When was the last time you took an in-depth look at your current retirement strategy? Are you confident that the plan you have in place is going to come through in the end? If you answered yes, let me be the first to congratulate you. However, I am willing to bet there is a larger contingent that is less confident in their retirement strategy. If you are the latter, it’s time you stopped leaving your retirement up to chance. Let me explain.
It’s a sad truth, but a reality nonetheless: the majority of Americans are nowhere near being ready to retire comfortably and on their own terms. According to a report conducted by the Economic Policy Institute (EPI) last year, an estimated 41% of households aged 55-64 have no retirement savings at all. What’s even scarier is that a great deal of those who have implemented their own retirement strategy are only slightly better off. According to the same EPI report, the average household aged 56-61 has managed to scrimp together somewhere in the neighborhood of $163,577 specifically designated for retirement. And while that number may sound like a lot to the untrained ear, it’s far from a comfortable amount to retire on. In fact, over the span of a 20-year retirement, $163,577 amounts to just $8,178 a year, or $681 a month, of income. Does that sound like an amount you would be comfortable living off of in your golden years? Probably not.
The $163,577 most baby boomers have managed to save for retirement is nowhere near the amount they will need to retire comfortably. Data presented by the latest Merrill Lynch Finances in Retirement Survey suggests as much: the average cost of retirement has risen to $738,400. That equates to roughly $36,920 a year, or about $3,076 a month. And remember, that’s just an average — those that have grown accustom to the finer things in life will need more to maintain their current lifestyle.
It’s worth noting, however, that many Americans may not be able to get to the number identified by the EPI report with their 401(k) alone. According to Fidelity’s most recent retirement analysis, the average American’s 401(k) rests comfortably around $92,500. What’s more, that number represents an all-time high, or $4,300 more than last year. However, despite being higher than it has ever been, most 401(k) retirement plans aren’t going to be able to supplement their holder’s golden years sufficiently. As I said before, the average cost of retirement has risen to $738,400, so most retirement accounts have a long way to go before their owner’s can feel comfortable about retiring.
