The run-of-the-mill retirement article is packed with statistics that can lead you to feel good, bad, or indifferent about your own situation. Often it can lead you to draw a conclusion about your own situation. Perhaps feelings of uncertainty or maybe even hopeful. But there is a lot of information published or otherwise that is misleading.
Generalized statistics can also lead you down the path of comparing yourself to the reported average. I don’t recommend doing this.
“If no one else is saving then why should I?” or “Since no one else saves and I save a little, I must be doing well?”
If you hear that the average American only has $10,000 saved for retirement, and you have $50,000, you must be doing pretty well, right? Wrong. Stop it.
That is, stop comparing yourself to the masses. The masses are not you. The only numbers that really matter are your own. All starting in step 1 of the series, “How Much Do You Need to Save?”
In the post on the Progress Principle, I discussed the importance of tracking your finances. Once you set yourself up financially, you will be in a much better position to help some of those masses of people who are not in a position to do so. Some of the less prepared might even be in your family and will need your help. Until then, the averages of the masses don’t really matter when it comes to your own financial situation.
Today, I thought I would post a common article from USA Today and go over some of the stats presented. And maybe I’ll just try and have some fun with it. This is not a criticism of USA Today in any way. Seriously, who doesn’t like free and entertaining newspapers while on business travel?
The full article can be found here
1. One in four 65-year-olds today will live past age 90, while one in 10 will live past age 95
I find that stats like this make more sense if you read it in reverse. If you’re 65, you have a 75% chance of not living past age 90. And even less of a chance of not making it to 95. That might be a blessing. This is certainly no time to panic. What it does mean, is you should plan to live until age 95. Why? Because you might just live that long and you will need a financial plan to get you there. If you are one of those many people who don’t make it to age 90, you will just have to live (or actually not live) with the idea of giving your heirs something to play with when you pass on. See this article on “How Much Will You Leave Behind?”
2. One out of every three Americans has no retirement savings whatsoever
This is a very typical statistic to be advertised. So you are telling me that 2 out of 3 people do have some form of retirement savings? That’s good news. Let’s be honest, those who are just struggling to put food on the table every month are most likely not saving for retirement. Those that are in a position to save for retirement and choosing not to either because of ignorance or gleeful hope are also probably part of the “1 out of 3” quoted in the article.
The article goes on to state that, “[Of] those who have saved, 56% are sitting on less than $10,000. Given that most retirees can’t survive on Social Security alone paints a pretty bleak picture.” I agree that it doesn’t sound great, but I suspect many of these people who have some sort of safety net will not end up in the street. At least I hope not. The trend of multi-generational homes will rise and the less fortunate will be taken care of by those that are continuing to work or are more fortunate. That’s a protracted way of saying that families will be moving in together to take care of each other. Those without a safety net could be in for some trouble.
3. Over 40% of single seniors 65 and over get at least 90% of their income from Social Security
I think the key word on this one is “single” seniors. At least with a couple, there might be more than one social security check coming in. Who I feel bad for is the older generation that didn’t start their career with access to or education about retirement accounts like IRAs and 401Ks. But then again, it shouldn’t be a surprise to anyone that everyone gets old, probably won’t be able to work forever, and will need to save money – regardless of what type of account you save it in. Depending on Social Security for the bulk of your income is not a good thing.
4. Only 51% of Americans are confident they’re saving enough
I have to laugh at the article when it says, “Given the number of people who aren’t saving anything, this (51% of Americans) certainly isn’t shocking.”
Yah, but why did you ask them this question? If you aren’t saving anything, why in the world would you be confident in having saved enough? To me, stats like this are nearly useless. It’s also a very grey area type of question. I save a great deal of my take-home pay and might still answer a question like this as a, “not so confident” if the mood hits me just right.
5. Outliving their savings is what 60% of older Americans fear the most
But now I’m confused. Shouldn’t that say, 60% of Americans who saved for retirement fear outliving their savings? Because one of the benefits of not saving for retirement is you don’t have to worry about running out. You don’t have anything to run out of.
Or maybe I should just let it go because preceding that stat was, “One out of every three Americans has no retirement savings whatsoever.” So 60% of Americans are worried about running out of money also could mean that 100% of all Americans with retirement savings are worried about not having enough. I suppose that could be true, but I’m not sure the deca-millionaires ($10,000,000 or more) is worried in the same type of way as someone with $50,000. The deca-millionaires are probably more worried about a lifestyle adjustment in the future but that’s not what the stat says. So, I’m left a bit confused over what and who the 60% is.
Moving along (this is all in good fun).
6. Almost 60% of retirees don’t budget for leisure activities when planning for retirement
Well, duh! If you believe the previous stats, this doesn’t come as a surprise. The best time to plan for leisure activities during your retirement is when you are in your 20s, 30s, and 40s. Yep, you should figure out your expenses and account for some fun as part of your yearly expenses. This will then help you plan for how much you need to save.
7. The average healthy couple will spend $377,000 on healthcare in retirement
Of course this is all dependent upon how long you live. And I am certain this figure assumes you retire after Medicare coverage already exists for you. So, if you retire early the cost will likely go up.
8. Close to 50% of retired households spend more money, not less, in retirement
I can imagine how this happens. You are free from the chains of your job and off you go on lots of trips which involve spending money. One of the key point of this stat gets into the detail that the trend of ‘spending more’ takes place primarily during the first few years of retirement. Unfortunately, the first few years of retirement are the most critical for not wanting the stock market to “crash” or spending habits to go crazy. This is all the more reason why when planning for retirement, you should aim high when thinking about how much you will need to save and spend in retirement. Figuring out your core expenses and then adding in a buffer for leisure or simply to lower your risk of running out is a good move.
9. Seniors are the fastest-growing group of bankruptcy filers in the country
“Back in 1991, only 2.1% of bankruptcy filers were 65 or older. By 2007, that number had climbed to 7%.” I suspect this state will continue to go up as the baby boomer generation continues to age and retire.
What Does All This Mean?
I believe that a lot of the news about personal finance is misleading and overgeneralized. And it’s mainly caused by writers or commentators trying to speak to everyone all at once.
The stats given in articles like these might actually be right, but everyone’s interpretation of those numbers could lead to a number of different conclusions – although the stats do tend to point to a dire situation. Just know that you are the one in charge of your own Department of Treasury.