What Will Retirement Look Like For You?

September 24, 2013

I don’t know about you, but some days I dream of what it will be like when I retire after my 30+ year career in the public sector. Maybe that’s because I’m at the tail end of the Baby Boomer Generation and a lot of my colleagues at work have retired in the last few years. Or maybe it’s because nearly every media outlet I frequent has stories about life in retirement (and that’s probably because Boomers are turning 65 at the rate of 10,000 every day).

Some of the stories are happy ones featuring retirees spending time with grandchildren or volunteering to make their communities stronger. But some of the stories are downright scary. Those are the ones we’ve probably all seen and remember – retirees who were hurt by the Great Recession and are now forced to live solely on Social Security, move in with their children, or go back to work.

I’m pretty sure most of us would prefer the first retirement scenario – to be able to retire and spend time doing things that we didn’t have time for while we were working. I recently came across some research that motivated me to take a hard look at my retirement “dream” and take steps to make sure I wouldn’t end up being one of the report statistics.

Here are the sobering findings of the National Institute on Retirement Security (NIRS) on retirement readiness of Americans. In this research, NIRS measured whether or not Americans have saved enough for retirement. What they found is the stuff nightmares are made of. Their report, “The Retirement Savings Crisis: Is It Worse Than We Think?” should be a wake-up call for many of us who haven’t started saving (or haven’t saved enough) for our Golden Years.

According to the report, financial experts at Fidelity say that you’ll need eight times your current annual income saved so that you can live comfortably (but not in luxury) if you retire at age 67. At Aon Hewitt, they suggest a target of 11 times your annual income if you want to retire at age 65. Do the math – are you on track to saving enough according to the experts?

NIRS set out to see how Americans are faring in meeting these goals. What they found is pretty shocking:

  • More than 38 million working households in the U.S. do not have anything saved for retirement. That’s almost half of American households (45%) that have nothing saved in an employer-sponsored 401(k) or IRA for retirement. Zip. Nada. Zilch.

  • Even in households that have retirement accounts, the balances can’t come close to supporting a retirement lasting many years or decades.

This is scary information. Even households 10 to 20 years away from retirement with access to a retirement account don’t have nearly enough saved to fund a retirement “dream.”

NIRS identifies three areas for improved retirement policies:

  • Strengthen Social Security, which is the primary source of retirement security for low-and middle-income Americans.
  • Expand access to high-quality, low-cost retirement plans that, like pensions, are professionally managed, spread financial risks across members and pay lifetime benefits.
  • Expand a refundable Saver’s Credit to help boost retirement savings for workers facing stagnant wages. The Saver’s Credit assists low- to moderate-income Americans in saving for retirement.

What should you do if you’re not a public employee and/or don’t have access to an employer-sponsored tax-deferred plan like a 401(k)? Contact your elected officials (state and federal) and let them know about this NIRS research. Tell your story. And look for ways to build your savings wherever you can. It could mean the difference between having a sweet retirement dream or a nightmare.