Most Americans, in general, are woefully behind when it comes to their retirement savings. It’s no huge secret that people think more about their next vacation than they do about what happens to them once retirement comes knocking on the door. A typical household that is aged between 44 and 49 has as little as $81,347 stored away. This is compared with $121,831 that those aged between 50 and 55 have been able to save
Those that are closer to retirement age are not faring that much better, with the average savings balance of the 56 to 61 year olds being $163,577. What’s worse is that nearly half of all families in the United States have no retirement savings whatsoever.
You would think that more people would be keen on playing catchup, building that nest egg so that we are not left wanting when we do finally hang up our work boots. Sadly though, that does not appear to be the case. In a NerdWallet study that was conducted fairly recently, it was discovered that Americans are more intent on saving up for vacations rather than retirement.
That’s pretty shocking, really, when you realise just how easy it is to open a savings account. There are some really good ones out there too, for all kinds of savers, here are the best savings accounts of 2017 to give you an idea.
The culture of immediacy and instant gratification
We find ourselves in a curious situation these days where just about everything we need is either a tap, mouse click or call away. Even dating has been reduced to literally swiping a thumb across a screen. With the above being true, perhaps the fact that retirement is largely going ignored is not that much of a surprise – it just isn’t that imminent, and therefore not so important, for the majority of us.
It would also go some way to explaining just why so many of us carry as much credit card debt as we do. Add to that the fact that around 39% of individuals have no funds in immediate savings and the idea of saving for retirement not being a priority becomes even more understandable; how can you focus on saving when you need to eat?
Still, there is no escaping the fact that we need to save for the future and the sooner that people begin to realise this, the better chance they will have of turning things around before it is too late and they can still save enough to make a difference later on down the line when retirement is a reality.
You cannot risk your own retirement
Lots of people don’t save for their retirement, purely because they can’t – or at least, think they can’t. Having your paycheck eaten up by living expense such as utility bills, food, rent etc. is one thing, and there isn’t too much that can be done about that, when people somehow find the money to go on vacation that is a clear indicator that there is indeed money to spare, somewhere.
What that being the case, why is it that so many think that the future, which is getting closer every single day, can be safely ignored? Over reliance on social security could be the root cause, as lots of people seem to think that it will be enough to live on come retirement time. Sadly, they could not be more wrong, even if they put real effort into being wrong.
Right now, social security provides the average American retiree $1,360 a month or $16,320 a year. That is maybe just enough to live on, if you ignore everything else. Healthcare, for example, is a massive expenditure. A healthy, average 65 year old is, just for example, expected to throw $200,000 and more just on healthcare.
Social security was only meant to supplement savings, not replace them. In fact, savings were only ever meant to be supplemented by a maximum of 40% by social security. Most however need a minimum of 70% of former earnings to live on, so that 40% isn’t nearly enough to cover costs.
The onus is on the individual to start saving as soon as possible, and to save as much as we can each month and if that means forgoing every other, or more, vacation then that is something that just needs to be done.
Start on that savings nest egg
If you are one of the many that are planning on saving for that vacation, before you think of saving for retirement, just don’t. If you are putting into a an IRA or a 401(k), regularly, and want to put some of your hard fought for cash on a break away then that’s one thing. If you ever find yourself in the situation where you have to pick one over the other, however then don’t be under any illusions about which you should choose – retirement always comes first.
Let’s say you are saving up $2k to pay for and go away on vacation, and you would typically spend this amount each year on that. If you were to put that money into a savings plan instead, you could save $399,000 by retirement age if you start at age 25. That’s a huge chunk of change, and no mistake.
Giving up vacation time does sound like a painful compromise, but there are other options available to you so you can still get the break you need and deserve. Road trips to visit freinds and relatives, staycations where you can explore the local area are also a ton of fun especially if you do it with a companion.
Cheaper vacations are also an option. The point is, you have options and always will – not everything has to be high-cost in order for you to enjoy a nice break away from the daily grind. In the end, your retirement is much more important anyway.