’s find a way to get the right audience to read it.

  4. Hi Fritz – Thanks for the compliments, they always mean more when they come from peers! I’m not sure the problem is lack of education. From what I’ve seen anecdotally, and supported by the statistics that leak out, is that the vast majority of the under-prepared lack the income. That’s fundamentally a different problem. It’s not a matter of saving the right percentage of income early in life. For millions of households either the income isn’t there, or they’ve faced either medical catastrophes or prolonged periods of unstable employment.

    The bigger concern is how to deal with creating a comfortable life during the retirement years that won’t necessarily involve retirement. Let’s face it, if you’re not prepared by 55 or 60 it’s probably not going to happen. So where do you go from there? That’s the real challenge. And I think it’s going to get a lot bigger after the next recession. Believe me, I saw dozens of people who once had fat retirement plans being forced to liquidate them in their 40s, 50s and early 60s, just to survive. No one’s talking about that group, even though it’s almost certainly a lot bigger than the 10-15% who are sailing into their 60s with generous six- and seven-figure retirement portfolios.

    And looking forward, there are millions of Millenials who are struggling just to get out of the career starting gate. What will retirement look like for them? I think this is a group that will have to be more open to alternatives. They have a lot in common with the un-/under-prepared Baby Boomers. Both groups need strategies.

  5. Another great article. It really hit home when you talked about facing a job loss every few years, because that’s what happened to me over the past decade. But it’s hard to give up the fantasy of retirement. I don’t hate work, but I love the idea of retirement. Thanks for your great work.

  6. Thanks John! Maybe you can take some comfort in the fact that there are millions of people in the same unstable career boat. I’m about to do another post on this topic (this week) about work options during the retirement years. I promise it won’t be gloomy!

  7. I believe you are absolutely right. Retirement will soon have to be redefined for those with a small portfolioor none at all, which according to the stats is the majority of people 50+.

    Our parents’ generation have the traditional retirement lifestyle – foreign holidays, cruises, dining and wining without spending a day having to work. That is the life we dreamed of which are being denied. Unfortunately, we’ll have to learn to accept what we can’t change and find work we can enjoy which doesn’t feel like work.

  8. Hi Tim – I’ve always thought that the current generation of retirees are living in the golden age of retirement. Meaning that retirement won’t be as kind to future retirees. Sure, the wealthy will continue to enjoy a golden retirement, but most of the rest of us will continue to do what we’ve always done, which is to survive. Still, there are ways to do that in relative comfort. I think that traditional retirement planning, when supplemented with employment, self-employment, and passive income sources will enable a comfortable living. But not retiring to the beach without ever lifting a finger again. Part of my goal on this site is to awaken people to that reality, and to help them better prepare to thrive in it.

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