Financial professionals have been sounding the alarm for a long time warning that a retirement crisis is coming. The National Council on Aging says more than 23 million Americans age 60 or over are already living at or below the federal poverty level. And still, much of the working class is ignoring the warnings and the struggles of those around them.
According to the Federal Reserve, only 13% of Americans have given their financial planning for retirement “a lot” of thought. Half of Americans say they either only thought about it a little bit or they haven’t thought about it at all. Yet the Employee Benefit Research Institute (EBRI) shows that confidence about being prepared for retirement spiked in 2014 and again in 2015 after sitting at record lows between 2009 and 2013.
However, that growing level of optimism isn’t grounded in better preparation, the EBRI notes. Savings levels are low and most people aren’t even taking the basic steps necessary to prepare for retirement – many seem to believe things will just work out in the end. That approach simply doesn’t work.
If you don’t want to join the millions of senior Americans teetering on the poverty line, you need a sound retirement plan that steers you off the path of common planning pitfalls. Otherwise, you risk making mistakes that will hinder your ability to retire when you want, or otherwise will create financial problems for you after you do retire.
Inflation is a reality you can’t ignore. Over time, costs of living are sure to go up.
Take housing, for example. MarketWatch says rents in the third quarter of 2015 rose 5.7% compared to the previous year. It’s hard enough to handle price spikes when you’re working, but when you’re not, it can be much harder, if not impossible. No one wants to struggle during their retirement years, but the only way to avoid it is by saving during your working years.