Times are surely changing in the United States and not for the better. While the economy is roaring back to life after a decade-long recession, it’s not good news for everyone. There’s still a lot of income inequality and massive quantities of debt. Social Security is being drained out. The cost of living is rising while incomes are staying the same.
$20 used to buy you a lot more at the grocery story just a few short years ago. Gas prices are one crisis away from jumping past $3 and even $4 per gallon. All of these struggles and worries combine and prevent average Americans from being able to save any money. They can’t afford healthcare costs or insurance. Prescription drugs are too expensive.
And because so many people are living paycheck-to-paycheck, they worry about a lot of things. Retirement is one of them. If you can’t save money for retirement, you’re going to be worried about whether you can retire at all. In fact, one-fourth of all Americans already think they’ll never be able to stop working in their lifetime.
According to a study from the Economic Policy Institute, more than one-fourth of the population should be more worried about retirement. Over one half of working people have absolutely nothing saved up for retirement at all. Many apparently think they’ll be able to make up the difference at some point. They’re deluding themselves if they think they will.
Debt is a Major Driver in Preventing Retirement
There are several things that contribute to this lack of saving for retirement. Healthcare costs, longer lifespans than previous generations, and other issues can creep in. But the main driver is debt. Americans can barely afford to live on a typical salary and take out hefty loans throughout their lives. These loans have high interest rates and are difficult to pay back.
Maybe we can afford all of our bills, but many Americans borrow more than they can afford. If interest rates rise, then it hits the economy like a ton of bricks. One study from the Transamerica Center of Retirement Studies reveals that 66% of U.S. citizens say they’re biggest concern in life is paying off their debt.
The study also revealed that paying off debt is a major priority over saving money. “Retirement is all about cash flow. In my mind, it doesn’t matter what your income is. It doesn’t matter what your portfolio size is,” retirement expert Bill Losey told Bankrate. “It really all boils down to habits: having a plan, being frugal, making sure that you have a debt reduction plan.”
It’s so much debt, it’s difficult to pay off in an entire lifetime. Americans expect they’ll be paying the debt well into their golden years, forcing them to work longer than expected. That can be a difficult thing, as companies often like to replace older workers with faster, younger, and cheaper employees.
Retirees Aren’t Ready for Healthcare Hikes
If you think healthcare is expensive when you’re a young adult or even middle aged, you haven’t seen anything yet. It’s much more expensive when you’re at retirement age. It’s common sense. We get older, our bodies start falling apart more. We might be fine for a while, but eventually, our age always catches up with us.
Women in particular have it rough. They pay more in healthcare throughout their life than men do. They also live longer than men, so they spend even more money on healthcare and retirement then men do. In a lot of circumstances, women leave it to the men to budget the money and save, leaving them in a massive hole.
It’s really difficult to know what to expect when you’re older. Maybe we can look at family history and expect some health issues, but most people don’t. They don’t save or plan for accidents. They don’t have a rainy-day fund. Worst of all, they don’t save much for retirement at all, expecting it to be covered later.
Retirees Are Scared
As we continue to age, more Americans start feeling the retirement crunch. They begin to feel as if they won’t have enough money to last the rest of their life. What happens when they officially run out of retirement money? This is a real fear that’s growing. Retirees are becoming increasingly scared of running out of all their money before they die.
While this is going on, it’s going on quietly. The rest of us aren’t really as concerned about it. Statistically speaking, we’re showing we don’t really care to save money for retirement. More studies are coming out all the time proving that we don’t put our money where our mouth is. Short-term goals constantly take precedence over long-term goals and it’s hurting us.
Why save when we want that giant house or brand-new car? There are credit cards we need to max out buying stuff we really don’t need or care about once we have it. It’s this thinking that desperately hurt us later in life. We get to the point where we realized just how much money we wasted and regret not saving more. 68% of millennials have no retirement plan.
“Many people today are outliving their assets because they did not include retirement in their long-term financial goals,” says Doyle Williams, an executive at COUNTRY Financial. “Americans need to seek financial guidance now so they can eliminate the fear of never being able to retire. By taking some simple steps almost everyone can put a plan in place to secure their financial future.”
A World Economic Forum Study
A new study from the World Economic Forum bares all of this out. We’re living longer than we anticipated. “The key driver of the challenges facing retirement systems is increasing life expectancy and a falling birth rate,” the study says. “This leads to a smaller workforce supporting an ever-growing population of retirees.”
“The lack of awareness of the basics on how interest and returns will compound over time, how inflation will impact savings, and the benefits of holding a broad selection of assets to diversify risks means that many individuals are ill-equipped to manage their own pension savings,” WEF says. “Some groups are particularly vulnerable, including women, the young and those who cannot afford, or choose not to seek, financial advice.”
