As Median Retirement Savings for Seniors Sits at $14K, Experts Seek Solutions
As few future retirees feel secure about their savings for their golden years, financial and retirement experts recently gathered to create a more comprehensive plan for America’s seniors.
The Aspen Leadership Forum on Retirement Savings joined together more than 80 financial researchers, policymakers, entrepreneurs, and others to address the rising retirement concerns and to discuss ways the public and private sectors can alleviate the problems. This month, the forum issued a report on their findings, authored by finance writer Ellen Stark.
The forum, which convened in Middleburg, Va., discussed how to extend retirement plans to all Americans, how to improve short-term saving strategies, and how to stretch retirement dollars as people live longer than ever.
Themed “Expanding Retirement Security Through Public and Private Innovation,” the forum concluded that retirement anxiety isn’t surprising: Even with employer sponsored-savings plans like 401(k)s and supplementary Social Security payments, many do not have nearly enough saved as they stop working. For example, about 40 percent of American workers say they have less than $10,000 in retirement savings, and it’s not much better for those preparing to leave the workforce.
“Among households led by someone between the ages of 55 and 64 — the cusp of retirement — the median retirement account balance is only slightly higher, $14,500,” the forum’s report noted.
One way to improve financial outlook and protect employer-sponsored savings is to increase short-term savings before retirement, the report suggested, adding that main reason people tap into 401(k) funds before retirement is to pay off debt.
“With more than 40% of Americans unable to cover an unexpected $400 expense, retirement plans often become de facto emergency funds, eroding retirement preparedness,” the report noted.
Creating “rainy day” accounts and strengthening penalties for early withdrawals could further help.
And lacking savings isn’t the only problem. The experts pointed out that many Americans enter retirement with significant debt, and a main reason for this is a recent home purchase.
“One driver of this trend is the close-to-retirement purchases of pricier homes with relatively smaller down payments,” according to the report.
The forum also suggested rethinking the ways we determine the ideal amount to have in savings. Currently, the trusted rule is that retirees need 70% to 80% of final preretirement income once they stop working, but the findings concluded that this cannot necessarily predict actual living standards later on.
“As an alternative, one researcher has proposed a replacement rate based on retirement spending, not income,” the report stated, adding that this method has had some success in Canada.