Most people are anxious to retire. A big part of the reason they work hard now is that someday they simply will not have to work so hard anymore. They meet with their advisors, they contribute to their 401k’s and they strive for the day of retirement. However, there are a growing number of people who are not sure if they will have enough to retire. They know all the concepts, but they simply do not have the confidence. A new study by Employee Benefit Research Institute shows that many people are not very confident when it comes to the size of their retirement savings.
There is a big disconnect between the idea of retirement savings and the reality of retirement savings. In fact, nearly half of those surveyed (43%) say they need to save 20% or more of their income in order to be well prepared for retirement. However, many things stand in the way of people actually saving as much as they would like. Debt and cost of living are the two biggest obstacles preventing people from saving as much as they feel they need to.
Living in a culture of consumerism many people feel the need to buy more things. The idea of keeping up with the Joneses has caused them to dive deeper and deeper into debt. As we know, every dollar that goes toward paying down debt is a dollar that could have been used to fund retirement. These high costs of living translate into very little retirement savings. In fact, only half of those surveyed were able to say with confidence that they could come up with $2,000 if a large need arose.
Another huge player that takes away from people’s ability to save more is the cost of insurances. Protecting one’s wealth against various mishaps is a drain on the pocketbook. As these expenses continue to climb, people’s confidence in their ability to afford them dwindles. In fact in the last year those who are not at all confident in the ability to pay medical and long-term-care expenses each rose 5% (24% to 29% and 34% to 39% respectively).
Even though people understand that the costs of insurances are increasing, and even though they know that they could lose their job at any moment, they are still not saving more. They are making their best guess at what they should save for retirement, but only 46% have sat down and calculated out what they will need to save based on their desired lifestyle. Despite almost half of the people knowing how much they should save, there are too many outside pressures that do not allow them to save that much.
Saving money should not be difficult. But our culture often values instant gratification much more than delayed gratification; causing many people to have gotten too far into debt and have failed to save enough. Now their lack of savings has translated into worry if they will have enough in retirement. Unfortunately, many people still do not save even though they are worried about not having saved enough. The only solution is to slash expenses, earn more on the side, and save as much as possible.
How about you? Have you calculated how much you will need to save in order to retire on time?