Saving for Retirement
Have Americans Given Up on Saving for Retirement?
In the throes of the Great Recession, retirement-conscious Americans are experiencing an unexpected amount of frustration. They are under saved and — worse — find little reason to make any effort to correct it at all.
That is the disquieting conclusion in a recent report from the Deloitte Center for Financial Services, which surveyed that 60% of preretirees believe health-care costs will deplete their savings no matter how much money they try to save. Likewise, 39% believe investment returns will not be that high to provide sufficient retirement income, regardless of how much they are able to put aside.
Deloitte found exasperation at every point: 58% do not have a retirement plan; nearly 40% do not know what an annuity or mutual fund is; and 20% expect to rely purely on Social Security for their retirement needs. Over half mistrust any advice given to them.
As one society at-large, we appear to be giving up. It is not very difficult to understand why this is so. After a drastic pullback in 2008 and 2009, stocks are only now achieving levels they previously attained in the late 1990s. So, the market has been practically useless or dead money for about 15 years if you invested early on and simply maintained your hold. Many individuals who were consistently saving at, say 45 years old, have fallen far behind at their present age of 60. This explains why so many baby-boomers now plan to remain employed past their normal retirement age of 66 or 67.
Meanwhile, housing has finally made a positive sign of coming back. But real-estate values in majority of markets still do not come close to the levels seen in 2007. And, historically, low interest rates spawn the creeping feeling that respectable retirement income is an illusion.
The forbidding cost of health-care and gradually diminishing coverage for retirees further stoke the increasing retirement jitters. Extend Health conducted a survey which showed that adequate health-insurance coverage was the retirees’ highest concern and that the number of those who worried about “having sufficient cash to pay out-of-pocket medical expenses” had grown twice in the last five years.
Half of all workers prefers to delay retirement mainly to keep their health plan, reports the Employee Benefit Research Institute (EBRI); a quarter says they would retire before their currently planned age as long as they are assured of access to health insurance.
Only 18% of employees work at firms that offer health coverage to early-retirees, down from 29% in 1997, EBRI reports. From 1997 to 2010, the share of retirees above 65 with retiree health-benefits went down from 20% to 16%.
With an economic rebound approaching, housing recovering and stocks attaining on new highs, perhaps, the sense of frustration will decrease and prevent us from slipping into a coma. We should all hope so because giving up will not cut it!