One-third of Americans Are Financially Unable to Retire

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One-third of Americans are financially unable to retire according to a survey recently released by the Society of Actuaries (SOA). Why are so many Americans ill-prepared for the Golden Years? It may be rooted in the mistaken belief that a strategy of “planning for the short-term” is sufficient. In fact, 54 percent of retirees and 64 percent of pre-retirees “agreed that if someone manages their finances well during the first three years of retirement, their money will last for the rest of their retirement.”

The false impression that short-term retirement planning is good enough further highlights other troubling trends:

  • Only 48 percent of retirees indicated that they have completely paid off their mortgages, which is down from 76 percent in 2007
  • Only about half of pre-retirees said they have saved as much as they could, states the SOA
  • The vision that pre-retirees have for retirement does not match up with the experiences of those currently in retirement. 66 percent of pre-retirees believe they may receive income from retirement plans, such as an IRA, compared with the 45 percent of current retirees who state they actually receive retirement account income
  • An Employee Benefit Research Institute (ERBI) survey from March 2010 reports that only 28 percent of workers plan to retire before age 65, compared to 50 percent in 1991
  • The ERBI finds that less than 55 percent of workers (ages 21-64) participated in a retirement plan in 2008

Retirement Concerns

In addition to a lack of retirement planning, the SOA states that retirees and pre-retirees had other savings related concerns. Almost 70 percent of the pre-retirees surveyed were worried that the value of their savings and investments might not keep up with inflation. Inflation related concerns also exceed concerns about health care risks. Given that inflation can outpace savings growth in any given economy, it should be a major factor in the retirement planning process.

Long-term Planning Is Needed

The SOA also states that retirees and pre-retirees alike planned to prepare for retirement risks, but did little to fill in the holes of their retirement strategies. Illustrative of this finding, is that despite serious fears about inflation, 26 percent of pre-retirees do not have plans to figure out how much inflation may impact the money they have in their retirement years.

You may be able to better prepare for retirement by adopting a long-term plan. Retirement can last more than 20 or 30 years, so the planning phase should take place over a longer term as well. Your long-term plan should include retirement, but you should also think about providing for survivors. Fortunately, there may be a strategy that may help some people manage their finances. Whole life insurance might be the answer. Whole life offers one of the best means to financially support family members after death, especially if savings and retirement funds are lacking.

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