“Most U.S. households are heading for a worse lifestyle in retirement than they had while they were working, because they simply aren’t saving enough…” So writes Stan Choe in an Associated Press article. Check out the Retirement Planning category for past blog posts on this subject.
Date from the Federal Reserve indicates that thirty-five (35%) percent of households in their prime earning years or later have nothing saved in a retirement account and no access to a traditional pension. Let that sink in for a moment. If lack of savings is not enough of a problem, consider the new administration proposals to privatize Social Security and Medicare. To add insult to injury, consider what will happen to the very poor is Medicaid is eliminated. Many 401(k) plans are poorly managed and are designed to skim a significant percentage from the portfolio in the way of excess fees. Despite the current high fees, word is that the new congress is considering rolling back regulations designed to protect unsuspecting individuals. All this reminds me of H.L. Mencken’s political quote, “Democracy is the theory that the common people know what they want and deserve to get it good and hard.”
Choe goes on in his AP article. “Among households that do have some savings, the typical amount is $73,200. That’s about 15 months of the median household’s income. One group doesn’t have to worry as much, the richest 10 percent of households. They typically have more than $413,000 in a retirement account, according to the analysts of the Fed’s latest data, which is from 2013.”
While I am likely preaching to the choir in this post, you may know someone who falls into the “saving too little” group. If so, forward this link. Not only is this a warning the working class needs to spend less and save more if they want a semi-comfortable retirement, but even more to the point is the assault the middle class can expect on their retirement benefits.
Here is some advice from William J. Bernstein, one of my favorite investment writers.
Discover more from ITA Wealth Management
Subscribe to get the latest posts sent to your email.
Lowell,
I’ve mentioned this before I start IRA’s for all my grand children at 18 years. I contribute for 7 years then they’re on their own. All my grandchildren have enough earned income to balance out the IRA contribution and it also lowers their income tax. The deal is they get no gifts from GM & GP on birthdays, holidays etc. and they’re not in the will: ^) This leaves more $ for charities that are dear to my heart.
Bob W.
Bob,
A wise man. I’m helping cover the grandchildren’s college expenses. Will need to see what is left after those years are finished.
My wife and I continue to contribute to a variety of charities and not-for-profit organizations.
Lowell
Just a comment that might be of interest. In the case of my grandchildren, I have opened ordinary saving’s accounts for them and then Roth IRA accounts for them as soon as they have earned income. I figure the regular IRA’s are of little value over Roth’s as they will likely not have taxable income until they have completed college. At that point, they can transfer from savings accounts into the Roth accounts.
Len
Len,
Another wise grandfather.
Lowell