The data over the past week on the preparedness of Americans to retire has been shockingly abysmal. Only last week, Northwestern Mutual the financial services conglomerate revealed interesting data they collected. It demonstrated that a full one-third of American workers possesses under $5,000 worth of total retirement savings.
They are not alone with these dismal revelations either. The most current Survey of Consumer Finances by the Federal Reserve shared the median bank balance of U.S. residents. It is a paltry $2,900.
Bank of America Merrill Lynch has its own yearly report that demonstrated the average checking account balance per household in the country is a low $12,870. The chart below shows how much this varies based on your income. As you might expect, high income wage earners have no problems in this department. For those earning less than $70,000 though, it is a different story:
This average checking account balance represents a lower figure than the same bank balance BOA shared back in 1997 (twenty years ago). It is another sad reflection of how little the average American has managed to save for retirement.
Northwestern Mutual shows that 21 percent of Americans possess no retirement savings whatsoever. An incredible 33 percent of the retiring Baby Boomers have in the neighborhood of from zero dollars to $25,000 in total socked away for their imminent retirement. It means that these millions will have to fall back on their monthly Social Security checks in order to survive.
This would not be anything new either. Gallup Poll released a survey in May of 2017 that showed 58 percent of American retirees have Social Security for their primary income source. This would not be so serious were it not for the truth that Social Security is burning through the last of its entire program savings at an alarming pace.
The most current Social Security Board Trustees report states that the cost of the program has been greater than its revenues from taxes since the year 2010. The shortfall for 2017 was 11 percent more severe than the one from 2016 at $59 billion and counting. It will only be 2034 when the program has exhausted its trust fund savings entirely.
This is a mere 16 years from today. It means anyone retiring after 2034 can not count on a significant Social Security monthly check any longer. The state of pension funds is worse. Both local and state pension funds are hopelessly insolvent. Equally disturbing, a great number of corporate and union pension funds have also become terminally insolvent.
How badly are they in the hole now? Only a few months ago, the American Legislative Exchange Council published its own report. They estimated that the current unfunded liabilities of local and state government pensions is greater than $6 trillion. It means that the promised retirements of teachers, firemen, policemen, and government employees are all in serious jeopardy these days.
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There is no silver lining in any of these sobering data points. The only real hope you have for any meaningful retirement is to build up and protect a retirement portfolio that can contribute monthly and yearly income for your needs once you stop working.
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