The goal: Ease into retirement in your 60s at a time of your choosing, and have adequate financial resources to allow you to pursue your ministry and recreational interests.
The reality: More of today's 60-somethings reach retirement with inadequate savings and are working longer and/or experiencing a lower standard of living.
Simply put, too many Americans are financially unprepared for retirement. Consider the results from this 2013 Gallup poll: About three-quarters of today's workers 55 and older expect to continue working past retirement age, with about 40% saying they will do so because they want to, and almost one in three because they will have to.
What's gone wrong for these folks? Ameriprise Financial conducted a survey last year to find out. They interviewed 1,000 Americans ages 50-70 who had at least $100,000 in savings and/or retirement-plan assets. They found that the overwhelming majority—90%—had "experienced at least one unanticipated issue or event that may have made retirement more difficult." Ameriprise calls these events "retirement derailers."
Four of the top six were investing related: Low interest rates meant slower than planned asset growth (63% of respondees), market declines caused by recession (55%), pension plan not worth as much as anticipated or discontinued (23%), and bad investments caused loss of some savings (22%). According to the survey, the average cost of derailers is significant: a loss of $117,000 in savings.
Other derailers are a reflection of personal issues or priorities. These include: supporting grown children or grandchildren (23%), collecting social security before retirement age (19%), lower income or higher expenses due to caring for an aging family member (15%), retirement savings spent for children's education (11%), and living beyond means and not saving for retirement (9%).
As a result of these and other derailers, retired Americans are ill-prepared for future bumps in the road. A survey by the Employee Benefit Research Institute found that only 52% of retirees say they could "definitely come up with $2,000 if an unexpected need arose within the next month."
It's easy to reach the conclusion that the average family is failing to save and invest wisely for the uncertainties that accompany retirement. But we like to think that SMI readers aren't "average" in this important area. After all, you're tuning in each month to the specific, biblically consistent guidance we offer on planning for the future and dealing with the unexpected. Many of you are following our portfolio-allocation suggestions based on your season of life and risk-taking temperament. Many are following one or more of our proven investing strategies. Many web members are using our Personal Portfolio Tracker—designed to simplify and maximize the effectiveness of retirement-plan investing—to boost returns in their 401(k) accounts. They also are following our daily blog posts to gain understanding of market behavior and receive encouragement to follow their personalized long-term investing plan.
This issue of SMI reflects our ongoing commitment to help you in your retirement planning. We're offering articles that bring you up to date on Individual Retirement Accounts (cover), traditional and Roth 401(k) accounts (see Roth 401(k): Is It Right for You?), and selecting the best vehicles for maximizing your retirement income (see Traditional IRA vs. Roth: Which Maximizes Retirement Income?). Also, our report card on the success of SMI's various strategies during 2013 (as well as the past decade) should be an encouragement to continue (or start!) down the path of consistent monthly retirement investing.
For some, retirement is far off and the articles in this issue may seem of little interest. Please…don't make the mistake of ignoring this important area because you think "there's still plenty of time" for that. In the Ameriprise survey, respondents expressed regrets that should motivate you to avoid making similar mistakes. The majority said they wish they would have started saving for retirement sooner (57%), while others admitted they would be in better financial shape if they knew more about investing (37%), and/or said a written financial plan would have helped them be in better shape for retirement (29%).
We understand it's an ongoing battle to stay on top of the information and decisions necessary to manage your retirement savings. But it's a battle you can't afford to lose, and you get to fight it only once. We're in this fight with you, and we hope we will get the satisfaction of seeing you through to your own personal retirement-savings finish line!