Research about the retirement funding crisis is giving off mixed indicators. Some are positive, but many are still in the red.
Some numbers indicate that the monster that has been the stock market for the last three years has done a lot to ease people’s concerns about their retirement funding.
The Journal of Accountancy reported in February that 50% of the certified public accountants surveyed found their clients were more confident in their ability to finance their retirements now than they were five years ago.
The huge move in equities has also been credited for improvements in public pensions. Some have exceeded their pre-Great Recession levels by 50%.
Other public pensions still report funding issues, and some are significant. But they’re nothing like the problems we faced in the years immediately after the financial crisis.
On the other side of the issue are the Employee Benefit Research Institute’s (EBRI’s) numbers. Data from 27 million 401(k) and IRA accounts indicates that 40% of households headed by people ages 35 to 64 will run out of money in retirement.
That is an estimated shortfall of around $3.38 trillion. As bad as that seems though, it’s lower than the $4.4 trillion deficit the EBRI estimated in 2014.
Contingency Retirement Planning
For the 40% who the EBRI says will not make it through retirement on what they have saved, the picture is not pretty. Aside from slugging through their golden years below the poverty level, working through what are supposed to be years of rest and relaxation appears to be the only solution.
The Bureau of Labor Statistics reports that in the last 30 years, the number of workers age 65 and older has tripled. And even more amazingly, the number of those aged 75 and older who are still in the work force has quadrupled from 461,000 in 1988 to 1.8 million in 2018.
And in the last 20 years, full-time employment for gray hairs grew 2 1/2 times faster than part-time work.
People are working much longer, and for many, it isn’t a choice.
As I have said in several articles this year, there are no easy solutions to the retirement funding problem we face. I wish I had some high-tech-sounding solution or some kind of a three- or four-step program that could lift the 40% out of the red. But I don’t.
This is repetitive, I know, but the only solution is a matter of cutting expenses, saving more money while you can, investing it wisely and giving it time to grow.
At the age of 55 or even 60, there is still time to implement an aggressive savings program that can get you out of the 40% who aren’t going to make it.
A huge portion of our population running out of cash at ages when most will be physically incapable of working to make up the deficit is a nightmare scenario none of us want to face.
There’s still time!