The study does not comment on government's failure to responsibly invest and protect trillions in workers' and employers' paid in social security taxes, or to reign in meteoric health care costs. It does, however, fairly put the final responsibility for retirement preparedness on the individual. The study's "comforting" conclusion states:
"Working longer is the key to a secure retirement for most households. Often people respond to such a proposal, however, with “I don’t want to work into my 90s.” Today’s workers should derive comfort from the calculations presented above, which indicate that the vast majority of households – more than 85 percent – would be prepared for retirement by age 70. While this finding suggests that today’s workers will need to work longer than their parents, they are also healthier and better educated, generally have less physically demanding jobs, and can expect to live longer. In short, working longer is feasible for most households, and it does not mean working forever."A related op-ed in Sunday's New York Times - Our Ridiculous Approach to Retirement - was less comforting:
"Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts. The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day.
"To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security. If you have an income-producing partner and a paid-off house, you need less. This number is startling in light of the stone-cold fact that most people aged 50 to 64 have nothing or next to nothing in retirement accounts and thus will rely solely on Social Security.
"If we manage to accept that our investments will likely not be enough, we usually enter another fantasy world — that of working longer. After all, people hear that 70 is the new 50, and a recent report from Boston College says that if people work until age 70, they will most likely have enough to retire on. Unfortunately, this ignores the reality that unemployment rates for those over 50 are increasing faster than for any other group and that displaced older workers face a higher risk of long-term unemployment than their younger counterparts. If those workers ever do get re-hired, it’s not without taking at least a 25 percent wage cut.
"Not yet convinced that failure is baked into the voluntary, self-directed, commercially run retirement plans system? Consider what would have to happen for it to work for you. First, figure out when you and your spouse will be laid off or be too sick to work. Second, figure out when you will die. Third, understand that you need to save 7 percent of every dollar you earn. (Didn’t start doing that when you were 25 and you are 55 now? Just save 30 percent of every dollar.) Fourth, earn at least 3 percent above inflation on your investments, every year. (Easy. Just find the best funds for the lowest price and have them optimally allocated.) Fifth, do not withdraw any funds when you lose your job, have a health problem, get divorced, buy a house or send a kid to college. Sixth, time your retirement account withdrawals so the last cent is spent the day you die."Would you like fries with that?
No comments:
Post a Comment