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A Nationwide Insurance study found that 31 is the average age people begin saving for retirement. But will they ever be able to retire? Are most people in a position, or will they ever be in a position, to amass enough savings to retire? Saving for retirement is not even an option for many people. There’s little or no money left at the end of the month to sock away anything for savings. Yes, the statistics we’ll look at are discouraging, but there’s a flip side that is encouraging we’ll look at in a minute. Let’s look at the discouraging statistics first.

One study by LIMRA, a “worldwide research, consulting, and professional development organization” reports that 61 percent of employees say debt has “negatively affected their retirement savings.”

The average 25-34 year old employee earns about $3500 a month reports the Census Bureau. That’s before taxes and other deductions. But just using that gross income figure, let’s look at where the money goes. Average rent for a two-bedroom apartment is $1207 a month nationwide. Of course, it’s more or less some places, but that is average, just as is income. Then there are car payments. A monthly car payment for a used car averages $391 a month. Want a new car? Bump that up to $554. That’s for one person. A two-person household might add a second car for another $391 a month. And that’s just the car payment. Add gas, maintenance, other transportation and it’s another $336.

Then there are the student loans. Those average $400 a month per person and take around 20 years to pay off. So if someone finishes college with a bachelor’s degree at 22, the student loan will eat up $400 a month until he or she is about 42. Grad school loans extend that repayment time and amount, assuming they aren’t paid off early. That’s if the loan isn’t put in forbearance for a time, which would obviously add to the time before it pays off.

And there’s food, and that’s another $1,000 or so. Right now, we’re at $3334 in expenses, only $116 before the $3500 is all gone for the month. But we haven’t touched credit card debt. The average monthly minimum credit card payment is $58, bringing us to about $3392.

The biggest knock after that is health care. The “2018 Milliman Medical Index” from May 2018 reports that the cost is just over $6,000 a year for two people, double for a family of four, but even one person will pay $250 a month, and that’s even with the “most common employer-sponsored health plan.” So now the entire $3500 is wiped out and then some.

Mind you, we haven’t touched child care, lunches, or dinners out. Child care will eat up $200 a week per child, or $800 a month. If it’s a couple with a child and two incomes, it’s possible, but another huge expense to deal with.

But won’t that all get better as those 31 year olds get older and they try to sock away some savings when they move up to better-paying jobs? Not necessarily. A LinkedIn survey of 1019 working professionals in September 2019 found that “41 percent of millennials—and 30 percent of all adults—found it difficult to move up in their fields because boomers are waiting longer to retire.” Because many baby boomers, those 54 to 74, aren’t retiring, there’s no vacancy for the higher paying jobs. The Bureau of Labor Statistics reports that 20.6 percent of Americans 65 and older are either working or looking for work, up from 12.4 percent in November 1999, 20 year ago. In fact, it’s the largest percentage since November 1960.

Why aren’t they retiring? Transamerica Center for Retirement Studies reports that more than half of all workers in the US plan to keep working past 65 or just forget about retiring entirely. After all, with their improved health, they won’t be forced into retirement and with their hammered 401(k)s from the Great Recession, their savings may be in non-retirement shape. According to the Federal Reserve’s Study of Consumer Finances the median retirement account for people 55 to 64 who have a retirement account is $120,000. If we include those without a retirement account, median savings are just $17,000. Yes, they have to keep working.

A Moody’s study found that older workers failing to retire has held back wage growth. The more workers 65 and older in a company, the more slowly wages increased and in fact the lower wages over all.

Those people who begin saving for retirement at 31 still have at least 36 years before they can retire, longer than they have been alive. Considering their debt, which 2/3 of employees say negatively affects their lifestyle, and with the opportunity to move up in their jobs hindered by older workers not retiring, they could be on the lower rungs of the income ladder for 20 years, in their 40s and early 50s before they earn enough to think about sufficient retirement savings.

That means millennials and even many Gen Xers may be in no position to retire at 67 or even 70. They simply won’t have accumulated enough savings to live the retired life they imagine. But some people will have the savings because they are careful savers.

Here’s the encouraging part. The Nationwide Insurance study reports that 56 percent of people have less than $100,00 in savings. But that means 44 percent have more than $100,000 in savings. The study further reports that 22 percent of employees say they are unprepared for retirement, but that leaves 78 percent, more than three-quarters, who are prepared. These are people who have found a way to put money away by whatever means. These are the people who take advantage of matched savings from the companies where they work, either for retirement or other savings. As of 2020, they can contribute up to $19,500. These are people who budget carefully and believe in paying themselves first. It’s hard to say what techniques they use because every person’s situation is different. Whatever it is, it works for them and shows them to be responsible money managers.

Close to half of Americans are finding a way to save for retirement, and that is encouraging. The other half may not be in as good a position to retire even after working 40 years. Are those who save financially responsible? Probably. Are those who can’t save irresponsible? Not necessarily, they are just trying to get by.

By Robert L. Cain

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