Wednesday, April 3, 2013

Most Old People Haven't Saved Enough For Retirement

Anyone been the grocery store recently? Notice how the individuals manning the tellers and bagging your groceries have become silver haired? This my friends is due to the fact that too many of our elderly failed to save for retirement. Now many individuals will point out that the financial crisis destroyed the savings of these Americans and they are now forced to work.  But I would argue that this is more due to older Americans mistakenly believing that their home values were tantamount to savings.  But that point aside, the fact is that, objectively speaking, the cause is that they didn't save enough. MSN money reports that only a quarter of Americans older than 55 have savings of $ 250,000 or more.  Right off the bat three quarter of all Americans older than 55 have booked a boiler room ticket on the Titantic. But what of the seniors who actually saved some money during their careers? Time for some numbers.

Financial analysts estimate that at the bare minimum you need $ 400,000, which means a quarter of our seniors would need to save an additional $ 150,000 to make that cut off point. This means, assuming a 4% return rate for investments, that the individual in question would have to save $ 2,493.64 per year for the next ten years to reach that mark.  That grand nest egg that they will have acquired will have to last them twenty years assuming they live to 85.  In order for that nest egg to not run empty early, that individual cannot take out more than $ 29,433 a year. Assuming the typical payout from Social Security, this would give that elderly American $ 45,432 to live off of. Now to me this seems more than doable, but then I don't have a mortgage payment, children, medical conditions, or imagines of cruising around the world with my schmoopsy. I have a feeling that most elderly Americans were expecting for a bit more.

What about a $ 1,000,000, an oft touted metric of financial consultants. Assuming retirement at 65, and a twenty year period after retirement, a person could take out $ 73,581. This will allow those cruises that schmoopsy and golfing that hubby want to do so much, assuming that a major medical condition doesn't come along of course. Well, unless the 55 year or older American is already close to that goal then it a mathematical impossibility. A boomer with $ 250,000 in savings would have to save in excess of $ 52,000.  If this hypothetical 55 year old American is able to devote $52,000 a year then they are probably already wealthy and don't have to worry about retirement.

Ultimately my point being is that the vast majority of Americans 55 years old or older are no where near where they need to be if you don't factor in the hypothetical selling value of your house; which you shouldn't as there is nothing backing that number, other than pixie dust and wishes, if there isn't cash flow behind it. Most likely your home, unless your renting a room out, own and live in an apartment complex, or live on a farm, is not producing cash flow.

But if you are reading this you are most likely not a silver heard boomer, you are probably like me, under the age of 30. What do the numbers look like for you. Assuming the same criteria, but assuming you start saving at 21 with absolutely no savings, then you would have to save $ 3,465 a year until you were 65. Of course, unlike your boomer parents, you won't get an additional $ 16,000 to supplement your yearly chedda.  If you want to save up to a $ 1,000,000 you would have to set aside $ 8,664 a year until you are 65.  Now before you rush off to save your money, if you even are able to do so, you should mosey on over to Captain Capitalism and watch this video.  I for one do try to limit my expenses and save my money, but I am also under no illusion that I will be retiring come 65.


  1. Actually, the bit about saving enough for retirement is a bunch of hog wash. That is, the idea that the average worker, by saving alone, can retire at 65 (or thereabouts) and live a luxurious lifestyle of eating out 4 or 5 nights a week, taking trips and cruises, etc. is baloney.

    The original sell was that Social Security and defined benefit pension plans would provide that lifestyle. When the cracks started to appear, the 401K was added (late 70's). Whether that was an honest attempt to provide people with an alternative or actually a hook to ensnare savers into the Wall Street casino, it has proved to not be the retirement solution.

    The fact is, that throughout history, the vast majority of people had to continue working until they no longer were able at which time children and relatives were expected to provide any and all backup support. Savings, placed in gold and silver coin, would provide a store of wealth.

    The only group this dream panned out was for the generation which started working immediately after WWII, was covered by a defined benefit pension plan, retired sometime in the early 80's and began dying out around 2000.

    1. Well thats the rub, you can 'retire' but it's not going to be like you anticipated, no cruises, no golfing, no world tours. And your right, it's always been nothing more than a bunch of snakes oil sold by progressive politiicans back in the 1930s.

      Ultimately a real retirement plan consists of having children since, historically, it was your progeny who took care of and supported you after you could pysically work no more.


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Seattle resident whose real name is Kevin Daniels. This blog covers the following topics, libertarian philosophy, realpolitik, western culture, history and the pursuit of truth from the perspective of a libertarian traditionalist.