How To Solve Your Retirement Savings Problem So You're Not The Next Statistic
- The shocking statistics behind retirement savings.
- Learn how to avoid being part of the 50% who aren't prepared.
I'm always amazed when I see retirement savings statistics.
It's a scary picture that's only made worse when you know how much money it takes to retire with security.
Long-time readers already know less than 5% of workers will achieve anything remotely close to financial security.
Fortunately, your future doesn't have to look that way. You're raising your financial intelligence to the next level through this site and related education we offer.
A recent article by professor Robert Shiller (from Yale University and “Irrational Exuberance” infamy) provided some more amazing stats to add to our already overstuffed collection, showing a fast approaching disaster in retirement planning.
Below is a sampling:
- 54% of 401(k) assets are invested in stocks.
- 50 million Americans had 401(k) plans worth $2.5 trillion at the 2007 market top, which subsequently lost over $1 trillion by October 2008. Another $1 trillion in IRA assets vanished as well.
- Over 50% of households are financially unprepared and lagging greatly on retirement savings. (This estimate is hopelessly conservative, IMHO, because of the way they calculate the amount of savings needed for retirement. I believe time will prove the actual number is much larger.)
Related: 5 Financial Planning Mistakes That Cost You Big-Time (and what to do instead!) Explained in 5 Free Video Lessons
- In 2007, near the market peak and before assets were nearly cut in half, defined contribution accounts administered by Vanguard (a fair representation of the industry as a whole) showed median account balances for 55-64 year-old's (those approaching retirement age) at just $60,740 (remember, that account value is greatly reduced now).
- Data by Fidelity as provided in a March 20th, 2009 BusinessWeek article shows how much 401(k) balances actually declined. Surprisingly, not as much as you'd expect by falling from $69,200 in 2007 to just $50,200 in 2008. The reason for the less than expected decline? Participants and employers offset much of the market losses with contributions throughout the year.
- Unfortunately, only 10% of defined contribution participants contributed the maximum to their accounts. (What are they thinking?)
Yikes! There's a serious disaster brewing in the retirement planning world. The numbers are unequivocal. Average balances in the range of $50,000 aren't even in the ballpark of what it takes to retire with financial security.
If you'd like to know a smarter way to plan for your retirement, I highly recommend my book How Much Is Enough To Retire (but maybe that recommendation is a little biased since I wrote the book :-)).
It's a quick read that will provide you with a clearly defined retirement savings goal to build toward.
Alternatively, you can take the advanced Expectancy Wealth Planning course here and know more about how to develop your personalized wealth plan than most financial planners.
The reason that's important is because all the studies show that merely figuring how much money you need can dramatically impact how successful you are at attaining the goal. It's an exercise well worth your time and effort.
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