Many people have saved very little for their retirements, but of course they have nothing to worry about. The government will take care of them. From Simon Black at sovereignman.com:
Last week, the financial services giant Northwestern Mutual released new data showing that 1 in 3 Americans has less than $5,000 in retirement savings.
It’s an unfortunately familiar story. And Northwestern Mutual’s data is entirely aligned with other research we’ve seen in the past, including our own.
The Federal Reserve’s most recent Survey of Consumer Finances, for example, shows that the median bank balance among US consumers is just $2,900.
And Bank of America’s annual report from last year showed that the average balance per HOUSEHOLD (i.e. -not- per person) was $12,870… which was actually LESS than the average account balance that Bank of America reported in 1997!
On average, the typical US household has less savings today than they did 20 years ago… and almost nothing put away for retirement.
In fact 21% of Americans (based on Northwestern Mutual’s data) have absolutely nothing saved for retirement.
And 33% of Baby Boomers, the generation closest to retirement, have between $0 and $25,000 saved for retirement.
That’s hardly enough savings to last more than a few years… and a major reason why most retirees currently rely on Social Security to meet their monthly living expenses.
According to a Gallup poll from last May, 58% of US retirees said that they rely on Social Security as their major source of income. They simply don’t have enough of their own personal savings stashed away.
But as we’ve discussed many times before, Social Security is rapidly running out of money.
The most recent report from Social Security’s Board of Trustees (which includes the US Secretaries of the Treasury, Labor, and Health & Human Services) tells us that the program’s cost has exceeded its tax revenue since 2010.
Last year this shortfall was $59 billion, 11% worse than in 2016.
And in order to make up the difference and cover this deficit, Social Security has to dip into its trust fund, effectively burning through the program’s savings.
The problem with this approach is that, eventually, these annual deficits will burn through ALL of the program’s savings.
The government knows this; the Board of Trustees even state this in their annual report, projecting that the Social Security trust funds will become fully depleted in 2034.
Sixteen years may seem like a long way off. But we’re talking about retirement here. You’re supposed to think long-term about retirement. And the math simply doesn’t add up.
To continue reading: America’s long-term challenge #2: the looming retirement crisis