Despite the coronavirus pandemic, many of my friends are making large purchases in the forms of bigger homes, Airstream RVs, and even second homes. They make these choices based on many factors, but one of them is because they’re able to work remotely. They easily justify a bigger house due to both parents and their kids doing school or working from home. They justify the RV (remember, they also have to pay for storage, extra gas, campground fees, maintenance fees, etc.)….because they can travel and work now, at the same time. The second home is also justifiable, since they can play, work and stay in a remote cabin, seaside cottage, or an apartment with views of the Seattle skyline. No more commute to the office. For now.
While envious, I am not jealous. Sure, it would be nice to have all those things, but what about retirement? It has long-been established that most Americans approaching retirement age, have little to no savings. In fact, according to a survey conducted by the Transamerica Center for Retirement Studies, the median retirement savings for folks in their 40’s, is $63,000. If you live to 90, as more and more people are doing, how will you get by on $63,000? If you did live to 90 – and say, you’re 45 now, that means you’d have to keep your annual spending to just $1400. I won’t even go into factors such as your health needs, increased taxes, increase inflation, etc.
I’ve gleaned the following recommendations for late-savers from several reputable sources, such as the 2020 annual report of the Social Security Board of Trustees, the Stanford Center on Longevity, and AARP.
Pay off your debt – yes, your condo, townhome or house. Your Tesla. Your MasterCraft ProStar. You get the idea. And then…don’t accumulate more debt. You will never ‘keep up with the Joneses’, let alone the Kardashian’s.
Max out your contributions and take advantage of the $6,000 you can contribute to your 401(k) as soon as you turn 50. Literally, the day of…consider it a birthday present to yourself.
Have a back-up plan. With the coronavirus pandemic, we’ve seen a significant decline in jobs. It hasn’t even been a year, but many people who were on the verge of retiring have to rethink their futures. Even if you are on track to retire at 65, according to the Stanford Center on Longevity, existing norms no longer work because they evolved for lives that were half as long.
Don’t retire until you turn 70. That’s right – 70. Even though people are living longer, the ‘age of retirement’ hasn’t increased since President Roosevelt signed the Social Security Bill into law in 1935. There have been amendments to the law during the last 85 years, but the age of retirement has never changed.
Don’t count on Social Security. According to the 2020 annual report of the Social Security Board of Trustees, “the surplus in the trust funds that disburse retirement, disability and other Social Security benefits will be depleted by 2035.” That’s only 15 years from now, folks! There may be some kind of benefit program or retirement law after that, but who’s to say? If there was some kind of monetary benefit, certainly the ‘age of retirement’ would be increased.
Consider that the coronavirus pandemic will likely have a significant impact on the long-term availability of benefits from Social Security due to the large-scale job losses which cut into the payroll tax revenue that accounts for much of Social Security. The August 2020 jobs report showed a surge in permanent job losses, which means 10 million Americans need to find new work. And fast.
Friends, I hope these numbers and facts have motivated you to act. It’s never too late to start planning for your retirement.
