3 Scary and Surprising Retirement Realities #Retirement #FIRE #MoneyTips

3 Scary and Surprising Retirement Realities

Retirement Problems: #1 Not Enough Savings

As I have written before, one of the key reasons that made me start a FIRE/Personal Finance blog was this kind of statistics:

Nearly half of seniors die owning less than $10,000 in financial assets, according to a 2012 study for the National Bureau of Economic Research. Meanwhile, debt among older Americans is soaring. It used to be relatively unusual to have a mortgage or credit card debt in retirement. Now, 23 percent of those older than 75 have mortgages, a four-fold increase since 1989, and 26 percent have credit card debt, a 159 percent increase, according to the Federal Reserve’s latest data from the 2016 Survey of Consumer Finances .

The problem is real, some people aren’t saving enough. Some are trusting too much on Social Security, that may well not be there when you need the most.

Save more. (Start now). Start your retirement plan right away, and focus on your savings rate. Start with 10% of your income, pay yourself first, and think how your future you will appreciate that you had the strength to not spend all the money that you’ve earned. When possible expand your savings rate. Build an emergency fund, so you don’t have to spend your retirement money.

Social Security: #2 Not Enough Sources of Income

According to data that we’ve found (US statistics):

  • A man reaching age 65 today can expect to live, on average, until age 84.3.
  • A woman turning age 65 today can expect to live, on average, until age 86.6.

If you don’t want to work until you die, you have to build passive sources of income. For at least 20 years. And don’t forget those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.

Relying solely on Social Security benefits can be short to fund all your needs (health, and so on) and lifestyle. The average monthly Social Security retirement benefit for January 2017 is $1,360. The amount changes monthly. So do your math, and start thinking about other sources of income. Otherwise, you might outlive your money.

Invest more. Consider and study all the options (Read more here). Only you know what’s your risk tolerance and future financial goals. Invest accordingly.

Federal Poverty Line: #3 Not Enough Money for Basic Needs

Over 25 million Americans aged 60+ are economically insecure—living at or below 250% of the federal poverty level (FPL) ($29,425 per year for a single person). These older adults struggle with rising housing and health care bills, inadequate nutrition, lack of access to transportation, diminished savings, and job loss. For older adults who are above the poverty level, one major adverse life event can change today’s realities into tomorrow’s troubles.

Start now. Begin to plan your retirement right now. A combination of an adequate savings rate, in addition to putting your money to work, i.e., building diversified sources of income, will decrease the possibility of running out of money for your basic needs.  Also it will increase the possibility of a comfortable and secure early retirement.

If you start with:

  • $1,000
  • Annual Addition of $6,000 at the beginning of each year
  • Compound interest of 5%

You will have:

  • $80,869.62 (10 Years)
  • $422,886.68 (30 Years)
  • $1,330,359.77 (50 Years)

In conclusion…START NOW.

3 Scary and Surprising Retirement Realities #Retirement #FIRE #MoneyTips

About GTRetire

GTRetire is the founder of GrowtoRetire, a blog about financial independence and early retirement. Click here to learn more about starting a blog! Also, this post may contain affiliate links, please read the disclaimer for more info.

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