Most Americans do not save enough for retirement. And unless you put about 15% of your income, chances are good that you are one of them.
Saving a lot of your money at home can seem daunting and can even feel immediately impossible. But the reality is that if you do not prepare for a secure future, you will probably spend your later years struggling financially, if you can afford to do so, because you have far fewer options to deal with the situation. to solve.
If you are not convinced it is worth making sacrifices now to make sure you are in good shape later, here are three horrible facts that may help to change your mind.
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1. The Average Benefit of Social Security
This year, the average benefit of Social Security comes in at just $ 1,503 per month. A little quick math will tell you that if you relied solely on Social Security to fund your retirement, that would leave you with $ 18,036 in annual income.
That shockingly low income number is about $ 5,200 above the federal poverty level for this year, which means you hardly have to have money to pay even the basic necessities of life. And unfortunately, seniors often have higher health care costs than the rest of the population, so older Americans with such low incomes are more likely to have real difficulty paying to address their medical needs while also covering living expenses.
While your benefit may be higher than average, it should only provide you with a portion of your retirement income. If you assume that it is more than one of several sources of funds, you rely on it and there is a serious risk that you will be poor as a pensioner.
2. The cost of health care for a pension
Speaking of high costs for health care, it is important to realize just how expensive medical care can be late in life because the number is shocking.
A 65-year-old man with median spending on prescription drugs would need to save a whopping $ 73,000 to have just a 50% chance of covering Medicare premiums and other out-of-pocket expenses while a woman in the same boat ran $ 95,000.
And remember, that is to have a 50-50 shot of coverage of care if your prescription medication needs are nearly average. If you had a 90% chance of covering costs, a man would need $ 130,000 and a woman $ 146,000.
These numbers, from Institute of Employee Benefit for those retiring this year, make it clear that you need a small fortune just to pay for medical expenses. To just raise the $ 146,000 needed for median prescribed medical expenses and other medical expenses by age 65, you would need to save about $ 1,550 a year if you started at age 30 and have an annual return of $ 7. % earned on investment.
3. The percentage of seniors who cannot meet the needs
If you are already worried based on the first two numbers, this one may be the worst yet: Half of single adults aged 65 and over can not pay the basic, and also about a quarter of households with two adults of 65 years and older not.
Too few financial resources to meet the necessities of life can be extremely stressful – especially if this happens late in your life. It is often impossible to return to work due to lack of employment, family problems, or health problems, so you may have no choice but to do so and experience a large reduction in livelihoods.
Are you still ready to save more for retirement?
As you can see, the average benefit for Social Security will not go very far, while health care is likely to save a large chunk of your pension. You need to be prepared here, or you could end up as one of those seniors who can not afford the necessities.
By increasing your retirement savings now, you can ensure that you do not have to rely too much on a control of social security that is too small, which will make it difficult for you to spend your later years. It is worth the sacrifice to save more now to buy yourself safety later in life.
