By: Ross Biesinger
There are obvious rights and wrongs when it comes to most aspects of life. However, it’s not all simply black and white. Take comparison, for example; we seem to be subconsciously drawn to it like a bug to a light. If we’re doing better than our literal or figurative neighbors in a certain area of life, we pat ourselves on the back. On the other hand, if there’s a part of our life where we feel we fall short, we tend to beat ourselves up a little. And while we shouldn’t use comparison to measure all aspects of life, this behavior isn’t always a bad thing. For instance, comparing apples to apples can provide you with a general baseline to gauge whether or not you are on track with things like your retirement plan. Nevertheless, retirement is not a one-size-fits-all plan, so how do you make sense of the staggering amount of information available in light of your unique and specific situation?
With the vast amount of information instantly accessible on the internet, you can find more retirement information than you’ll ever need: plenty of advice on when to start saving, what the best strategies are, and what amount of money will get you through your golden years.
However, you’ll also quickly find that this abundance of advice winds up being overwhelming and even contradictory. We are told that we need X amount for a 20-year retirement, or that we should contribute X amount to our 401(k). The experts tell us to pay off all of our debt but make sure we have enough liquidity for emergencies. Sure, this looks great on paper, but how do you make sense of it based on your personal circumstances? Retirement is one of the biggest financial milestones you’ll reach in life. Without unique answers, how do you really know if you’re on track? When will you be financially ready?
With Baby Boomers retiring every day, the Census Bureau predicts that the population aged 65 and over will grow 50% between 2015 and 2030. Due to this considerable increase, the U.S. Government Accountability Office was tasked with finding out how well prepared American workers are for retirement. They published a comprehensive report in 2015 (1) that we can use to see if your retirement savings are on par with others your age.
Whether you currently assume you’re all set or way behind, as you read on, you may be surprised by what statistics actually show about retirement savings. Let these numbers serve you, either as a pat on the back or a kick in the pants.
If you have at least $1 saved for retirement, you’re doing better than 41% of those surveyed. If you have at least $25,000 saved, you’re in the top 59%. Surprising as that may be, those numbers may make you feel good about yourself. However, they don’t guarantee you a comfortable retirement, so don’t get cozy just yet. While you may not know how much you need for retirement, rest assured it’s more than $25,000.
Here is a table from the GAO’s report showing how resources are divided between households with and without retirement savings in this age group.
As you can see, those without retirement savings don’t have much to fall back on. Without additional resources, they will be dependent upon pension plans and Social Security to carry them through their retirement years. Furthermore, of the 59% that have saved, the median nest egg is only about $104,000. With increasing longevity and healthcare costs, it is likely even that won’t be enough for a smooth retirement.
In Table 2, you can see how much savers have actually managed to put away. Where do you fit in?
In this age group, it seems that only the very top savers are ready for retirement. But notice that most of them are still working. What about those a decade older? How do you compare to those who have already reached retirement?
Sixty-five is a popular retirement age, though more and more people are extending this date so they can catch up on their retirement savings. Like the previous age group, this bracket doesn’t have much in savings. Here is a chart showing the same information for this age group as the previous.
The people in this age group are a little more prepared, but with only a slightly larger nest egg. However, the median net worth has increased and homeownership rates are higher. Let’s look at their savings breakdown.
Surprisingly, the median amount saved is not significantly higher than that among households aged 55-64. It only increases from $104,000 to $148,000. On the other hand, the lower percentiles nearly double their savings. Where do you fall? If you’re in the 90th percentile, you are probably okay, assuming modest spending. But what about the lower percentiles?
It doesn’t take a whole lot of savings to look good relative to your peers, but how are your savings relative to your desired retirement lifestyle? Do you desire to maintain your current lifestyle or do you have dreams to do more? Will you have enough to live the life you want or do you need to step up your savings game?
When all is said and done, knowing how you compare to your peers can give you an idea of how you’re doing, but you really need to figure out how your savings compares to the cost of the retirement you plan to live. Online retirement calculators are available, but they are often generic and don’t take into account the wide range of important factors that will impact your personal situation, such as various lifestyle desires and medical expenses, just to name a few.
The fact of the matter is, the only way to have a clear and accurate idea of what you’ll need to retire comfortably is to have a financial advisor run a thorough analysis with your unique circumstances and dreams in mind. A professional can utilize technology and experience to show you different possible retirement outcomes and how to prepare for both the good and the bad.
When it comes to working with an advisor, many people assume robust savings should already be in place. But that couldn’t be further from the truth! If your savings are low or even nonexistent, you can’t afford not to work with an advisor. Building wealth is vital, and partnering with an experienced professional is the best way to do that.
At Cypress Wealth Services, our goal is to align your most important priorities, such as your financial needs, family values, and charitable interests, with your financial resources in a way that is tailored specifically for you. We will give you peace of mind as you realize your preparations for success by helping you develop and maintain a solid financial plan. We want to help you pursue a life with fewer worries and more time and resources to devote to your passions. Don’t keep yourself up at night wondering if you will have enough money to retire. Schedule a meeting by calling our office at 866.888.6563. Or, if you prefer, you can simply click here to contact one of our offices today.
Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services is uniquely qualified to serve a broad range of client needs, and their experience and expertise act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With offices in Palm Desert, CA, Tustin, CA, and Anchorage, AK, the firm serves clients across the country in Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit www.CypressWS.com or call 760.834.7250.