Americans
Rely on Guesswork for Retirement
Thought about your retirement
lately? If you haven’t, you’re not alone.
According to a recent survey conducted by Thrivent
Financial for Lutherans of 1,000 American adults,
nearly two out of three (62 percent) non-retired adults
have never estimated how much money they would need
for their retirement years.
“Financial ignorance never serves people well,”
says Todd Gillingham, a partner with Thrivent Financial,
a Fortune 500 financial services organization. “Estimating
how much you need to accumulate for your retirement
years is a critical first step in achieving a comfortable
future.”
So how much do you really need
to save for retirement? A few hundred thousand dollars?
A million? More? Not surprisingly, the answer varies
depending on one’s age, health, marital status,
income, assets, preferred lifestyle and dreams, among
others, according to Gillingham. But regardless of
whether an individual is five months or five decades
from retirement, delay in planning for retirement
can be costly.
“As a general rule, people
are retiring earlier and living longer,” says
Gillingham. “In addition, eligibility for full
Social Security benefits is creeping upward, making
it necessary that individuals plan carefully and set
aside more money for their retirement years than they
might expect.”
Unfortunately, most Americans
aren’t acting on that message. More than half
(52 percent) of non-retired, working Americans have
either not started saving for retirement or have saved
less than $10,000 for their long-term retirement needs,
and just 10 percent say they have personally saved
more than $100,000, according to the survey. This,
despite the fact that it may be necessary for many
Americans to save more than $1 million to fund a comfortable
retirement.
Why don’t Americans simply
save more? For most, it’s a matter of “not
having enough.” The Thrivent Financial survey
found that among those who haven’t started saving
for retirement, 54 percent simply say they don’t
have enough money, 21 percent say it is too early
and 17 percent say they haven’t’ gotten
around to it yet. Just 3 percent say they don’t
think they need to save for retirement.
However, according to Gillingham,
lack of money is not the true stumbling block that
keeps people from achieving their financial goals.
“A lack of money most often reflects individuals’
commitments to short-term priorities that keep them
from addressing their long-term financial needs,”
said Gillingham.
Fortunately, nearly half (49
percent) of working Americans say they began saving
for retirement by age 35. Still, that means most working
Americans are pushing retirement accumulation to the
mid- to late stages of their working careers. Why
does this matter? As a hypothetical example, a 20-year-old
who invests $80 monthly in an investment vehicle earning
a constant 10 percent rate of return (compounded monthly)
will accumulate more than $1 million ($1,025,535)
at his or her retirement some 47 years later. By contrast,
a 45-year-old who invests $1,000 monthly in that same
vehicle will accumulate just $953,173 by retirement,
a difference of more than $72,000. Time is on the
side of the steady, systematic investor.
“Retirement is a need
that simply cannot wait,” notes Gillingham.
“Time is an individual’s most valuable
ally in achieving his or her retirement goals.”
A financial professional can
help individuals identify personal retirement goals
and put strategies in place to achieve those goals.
