Last Updated: March 1, 2008
With all the financial responsibilities we face, it's often tough to put yourself first. But retirement savings must be a priority, and sometimes to drive that home, it pays to see some statistics:
- The Employee Benefit Research Institute (EBRI) reported last month that the group of people with the longest timeframe to save for retirement — young workers aged 21-24 — are the least likely to participate in any kind of workplace retirement plan. Only 29 percent sign up for their retirement plans at work, compared to 60 percent of the workforce aged 55-64.
- In a May 2007 MetLife study of mothers and adult daughters and their attitudes about retirement, women who are married are more likely to retire than single women. Mothers who are married are more likely than unmarried mothers to retire before age 55 (26 percent vs. 6 percent), and married daughters are more apt than single daughters to expect to retire before age 60 (13 percent vs. 8 percent) and less likely to retire after age 65 (28 percent vs. 43 percent). Debt is also a problem — daughters are almost twice as likely as mothers to have debt of 25,000 or more (22 percent vs. 12 percent).
- According to Social Security statistics reported last month by USA Today, there's a 41 percent chance that a 62-year-old woman today will live to be 90, while a man has a 29 percent chance. The publication also reported that retirees who signed up for retirement benefits at the earliest qualifying age of 62 would lose significant benefits due to the longer lifespan — roughly $39,000 in lost benefits for those who live until age 90, and up to $54,000 in lost benefits for those who live until age 95.
- According to the AARP Public Policy Institute, the average cost of a nursing home stay is more than $67,000 per year and exceeds $100,000 per year in some urban areas. Assisted-living facilities can cost more than $35,000 per year, while home care agency rates average $37 per hour for a licensed practical nurse and $19 per hour for a home health aide. For those who cannot finance those costs themselves, long-term care insurance might be a worthwhile investment.
- Don't ignore out-of-pocket health care costs in retirement, even for those with insurance. The ERBI reported in July 2006 that a couple, both age 65, retiring that month and living to average life expectancy could need as much as $295,000 to cover premiums for health insurance coverage and out-of-pocket expenses during retirement. A couple that lives to 95 could need as much as $550,000.
- And to underscore the need for retirement planning, the EBRI reported last year that many Americans have little money put away in savings or investments. Among workers who participated in the 2007 Retirement Confidence Survey and provided this type of information, nearly half reported that the total value of their household's savings and investments — excluding the value of their primary home and any defined benefit ("traditional" pension) retirement plan — was less than $25,000 (49 percent). Only one in 10 workers each reported total savings and investments of $25,000–$49,999. Only 14 percent reported having savings of $250,000 or more.
What does this all mean? That for the most part Americans are unprepared for retirement, which means we will all be working longer or trying to seek other means of covering the shortfall we face. In the short run, it makes sense to take better care of our health and try as much as we can to reduce debt and other pressures that get in the way of setting aside money. There is no question that the sooner you begin to plan and save for your retirement the better off you will be. But it also pays to get some advice. A financial planner can be a good guide to making the most of what you have and creating a plan that balances the financial concerns of today with those you will face in retirement. Find a financial planner.