While there is extensive media coverage regarding Americans’ lack of retirement savings, a much less discussed topic is the growing amount of debt that Americans carry into retirement. Larger mortgages, higher student loans and a greater overall comfort with debt than displayed by earlier generations has increased the average debt for households approaching retirement by nearly 160% from 1989 to 2010, according to AARP.
Here’s the perfect mix of good news followed by dire news.
In 2015, Americans put an average of 6.8% of their salaries into 401(k) and profit-sharing plans. That’s up from 6.2% in 2010, according to an annual survey by the Plan Sponsor Council of America released in December. This much-needed increase reverses the trend of declining savings rates and comes even though employer contributions haven’t budged for the past three years, according to the survey.
Investments with multiple objectives can be challenging to evaluate. In the case of a target date fund, how can we know if what works for young participants also works for those nearing retirement?
The need to serve changing objectives in one offering makes target date funds fundamentally different than other investments — and calls for a different measurement tool.
Health insurance premiums have shot up 242% since 1999 — more than double the rise in corporate profits and quadruple the growth in wages. An investment strategy that covers exploding health care costs requires different kinds of thinking for individuals, companies and advisors. So many are looking at Health Savings Accounts (HSAs) as a powerful way to invest for the long-term costs of health.
Everyone seems to want to help workers save for retirement. Employers encourage participants to use automatic payroll deductions to save as much as they can. Investment managers and the financial media stress the importance of retirement planning. The government has created a whole set of tools – from auto-enrollment to default investments – to increase the nation’s retirement plan savings.
Far less attention is paid to what happens when people actually retire. How do they draw out their funds? What investment changes should they make?