Thirty-five years of loyal service, a gold watch and a champagne send-off, followed by a steady pension. That was once the path to the American dream. Nowadays, it’s more like a fantasy. In its place is the so-called gig economy – the technology-enabled trend of individuals using their cars, homes, skills and spare time to earn income as freelancers.
Nearly all retirement savers worry whether their savings will be enough to support their retirement lifestyle. While a number of factors determine how much one can save for retirement, it is more difficult to accurately predict – and plan for – the total amount of your actual retirement expenses.
American workers rely on their employers’ plans for most of their retirement savings. There are plenty of challenges for retirement savings, but it’s far worse for the estimated 55 million U.S. workers — mostly in smaller businesses — who lack access to an employer-sponsored retirement plan. According to an EBRI survey, about two-thirds of workers without a retirement plan have less than $1,000 in savings and investments.
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.