Helping You Protect Your Money. Helping You Protect Your Future.
It is no secret that there is a retirement crisis facing Americans.
In a recent survey conducted on behalf of home financing and real estate website “Anytime Estimate,” Americans were surveyed on how much, or little, they have saved for retirement, and the results were not pretty.
Less than half of those surveyed have saved $100,000. The median income in retirement is $40,000, so this savings is not even close to being enough. One out of every six have saved absolutely nothing. One out of three are currently making no contributions at all. One might discount these statistics by saying, “it must be young people who are contributing to these numbers," but that is not the case. And if it were, at least young people have decades to make up the ground. Boomers do not.
Respondents who are still working, with a median age of 60, have average savings of around $112,000. One quarter of those surveyed, and 30% of millennials, said they were planning to rely on “cryptocurrencies” to finance some of their golden years.
Good luck with that! This may be hard to do if the crypto bubble continues to deflate at its current rate.
Probably the saddest part of the survey was that around 80% of people expect their standard of living to decline in retirement, while 10% feared they wouldn’t be able to retire at all. What is sad is that these people are obviously well aware of the problems they face but may not know the right steps to take.
Financial professionals, like those at Summerlin Benefits Consulting, help people determine how they can combat this retirement crisis, regardless of their age. It is never too early or late to get help.
For those who are young, the obvious answers are to save more, save earlier, and invest better- which usually means investing in long-term assets like stocks and keeping your costs low. But we all know how volatile the stock market can be, so even time is not always a guarantee of a healthy retirement.
Those who are older don’t have the luxury of time at all, and in most cases, they will need to rely on Social Security providing the bulk of their retirement income.
The Social Security dollars forcibly extracted from your paycheck have been poured so far this year into bonds paying interest between 1.625% and 3%. This, at a time when consumer price inflation is running at nearly 9%.
Las year FICA dollars were blown on bonds paying just 1.4% interest, and in 2020 less than 1%. So, large chunks of that money have already gone out the window.
No wonder Social Security is in a deepening financial crisis. The fund is invested early in low-paying U.S. Treasury bonds. Since the early 2000s, the fund has earned an average return of 3.8% per year, enough to increase an investment by only 80%. This is minimal compared to the return that other countries are seeing from their social security or “future” funds.
If you’re thinking that sounds like an unwise investment policy, you’d be right. But it seems like Washington won’t be making moves to change the policy any time soon.
Social Security is a “defined benefit” rather than a “defined contribution” retirement plan, so your benefits aren’t directly tied to the investment returns from the underlying assets. Instead, your benefits are set by law- but are supposed to be financed by underlying assets. The poor investment returns mean those assets are running out. This is why many people are talking about cutting Social Security benefits.
Heaven forbid they should improve the returns.
This is why many Baby Boomers have utilized products like Fixed Index Annuities (FIAs), which provide guaranteed income for life. An FIA is a safe money vehicle, where you can grow an asset (some portion of your overall retirement strategies) for the purpose of turning on income in the future. It allows you to create your own future fund, with a defined monthly income benefit that will work kind of like a pension, which can supplement social security and other retirement income sources. Boomers who haven’t set aside a huge amount of liquid savings can at least use some of what they have saved for this purpose, and it is a really good way to fill that void.
At Summerlin Benefits Consulting we are Safe Money Experts. We believe that helping clients protect the money they do have will go a long way to helping them protect their futures as well. If you’d like help reviewing your options for retirement income protection and/or to discuss how to best plan your financial future, please feel free to call today for a no-obligation meeting.