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Which side are you on? April 10, 2008

Posted by shaferfinancial in Uncategorized.
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Some interesting statistics came to my attention recently.  They only reinforce what I have been posting on a regular basis.  These stats are not broken down by age group as I have posted before, but are useful anyway.  They break down folks into either working age or retirees and look at total savings and investments not including one’s primary residence.  As usual, the majority of folks have little or no savings and investments.  For workers 49% have less than $25,000 total savings/investments, while retirees in this category is 60%.  Moving up to $100,000, which is the level at which one is considered part of the “mass affluent” we see that 73% of workers and 75% of retirees are below this level.  The final category is for those with $250,000 or more in which 12% of folks, both workers and retirees, have reached that amount of wealth.  This study concurs with the other information available.  The main part of the study was to look at people’s confidence in being able to retire with a comfortable lifestyle.  Only 18% of folks are very confident of a comfortable retirement a huge drop from last year.

The interesting part of the study for me is that at the top, the percentages are almost identical.  That reinforces what we already know is that most people remain in the same categories throughout their working life and into retirement.  In other words if your savings/investment totals are in the middle 20% you tend to stay there throughout your life, at least until the end when you rapidly eat through small savings. 

The other interesting statistic is that 51% of retirees have less than $10,000 in savings/investments.  Of course this group has a much higher percentage of folks with a defined benefit pension, than current workers, to help them out.

What this means is that at least 75% of folks can look forward to being poor in retirement.  Following the herd has its costs as I have pointed out before.  15% can look forward to making it by living frugally, extremely frugally.  And around 10% can look forward to having a somewhat comfortable retirement.  Just for comparison sake those at the $250,000 mark could buy a annuity that would pay them somewhere around $20,000/year for life.  This with another say $25,000/ year from social security could give them enough to live on today, but as inflation eats away will cause some issues if they live to life expectancy (17 years in retirement).  So even the highest category is not really enough to have a truly comfortable retirement.

What this means to the country on the eve of the baby boomer retirements is not pretty.  It is likely that as much as 95% of them will be dependant on social security to live in their retirement years.  Dependant on a program that is in crisis and will require increase tax collection to function in the future, no less!

Those folks who take these numbers to heart, and want to change their future, might want to go to www.shaferwealthacademy.com and contact me for a discussion about how to make that change.

Of course the ironic part of retirement planning is that the people who have real reason to change the course they are on (meaning the bottom 90%) tend to let “fear” rule the day and avoid doing anything different because they see it as risky, not recognizing the enormous risk they already are in.  

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