Where Have All The Pensions Gone? Financial Peril Awaits America’s Near-Retirees
The U.S. is entering a historic period of record retirement numbers, but a lack of sufficient pensions puts many Americans near retirement in financial peril. Here’s why pensions are a hot topic in the country.
According to research from the Pew Research Center, the number of retired citizens in America is climbing and is expected to rise to historic figures. Susan Miller of Route Fifty cited this information: “More Americans are about to be 65 years old than ever before. A record number will hit the milestone this year – about 4.1 million. But it’s just one of many waves in the ‘silver tsunami,’ a metaphor often used to describe the aging of America.” Since 2011, 10,000 Americans have been turning 65 every day and will continue to turn 65 every day until 2030.
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With this rising number of retired Americans, money and retirement are on their minds. CBS News reported that “about one in eight workers plan to stop working before they turn 61” to enjoy a 40-year retirement with a life expectancy of 100 years. The problem that many near-retirees are now facing is how they will fund this 40-year retirement when most of them are not even close to reaching their retirement savings goals. Financial services firm Corebridge Financial sought to explore this question, and what they found was not the news that near-retirees may be hoping for. The survey found that Americans are living longer and have embraced this long life; the only problem is that many Americans are not financially prepared for this long life. The survey found that 54% of participants had a goal of living to the age of 100, but 55% were very concerned that their money would run out. Two-thirds of the participants fear running out of money more than death.
“100 is a very long and fulfilling life, and that’s pretty optimistic and great to see. That optimism and hope does come with a little bit of tension – only 27% are very confident that they won’t outlive their retirement savings,” said Bryan Pinsky, president of individual retirement at Corebridge Financial.
See Also: How much money will a $200,000 annuity pay out each month? The numbers may shock you.
According to NerdWallet, the median retirement savings balance for people between 55 and 64 nearing retirement is $185,000. This number doesn’t provide the dream retirement many may envision. For example, if you had to withdraw 4% of your retired assets ($185,000), this amounts to an annual income of $7,400, which isn’t much for the elderly. Equally troubling is that according to CBS News, three in 10 Americans over 59 years have not saved for retirement and rely solely on Social Security benefits, which is about $22,800 annually. To retire comfortably in the U.S., you must save an average of $1.8 million.
With only 10% of retirement-age Americans financially stable, Teresa Ghilarducci, a professor at The New School for Social Research in New York, told CBS News that many retirees have accepted that they will need to work longer. Both Pinsky and Ghilarducci have emphasized the need for workers to start saving for retirement as early as possible, considering that the U.S. is facing a failing retirement system. Ghilarducci pointed out that many American workers lack access to 401(k)s and employer-sponsored benefits, making saving difficult, especially on a low-income salary and a high cost of living.
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