Detroit Is A Tragedy, But The Retirement Crisis Touches Us All---Especially Generation Y Jul 28th 2013, 14:26
Not even half of working Americans know how much they need to save for retirement. Don't join that club. (Photo credit: Tax Credits)
What's worse: Waking up at age 50 to find a big chunk of your retirement savings went Poof! (as many Detroit municipal workers did last week), or waking up to find you hadn't saved nearly enough because you didn't bother to plan for retirement?
If the first scenario makes you shudder, the second should make you scream.
Yet after a decade that saw a housing crisis, a Great Recession, spiraling health care costs, anemic bond yields, and now the country's largest massive municipal bankruptcy, many Americans are still no better at planning for retirement than they were in 2003—and Generation Y is notably worse.
According to a recent annual study by the Employee Benefit Research Institute (EBRI), a mere 46% of all workers have tried to calculate how much money they will need to save for retirement, up 3 percentage points from 2003 (see Chart 1 below).
Chart 1. Percentage Of Workers Having Tried To Calculate How Much Money They Will Need To Save For Retirement
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2003-2013 Retirement Confidence Surveys.
The stats are even scarier for Generation Y: Just 32% of workers ages 25 to 34 have bothered to run the numbers, versus 42% a decade ago, estimates EBRI.
Whatever the reasons—job uncertainty, student debt, nonchalance, refusal to grapple with reality—they ultimately don't matter and surely aren't helping us sleep well. "The percentage of workers confident about having enough money for a comfortable retirement is essentially unchanged form the record lows observed in 2011," the study reports.
Even a full one third of workers with "no debt problems" admit they are either "not too confident" or "not at all confident" they are prepared for their golden years (see Chart 2 below).
Chart 2. Retirement Confidence Among Workers by Level of Debt
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2013 Retirement Confidence Survey
Who knows how many Detroit city workers socked away additional savings to support their pension income? Who knows how many working Americans are counting on their 401(k)s to see them through to the end?
For context, here's a figure from a scorching post by Edward Siedle, former SEC attorney and financial watchdog, on America's looming retirement crisis: 75% of Americans nearing retirement in 2010 had less than $30,000 in their retirement accounts.
Detroit's debacle, decades in the making, is very sad. But when a 2-second Google search on "retirement planning" yields 123,000,000 results, including lots of useful free advice and financial calculators, all while less than half of Americans even bother to do the math—now that's a real tragedy.
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