the Retirement Drum Beat Gets Louder

Thanks Joshua Davis for this photo

I just read this article in the San Francisco Chronicle called Retirement Money Wories Mount for Workers. I am finding it interesting that the media is finally picking up on the fact that the average American does not save enough money for their retirement needs. The United States Department of Labor did a study on the retirement accounts of Baby Boomer’s back in 2005. As stated in their analysis…

There was at least one retirement account in 57 percent of the households. The average or mean amount in the retirement accounts was $49,944, but the standard deviation was $174,193, suggesting that the dollar amount held in retirement accounts varies widely by individual households. The median amount held in retirement accounts–$2,000–provides another indication of the wide variation in the amounts held by households.

This means that the average Baby Boomer has the ability to generate $1,960 in income per year in a safe 4% investment. I don’t know about you, but I could not live off of $1,960 a year. For an individual to generate annual retirement income of $72,673 (which is the average annual income of the Baby Boomer Population) they would need $1,816,825 in retirement at 4%. This shows that there is a lot of suffering ahead for those Baby Boomer’s that just don’t have enough and don’t have enough time to accumulate it.

I have found that retirement is a long term conversation that many people either avoid (they decide living in the present is more important than thinking about the future) until it is too late or they do not constantly and explicitly hold their retirement concerns when making important decisions that will affect their retirement futures. Either way people end up in the same place with not enough money for retirement and not enough time to do anything about it. Retirement should be an immediate concern that we are explicit about when making large financial decisions. This is because we cannot escape the mechanics of the time value of money any more than we can escape gravity.

This can be a grim subject, which is why I think the media has avoided it for so long. Yet, it can also be an enlightening conversation about how we can plan our futures so that we take care of our retirement concerns. I believe the saying, “Live long and prosper” needs to be updated to, “Plan to live long and prosper!”.