Whether your retirement is decades away or within view, reports shows that many Americans are not putting enough away in retirement accounts to maintain their current lifestyles, and that other economic factors will play a role in a big forecasted shortfall in retirement savings. A common guideline for retirement savings is to have between 65 and 80 per cent of pre-retirement income socked away to avoid a drop in living standards. Next Generation Trust Services asks you, how do your savings stack up?
The Great Recession resulted in 401(k)s losing $2.8 trillion. Individuals who participate in employers’ 401(k) plans or have money market accounts or other brokerage accounts as part of their retirement plans, might find that the unstable stock market has whittled away at what they’d hoped would be generous nest eggs. When it comes time to stop working, many people could be in financial trouble.
McKinsey & Company, a consulting firm, produced a report that says “the average American family faces a 37 per cent shortfall in the income they will need for retirement,” due in part to the economic meltdown that began in 2008 as well as Americans’ historically poor savings record. The report delineates projected shortfalls for different age groups and income brackets, with the prediction that workers presently in their thirties will have to rely almost solely on personal savings rather than any traditional defined-benefit pensions. The bottom line is that all age and income groups should expect savings gaps that will affect their ability to maintain their lifestyles during their retirement years.
Teresa Ghilarducci, a retirement specialist at the New School for Social Research in New York, says that “The baby boomers will be the first generation that will do worse in retirement than their parents.” She predicts the next generation of retirees will do even worse due to the declining numbers of traditional pension plans that prior generations used to rely on for their retirement savings.
Added to retirees’ woes are soaring health care costs, a depressed real estate market (bad for sellers, good for buyers), and the specter of scaled-back Social Security benefits. Plus Americans are living longer and therefore will have longer retirement periods. However, there’s still time to set the stage for a more well-funded retirement account. Start saving more, a little at a time, and consider rolling over your 401(k) or existing IRA into a self-directed IRA that allows you to invest in a slew of alternative investments that could pump serious life into your moribund retirement savings account.