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August 14, 2015
A whopping 86% of Americans feel there is a retirement crisis upon them, and many have little faith in the government to help.
How big is the crisis? Who is to blame? What can we do to protect ourselves?
How Big is the Crisis?
So, how many people are truly financially unprepared for retirement? The answer depends on who you ask.
The Employment Benefit Research Institute reports that 41-43 percent of Americans are at risk of running out of money in retirement.
Boston College’s Center for Retirement Research says that 53 percent of Americans won’t be able to sustain their current standard of living in retirement.
Fidelity Investments’ Retirement Preparedness Measure found that 55 percent of Americans are in fair or poor condition for covering essential living expenses in retirement.
What is really important though is how you feel about your own retirement preparedness. And, if you are like most of us, you are not feeling great. A PBS poll found that a whopping 92 percent of Americans think that there is a retirement crisis.
Who or What is to Blame for the Retirement Crisis?
Changing Times: Today’s retirees must adapt to a different U.S. financial infrastructure than that of their parents and grandparents, which is fueling retirement concerns, according to a new report by the National Institute On Retirement Security (NIRS). This is NIRS’ fourth commissioned nationwide opinions research project, which aims to monitor over time how Americans feel about their financial security and retirement.
Low Participation in Retirement Plans: “A large portion of the workforce lacks access to or is not participating in retirement plans, making future retirement security prospects—especially for middle class employees — challenging at best,” say authors in the new report, “Retirement Security 2015: Roadmap for Policy Makers.”
Indeed, fewer people are retiring with the promise of a pension, or regular payment made during a person’s retirement from an investment fund to which that person or his or her employer has contributed during their working life.
Poor Pension Performance and Cut Benefits: “The stock market has soared more than 75% in the past five years, yet many pension funds, where many middle-class workers should benefit from the market’s rise, continue to struggle, jeopardizing benefits for the workers who were counting on them in retirement.,” explains The Washington Post in a recent article, adding that cities including Chicago and San Jose have already moved to cut benefits for new or current employees to save costs.
Policymakers: Also contributing to Americans’ fears about retirement is their lack of faith in lawmakers to represent their best interests.
Some 87% of Americans say Washington policymakers do not understand how hard it is to prepare for retirement, while 84% say Washington needs to do more to help ensure retirement security, NIRS data reveals.
With these concerns in mind, many Americans say they support states providing retirement plans. Seventy-one percent of Americans agree state plans are a good idea, and almost 20 states have considered so-called “Secure Choice” legislation, which would make it easier for employers to give employees the option of payroll deduction for retirement savings, according to NIRS.
While the promise of a pension may be dwindling, Americans’ support for this product is growing—with more than half (56%) saying those with pensions are more likely to have a secure retirement than those who do not, according to the NIRS report.
Eighty-two percent of Americans say a pension is worth having because is provides a steady income that will not run out, NIRS data show. And more than half (67%) say they would be willing to take less in pay increases in exchange for guaranteed income in retirement.
How Can We Protect Ourselves from the Retirement Crisis?
While some state governments may be considering legislation to improve retirees’ financial outlook, there are steps you can take to ensure your fiscal well-being.
Start planning now, financial advisors agree.
Save More: No matter how old you are, it is not too late nor too early to save for retirement.
Continued Employment: When it comes to planning, data show that many Baby Boomers are choosing to delay retirement and continue working to meet their financial needs.
Seventeen percent of boomers say retirement financing will come from continued employment, according to a 2014 analysis of data from a survey by Merrill Lynch. “In the near future, it will be increasingly unusual for retirees not to work,” Merrill Lynch predicts, noting re-visioning of later life and increased life expectancy as contributing factors. And working past the traditional retirement age of 65 can actually be something to look forward to, says Jennifer Harris, president of CR Search, a Gurnee, Ill.-based executive recruiting firm.
“Baby boomers are very active,” Harris says. “Just stopping work won’t be attractive to many of those who are older. They want to still be a part of that bigger purpose and know they are contributing.”
In fact, more than seven in 10 pre-retirees say they want to work in retirement, Merrill Lynch data find.
Use Home Equity: If you own a home, you probably have significant savings in home equity. You can tap this valuable resource through downsizing or by get a reverse mortgage. You can estimate your reverse mortgage loan amount with a reverse mortgage calculator.
Have a Plan: The best way to get out of your own retirement crisis is to get your head around the facts of your own financial situation. A good retirement calculator can help you organize your resources and project your income and expenses into the future. It is best to use a retirement calculator that is not solely focused on savings and investments. Use one that calculates flexible work income, home equity and family resources.
The NewRetirement Retirement Calculator is arguably one of the best retirement calculators — useful to real people who may be feeling the effects of the retirement crisis.
Do it yourself retirement planning: easy, comprehensive, reliable
Take financial wellness into your own hands and do it yourself retirement planning: easy,
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