Retirement Problems in America

ny wills and estates attorneyAmericans are facing downward mobility during their retirement years. Americans simply have not saved enough money to meet their retirement expectations. In a study conducted in 2010, it showed that 3/4 of the Americans approaching their retirement years had approximately $30,000 or less in savings.

What’s Needed to Maintain Your Standard of Living in Retirement?

It is estimated, to maintain a family’s standard of living, approximately twenty times the family’s annual income is needed to be accumulated in savings. Under this theory, a man earning $50,000 per year, living by himself, would need approximately $1,000,000 in savings to retire and maintain his standard of living. This is in addition to what he will receive from Social Security Benefits.

Retirement Solutions

Two potential retirement solutions are: (1) work longer and retire later, and (2) die young. I suspect the second option won’t be popular. Recent studies show approximately half of the Americans questioned about retirement, felt that their standard of living would decrease.

401(k)s and IRAs

401(k)s and IRAs have for the large part replaced defined benefit pension plans. Under defined benefit pension plans an individual receives a certain amount each year during the course of his retirement. These plans still exist for individuals employed by the Cities, States, the Federal government and some large corporations. However, the large majority of Americans are going to be relying on 401(k)s and Individual Retirement Accounts (IRAs) to fund their retirement years. This is what is referred to as a do-it-yourself retirement system. Unfortunately most Americans do not start saving early enough and long enough to accumulate enough money in their 401(k)s or IRA plans to fund their retirement. Many 401(k) plans give their participants the ability to borrow against these plans. Studies have shown borrowing against the 401(k) plans further reduces the individual’s ability to accumulate enough funds in retirement.

My retirement solution is to keep working and avoid retirement!

help in financial planning for retirementElliot S. Schlissel, Esq. has been drafting wills and trusts, and representing clients regarding probating wills for more than 30 years.