Recent research shows that baby boomers and Generation Xers who are in the lower income brackets are more likely to fall short of their retirement goals, which will leave them lacking enough money to live on.
Researchers at Northwestern Mutual Planning and Progress found that some people may run out of funds within their first year of retiring, and that 22% of Americans have less than $5000 saved for retirement.
Even some people who fell in the highest income brackets would likely run out of money at some point during retirement.
The outlook for many of their futures remains grim. The survey found:
- 22% of Americans have less than $5000 saved for retirement.
- 15% have no retirement savings at all.
- 56% don't know how much money they need to retire comfortably.
- 41% are taking no steps to prevent themselves from running out of retirement savings though many see this as a possibility.
After gathering these findings and analyzing them, researchers point out that people who are in the lowest income bracket are extremely vulnerable.
With the possibility of not only running out of funds but running out quickly, people who are in this category should be concerned and take steps to enhance their retirement preparedness.
People in all categories, however, can find themselves at risk, and each person's likelihood of running low on funds will depend not only on their current financial status, but also on their health status. Not all health issues are predictable and what exists now may be complicated later.
Some people may need extra funds for health care. Most people don't have a plan to cover long-term care costs and mistakenly think that Medicare will foot the bill. However, Medicare only pays for 100 days of skilled nursing home costs and after that, how will you pay for it and where will the money come from?
What to do
First off, do not expect Social Security to keep you a float in your golden years. It won't provide enough income for you to live off in retirement. If you're like the typical recipient, your benefits would cover roughly 40% of your previous income, assuming that Congress doesn't move to slash future Social Security benefits.
If you have not started saving for retirement, regardless of your age, start doing so now. Thanks to compounding interest and earnings, the more you start socking away now, the more money you can earn in your retirement funds in the future.
If you begin setting aside a decent chunk of money each month, and continue doing so consistently for the remainder of your career, you have more than enough opportunity to catch up.
The following shows how much money you would have when you retire at the age of 67 if you start putting a way $500 a month at different stages
- 37 years old: $567,000
- 42 years old: $379,000
- 47 years old: $246,000
- 52 years old: $151,000
- 57 years old: $83,000
You should review your retirement plan and accounts annually and increase how much you set aside if you feel you are not meeting your retirement savings goals. It's never too late.
Update your options as needed and take into account long term changes in health conditions. To learn more about your options contact us.