News flash: Americans’ retirement plans are derailing

Posted: May 16, 2013 in Uncategorized

Finally, a survey about how Americans are falling short in terms of retirement savings that doesn’t blame the victim. Ameriprise Financial conducted a survey that notes how a number of personal events have derailed the retirement plans of many Americans.

As reported in The New York Times Bucks Blog, the recession plus a number of events that many could argue are linked to the recession, have put a significant dent in the ability of most Americans to afford to retire or to retire free of financial worries. Of those surveyed, the top “derailer” events include:

  • Low interest rates leading to slower asset growth
  • Stock market declines
  • Lower home equity
  • Supporting grown children or grandchildren
  • Pension not worth as much as expected
  • Bad investments leading to loss of savings
  • Earlier than expected enrollment in Social Security
  • Job loss

These events set back retirement savings by $117,000 on average, survey participants reported. What’s striking is that nearly 37 percent of those surveyed experienced five  “derailer” events, costing them $144,000 on average, while most others experienced four such events.

What I take away from this survey is that it’s not enough just to expect the unexpected, as the Ameriprise spokesperson noted. You’ve got to expect major unexpecteds and to be as financial prepared as possible for a confluence of events that can put your plan for retirement way off track.

This is no easy task in an economy where wages are stagnant, long-term unemployment is high, health insurance coverage expensive, lifespans are lengthening and social safety nets like Social Security are at risk of being cut back. In fact, for older Americans with median wages, it’s pretty much impossible to be financially prepared for all things that could go wrong and impact a retirement negatively.

That being said, it makes sense to save as much as you can and to start saving as early as possible. Living frugally helps, so that if there is a “derailer” event or two or three, your expense base isn’t high to start out with.

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