Workers Saving Too Little to Retire

That’s the headline in the Wall Street Journal

Workers and employers in the U.S. are bracing for a retirement crisis, even as the stock market sits near highs and the economy shows signs of improvement.

New data show that powerful financial and demographic forces are combining to squeeze individuals and companies that are trying to save for the future and make their money last.

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Fifty-seven percent of U.S. workers surveyed reported less than $25,000 in total household savings and investments excluding their homes, according to a report to be released Tuesday by the Employee Benefit Research Institute. Only 49% reported having so little money saved in 2008.

These numbers do not include pension income, but fewer private companies are offering pensions today and state and local governments are finding their pension obligations threaten to bankrupt them. 

The reasons that many people fail to provide for their retirement vary from person to person.  Financial literacy is woefully inadequate. People are graduating from High School  unable to read, much less prepare a budget; living paycheck to paycheck and using credit cards to fund a lifestyle they can’t afford.  But there is a second reason: many people have an opportunity to save via 401(k) or similar plans but have lost money (or failed to make any) during the last decade.  So, they reason, why invest for the future when doing so loses them money?   One of the biggest mistakes many investors made after the market dropped in 2008 was moving to cash … and never knowing how or when to get back in.  The market has doubled since the bottom in early 2009, and people who got out are afraid to get back in.

One of the big benefits from having a well diversified and professionally managed portfolio is that you’re not scared out of the market as it declines and participate on the upside.  For guidance on doing this, contact an RIA.

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