Welcome to another edition of Financial Fitness Fridays – my blog where I share a few words of financial wisdom to help put YOU back in the driver’s seat of YOUR financial future.
Today is Friday, October 23rd. This week, we are going to discuss America’s Retirement Savings Gap.
Let us start with a fun and depressing statistic.
In the year 2000, the Office of Research, Evaluation, and Statistics – which is a division of the social security administration – compiled a study and found that for every 100 people in the workforce, the following average outcomes would exist at Age 65:
- Approximately 16 out of 100 would not live to reach age 65
- 66 out of 100 will have incomes below $20,000 annually, which will force them to become dependent on their children, the government, or charity; OR it will require them to continue working past age 65
- 14 of those who reach Age 65 will have incomes in excess of $30,000 annually, giving them the ability to be financially independent, but without the substantial quality of life.
- Four of those who reach Age 65 will have an income in excess of $50,000 annually, making them financially independent with a substantial quality of life.
Can you imagine that?
America, one of the richest countries on earth – at any point in time in history!
And only 4 out of 100 will achieve what you might call financial success by retirement.
Granted, this study is dated at the turn of the millennium, 20 years ago, but the results are no less shocking.
We have a HUGE lack-of-savings problem in this country.
It is largely due to instant gratification. Our modern way of life, especially in America, has us addicted to instant gratification.
Here are just a few things that I personally do, where technology has me addicted to convenience and instant gratification:
- Place a lunch order while driving, so I do not have to wait at the restaurant
- Manage my business & schedule for the day with a calendar app from my phone
- Use Zoom to squeeze in a virtual meeting between client appointments
- Christmas shopping on Amazon
- Groceries delivered to the door with Meijer’s Ships (okay, I admit – this is mostly my wife)
With all of this technology and convenience, it is not hard to see why waiting for anything in this day and age has become so foreign, unfamiliar, and uncomfortable.
We have become addicted to instant gratification.
However, saving for tomorrow, while expecting absolutely everything right now, is a war that cannot be won.
Financial security is not built through instant gratification; conversely, it is built on delayed gratification, consistently, for years on end.
Sounds terrible, doesn’t it?!
Our ancestors who lived through the Great Depression would not even recognize their country, its economy, or its people today. 
We have gone from a culture of desperate savers to aggressive spenders, to debtors, and the result is a country suffering from a massive Retirement Savings Gap.
According to the National Institute on Retirement Security, for all US Households with inhabitants ranging in age from 25-64, the RSG is a projected $7 Trillion on the low end and as much as $14 Trillion on the high end!
Why is this happening?
Not only is there instant gratification, not only do we not save but even for those who do, they do not save nearly enough due to improper expectations.
There is a fundamental flaw in the way that most of America saves today.
When the 401k moved into wide acceptance in the 80s, and the company pension quietly faded in our society, did any financial expert step up and publish an article, paper, or analysis to tell people how much they were taking upon their own shoulders?
Did anyone tell them how much they would need to put away on their own to replicate what was previously given to them in a company pension?
Let us do a little basic bath here.
Easy stuff.
Let us say that you need to retire on $30,000 of your own resources, outside of and in addition to social security.
How much capital would you need to have accumulated to produce $30,000 of Retirement Income?
Working backwards and using the safe withdrawal rate of 3%, that means for every $30,000 of income you want, you need $1 M in capital to produce it.
What if you want to live on $60,000?
Well, you would need to amass $2M in your portfolio to spend $60,000 per year and not run out of money over the course of a 30-year retirement.
Has anybody ever educated you on this stuff?
For you older folks who still have pensions, do you realize how valuable it truly is? Going back to the previous example, in today’s economic environment, a $30,000 per year pension has the capital equivalent value of $1 Million in an investment account.
And for those folks without one, do you realize how difficult it is to properly save the amount that you will truly need?
And a general rule of thumb floating around for some reason is that if you save 10% of your income, you will do just fine in retirement.
REALLY? REALLY?
10% is not even close. I want you to get this through your head, and remember it was Ron Sneller who told you this: 20%.
Dave Ramsey says 15%.
But we cannot rely on the stock market like we used to, and the yield on safe money investments are at historic lows.
The solution? Save more.
And in order to work your way up to 20% – unless you are one of the very few special ones – there are going to be some sacrifices that must be made by your current self in favor of your future self.
This cannot be overstated or emphasized enough!
It is simple math and math does not lie.
America’s obsession with instant gratification has won far too many times over our future.
So collectively, we have to start saving more.
Most of us have to work our way up to 20% to maintain our standard of living for when we retire.
Or… do not do it!
Ahhhh… that feels better, doesn’t it?
What will that mean though?
Would you rather face the unknown?
Would you rather take the risk now and hope you do not end up stressed about money when you are no longer able to work?
But one day, the future will arrive, and it will become the present.
One day, your future self is going to wake up and realize (and much too late) that they were cheated, swindled, and forgotten by the younger, less – wise version of themselves.
Or would you rather take control?
Wouldn’t you rather remain in control of your destiny, and in control of your financial and retirement future?
I recommend working with a financial professional to take a look at your budget, figure out how you can save & invest more, and then put that plan into action.
If you would like my assistance in this matter, I am here to help. At Retirement Wealth Advisors, we are experts at getting the very most out of your investments to help you meet your goals.
If you would like to talk about any of the topics discussed, please give me a call at 248-241-6826 or message me directly here on social media.
Thank you for taking the time to read this blog post!
P.S. If you haven’t checked it out yet, please stop by my mini online seminar How Retirees and Pre-Retirees Can Potentially Avoid Going Broke While Keeping Their Nest-Egg Secure! Tons of great information and bonus is it is 100% COMPLIMENTARY!
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