Sad News – Retirement Savings Statistics Are Not Looking Good!
Retirement savings statistics are not looking good, and this has many Americans concerned. One reason for this situation is the recent economic downturn. This factor has had several effects on savings set aside for retirement. Baby boomers who will retire within the next decade have withdrawn retirement savings just to meet expenses. Many of these individuals have lost their job and with their older age it is less likely that these individuals will quickly find other employment. More people are making do with less money and this can have a devastating effect on any
retirement savings account. Less money is available to put away for retirement which results in a lower savings balance. It is not just the baby boomer generation that is affected either, individuals across all ages have felt the economic downturn and seen their retirement savings take a back seat to meeting expenses and surviving.
Another reason that the retirement savings statistics are not great is the reaction of the markets to the economic downturn. Many individuals choose to invest their retirement funds, and in the last few years even conservative investments have lost a significant amount of value. Individuals have seen the value of their investments in small business retirement plans like 401ks hemorrhage, with some accounts reaching lows of only a fraction of the original amount. A slow economy means that there is less money available to be put towards retirement and this has led to lower overall contributions. Less in contributions means a lower account balance and less in compounding interest over your lifetime.
High unemployment rates, low interest rates, and market uncertainty has caused the retirement savings statistics to plummet in the last few years. Some individuals have seen retirement accounts lose half their value because of these factors. Many can no longer afford to meet their maximum 401k contribution per year, and this also means a loss on any employer matches. The rising cost of medical care is also causing concern. Medical costs continue to skyrocket and unexpected medical expenses have caused many to withdraw retirement funds to meet these expenses. This has caused an even lower average savings amount in retirement accounts. Job losses have led to the loss of health insurance, and Medicare is not an option until the individual reaches age 65.
The sad news about the retirement savings statistics, and the sad state of retirement accounts today, has caused many to worry and stay awake at night. Many individuals have spent decades saving up for financial security after they retire, and these individuals have seen account balances drop substantially. Lower interest rates mean more risk must be taken to receive the same yield and return. Those who are close to retirement age are not willing to take high risks because the funds will be needed soon so they must settle for smaller returns instead. Comparing different options, like IRA vs 401k, may not help turn around retirement savings while the economy is still struggling and has not fully recovered yet.