Study Finds that 1 in 3 Americans have $0 Saved for Retirement
by Jacklin Bolduan
A recent study by GOBankingRates has found that one in three Americans has saved a total of $0 for their retirement. Kristian Finfrock, founder of Retirement Income Strategies in Madison, knows the realities of the this statistic. He says his company’s aim is to “help people who are at or near retirement preserve their assets and turn them into retirement income.”
Finfrock says that there are many reasons why people haven’t begun saving for retirement.
“Primarily the easy access to debt. And maybe some aggressive lending strategies. It’s more of the American way today to borrow money and just pay off slowly over time as opposed to pay cash and delay gratification.”
He says the kinds of obstacles people will face in their future retirement are unknown, which can be scary. “More and more Americans are being forced, nowadays, to create their own retirement. Pensions are essentially a thing of the past. We’ve transferred into the this 401K where the burden is on my shoulders and yours to save for our own retirement. And there’s far greater risks today than those of past generations, starting with longevity.”
He sites longer life expectancies as one of the major reasons saving for retirement, and starting early, is crucial. “Now we can expect to live 20, 30, 40 years into retirement.” So, Finfrock says, not only do we need retirement funds, but we need them to last longer. Along with longevity comes an increased chance of long term related care expenses. He cites an annual study by Fidelity that found that the average 65 year old married couple will need $220,000 in retirement on health-related expenses alone.
This cost on top of what it will cost to make ends meet quickly becomes a terrifying number.
On top of that, the social security system as we know it is changing. “The social security that we have today is probably going to look far different in the future.” Finfrock says changes are already happening. For example, in relation to File and Suspend. This option allowed a couple, at full retirement age, which Finfrock says for most Americans is around 66, to file for full benefits, but choose to immediately suspend the receipt of that money. This allowed that fund to grow by as much as 8% per year while suspended. In addition, the lower earning spouse could take 50% of what the other’s benefit would have been and allow that benefit to continue to grow until they both fully retire and begin to collect the benefit at 70. Finfrock says many Americans were able to create “literally hundreds of thousands more in lifetime income” through this strategy.
April 29 of this year will be last opportunity for people to exercise this option.
Finfrock says there’s no greater time than now to start saving. “It’s never ever too early to begin.
And quite frankly it’s never too late to begin. The best time is as soon as you enter the workforce and start earning any kind of money. Specifically with a 401K, and especially if there is any kind of an employer match. That’s just free money. It would be really silly to not take that free match.”
Finfrock says he understands how life can get in the way. Between sending kids to school, taking care of families, and just trying to make ends meet, retirement is often the last thing on someone’s mind. However, he says, “It’s not too late.”
“In fact the IRS gives a special catch-up contribution to individuals that are age 50 and older and they let us save additional money in our employer-sponsored retirement plans as well as our Individual Retirement Accounts and our Roth IRA.’
He says that if you haven’t started saving yet, the first thing you should do is take a look at what options you have with your employer. “Most Americans today have some sort of retirement account available through their employer. If not, look into the options of an IRA, and Individual Retirement Agreement.”
He says this is why it’s important to sit down with a financial advisor who can help make sense of the different options available. However, Finfrock maintains that it is not necessary to have a financial advisor. He understands the kinds anxieties that Americans have about discussing retirement with an advisor, and may even be embarrassed about not having done so sooner.
There are companies like Fidelity or Vanguard with which anyone can open an IRA. Whatever option you choose, Finfrock recommends you do it as soon as possible. And, he says, it can help to put your contributions on an automatic payment schedule so that you don’t even have to think twice about saving each month.
“Finances are very confusing. Most importantly I think people should understand that if you can’t pay for it, don’t buy it. It’s okay to wait. Pay cash if you can. It’s better to save something than nothing. Even every little penny helps. Here’s the thing: retirement is gonna get here sooner than you expect it. Every single person I’ve ever helped retire–whether they’ve had $250,000 or $200,000,000–every single person said the same thing and that is ‘I wish I had started sooner and I wish I had saved more money.’“
He says he offers a quote to many of his clients, “Trapped inside every old person is a young person wondering what happened.” Many nod their heads in agreement.
You can contact Kristian Frinfrock and other financial planners with questions about your retirement at madisonsfinancialplanner.com or by phone at 608-208-1800.