Thinking about retirement should involve looking forward to a long, well-deserved vacation—but for many Americans, it’s turning into more of a “will I ever get there?” situation. The dream of kicking back and enjoying the golden years is getting harder to achieve. And it’s not just because of one factor. Here are ten reasons why you should be worried about the retirement crisis.
Featured Image Credit: AndrewLozovyi /Depositphotos.com.
Shrinking Social Security Benefits
While Social Security is supposed to help us when we hit retirement, it’s not as sturdy as it used to be. Reports say that by 2035, Social Security may only be able to pay out 83% of what it promises. This will leave a lot of retirees without funds—or at least severely reduced ones, which is not what you want during your golden years.
The End of Pension Plans
Companies used to take care of their retirees with pension plans, although not so much anymore. Now, the focus is on 401(k)s—and hoping you’ve saved enough. Unfortunately, not everyone’s great at saving and even if you are, there’s no guarantee that what you save will be enough.
Healthcare Costs Through the Roof
If there’s one thing that’ll use up your retirement savings quickly, it’s healthcare. For example, a couple retiring today would need around $300,000 just for medical expenses—that’s a lot of money. And it doesn’t even include the regular cost of living! These fees are only going to continue increasing which is enough to make you think twice about retiring at all.
Living Longer, Saving Less
On the plus side, we’re living longer—on the negative side, our savings need to last longer, too. Many people are at risk of outliving their savings and they’ll need to plan for more years of leisure & living expenses. Even if you save early and aggressively, predicting the exact amount you’ll need is certainly difficult.
Not Enough in the Bank
Time for a worrying fact—nearly half of working-age families don’t have anything saved for retirement. Such a lack of savings is as much a personal issue as it is a problem for the economy as it could cause a strain on social services. It’ll likely increase the divide between the haves and have-nots during retirement.
Evolving Employment Landscape
The job market isn’t what it used to be since steady, lifelong employment is more of a rarity. Job hopping is far more normalized and with each move, there’s a chance of losing out on retirement benefits. Unless you stay in one place long enough to have a retirement plan or to get benefits, you’ll be looking at a leaner retirement fund.
The Gig Economy’s Retirement Gap
Similarly, even though the gig economy is great for flexibility and gaining many different opportunities, it’s not great for retirement planning. Many gig workers don’t have access to employer-sponsored retirement plans, like 401(k)s—so they have to be even more proactive about saving. However, without automatic deductions and employer matching, putting money aside becomes a lot harder.
The Uncertain Future of Tax Rates
Of course, taxes are a fact of life—but what’s unknown is how they’ll look in the future. If tax rates go up (and they well might, given national debts & social welfare needs), your retirement savings will take a hit. Any money you thought would be there for you in retirement will be massively reduced once Uncle Sam takes his share.
The End of the Homeownership Dream
Owning a home has traditionally been a part of retirement security as it gives you both a place to live & a potential source of income. Unfortunately, rising housing costs and changing attitudes toward homeownership mean that fewer people may end up owning homes when they retire. Without this asset, financial stability is a lot harder to achieve.
The Challenge of Caregiving
As the population ages, more people are becoming caregivers for elderly family members. This responsibility greatly affects your ability to save for retirement since caregiving requires taking time off work. It also causes unexpected expenses, with every bit of time & money you spend on caregiving something that doesn’t go into your retirement fund.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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