The conventional concept of retirement will likely cease to exist in the future. The days of relaxing on a hammock in the summer sun, traveling around the world and just enjoying life as you watch your grandchildren grow up are likely going to vanish in the next couple of decades.
The rising cost of living, the diminishing value of Western fiat money and falling savings rates are only some of the reasons as to why retirement will become a forgotten pastime for youth today. A growing number of the general public, particularly millennials, are completely foregoing the idea of retirement. Instead, a majority of pre-retirees are focusing on staying healthy and planning to work in their winter years.
Although we are living longer today than when Social Security was first instituted, our retirement savings are not enough to live on. This is why it’s crucial to either adapt or whimper into poverty by living within your means and saving at least 10 percent of your income no matter what.
“The graying of Americans, a growing retirement population, rapid changes in the private employer pension programs, projected insolvency in public pension funds, fiscal pressures at both the federal and state level — all this and more requires policymakers to renew their focus on ensuring existing programs support individuals and families in their twilight years,” Bill Hoagland, a senior vice president of the Bipartisan Policy Center, said in a statement.
If you have doubts that we’re in a retirement crisis then consider these 17 facts that highlight how retirement will become entirely alien to future generations and be read about in textbooks in government schools.
1. New research has found that retirement pension plans, such as 401(k) programs, will become cash flow negative by 2016. By that time, inflows will be $364 billion and outflows will be $366 billion.
2. Fifty-three percent of American households could potentially be more than 10 percent short of their retirement income needs to pay for daily needs and out-of-pocket medical expenses.
3. Between one-quarter and one-third of Americans is not saving any money for retirement because they don’t think about it or they can’t afford to put away money for a rainy day or their retirement days.
4. More than one-third of non-retirees have removed saving for retirement from their lifetime to-do list.
5. A retirement survey found that one-third of American workers think their standard of living will be lower in their golden years.
6. In order to fund their retirement needs, a growing number of seniors are taking out reverse mortgages on their homes.
7. Less than half of young American workers are contributing to their employer-sponsored retirement plan, compared to three-quarters of workers aged 55 to 64 contributing to their 401(k).
8. Workers under the age of 25 contribute only four percent of their salary to their 401(k) plans.
9. A study found that new college graduates won’t have enough assets to consider retirement until they’re 73.
10. Most millennials are financially illiterate: “Only 18 percent of young Millennials (ages 18 to 26) correctly answered four or five questions on a five-question financial literacy quiz in 2012 – and only 30 percent of older Millennials (ages 27 to 34) did, according to the ‘Financial Capability of Young Adults’ brief produced by the Investor Education Foundation.”
11. Due to the rising national debt and increasing interest rates, Social Security and Medicare will account for a considerable majority of federal revenues by 2019.
12. An estimated half of millennials have enormous debt levels, particularly when it comes to student loans. This means it’ll be difficult for young adults to start saving adequately for retirement.
13. Medicare will reach insolvency by 2026 and Social Security’s two trust funds will become bankrupt by 2033. A majority expect to receive zero benefits or have no idea what to expect when they file.
14. Millennials aren’t earning enough to save for retirement: two-thirds of millennials are earning incomes of less than $50,000.
15. A significant percentage of today’s Baby Boomers expect to work until they die
16. Debt remains a considerable hindrance to retirement: because of substantial levels of debt, 60 percent of households haven’t saved for retirement in the past six months. Of that same group, one-quarter of them are allocating additional funds to pay off their credit card debt.
17. Despite the financial crisis, Americans are still racking up credit card debt as it grew $8.8 billion. Total non-mortgage consumer debt is more than $3 trillion. With enormous debt levels, consumers can’t save for retirement.
The common theme in these facts is debt. If a household has too much debt then it will stretch itself thin and not have enough funds for an unforeseen event, a rainy day or their retirement. Rather than keeping up with the Joneses or buying things you don’t need, attempt to live within your means and downsize your lifestyle.
How you retire depends largely on your planning and saving/investing for it. For the best chance to retire on your terms you should start planning and investing early in life and do it consistently (with every paycheck). If at all possible develop multiple streams of income for retirement (social security, pensions, dividends, part time work, etc.) and not depend on ss benefits as the sole source of income. The site Retirement And Good Living provides good information on planning and finances as well as many other topics including health, retirement locations, part time jobs, volunteering and more. And it has a great blog of posts by guests from around the globe.