Saving Retirement

We have often written that when everyone is asking the same question, it is usually the wrong question. However, I have also found the converse to be quite true – if no one is asking a question, it is probably one that you want to at least ask yourself just in case. For this reason, my attention was drawn to a blog post by Peter Lazaroff of Plancorp last week that asked several big name financial commentators like Barry Ritholtz, Ben Carlson, and Josh Brown the following question: What issue in the world of finance isn’t getting enough attention? Naturally, with so much focus on the US political landscape recently, I expected to see responses about such under-the-radar topics as European banks, emerging markets, or the need to raise the debt ceiling once again in March. Yet, to my surprise, most of the answers were about more fundamental personal finance themes such as low savings rates, the amount paid in fees, and the switch to passive investing, all of which likely have a bigger impact on an investor’s long-term returns than just some transitory news headlines.
Retirement savings, in particular, received quite a bit of real estate on the blog, with Isaac Presley of Cordant Wealth Partners pointing out that ‘the median retirement savings for individuals aged 55-64 is just over $100,000, good for roughly $4,000 in annual spending’ (per the Government Accountability Office). That is a frighteningly low number for people who should be nearing or entering their retirement years, especially when modern medicine and a renewed focus on health keeps extending our life expectancy upward. According to the Social Security Administration’s actuarial table, a current 65-year-oldemale is expected to live another 20 years (to approximately 85), but one thing that is often overlooked about aging is that the older you get, the longer you are expected to live compared to the average life expectancy. For example, while that 65-year-old woman is currently expected to live to 85, a woman who has enjoyed enough good health to live to be 80 is then expected to live another 9.64 years, to the age of almost 90. The point is, there is a very good chance that retirees will require income for longer than they anticipate, and the average person is woefully unprepared.

This post was published at FinancialSense on 01/23/2017.