Retirement is meant to be a time for relaxation after decades of hard work. But for many Americans, retirement is filled with financial worries after inadequate preparation and financial concerns rather than relaxation. Shocking statistics reveal how unready many people are for their later years after their career ends. Issues like low Social Security payments, paycheck-to-paycheck living during their working life, and a lack of retirement planning create a perfect storm that leaves countless future retirees in a precarious situation. Speculating on cryptocurrencies, 401(k) withdrawals during the pandemic, unexpected costs, and general retirement fears further compound the problems. The current financial data exposes a bleak outlook for many Americans’ golden years.
With proper planning and diligence, these trends can be reversed. But urgent action is required now to enable the secure and enjoyable retirement everyone deserves. This article will explore nine startling statistics that uncover just how unprepared much of the population is for leaving the workforce. The insights highlight the current issues and provide a roadmap for the advanced preparation needed to alleviate retirement struggles. Here are nine shocking statistics showing how unprepared many people are for retirement.
Nine frightening retirement statistics that should scare people into action:
- Most people will get only a little over $1,700 on their Social Security check when they retire.
- 60% of Americans are living paycheck to paycheck.
- 50% of workers don’t know what they will need to live on in retirement.
- The median net balance for people between 55 and 64 for retirement is $134,000.
- 26% of retirees have higher expenses than expected.
- 30% of people took money from retirement during the pandemic.
- 25% of Americans are now cutting back on their retirement savings.
- Cryptocurrency is gaining popularity in retirement savings.
- 43% of people are worried about outliving their retirement savings.
1. Most people will get only a little over $1,700 on their Social Security check when they retire.
Social Security offers a monthly benefit check to many kinds of recipients. As of August 2023, the average check is $1,705.79, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. Retirees typically make more than the overall average.[1] This is very low, especially for those needing substantial retirement savings. For most retirees, Social Security was never meant to be their only income source. But far too many Americans have yet to save enough on their own and will struggle to cover basic living expenses on such a small fixed income.
2. 60% of Americans are living paycheck to paycheck.
Americans are just getting by after prolonged high inflation and higher interest rates. As of August 2023, 60% of adults said they are living paycheck to paycheck, according to a new LendingClub report, unchanged from last year.[2] It’s tough to save for retirement if you use every dollar to cover current expenses. With 60% of Americans living paycheck to paycheck even while working, saving for a distant retirement is challenging. This statistic indicates that many people will reach retirement age without adequate savings.
3. 50% of workers don’t know what they will need to live on in retirement.
According to US Census Bureau data, 50% of women and 47% of men between 55 and 66 have no retirement savings.[3]Retirement planning starts with figuring out your expected expenses. But 50% of today’s workers need to know how much income they will require once they retire. This lack of planning means many will undersave and need more income later. Education on retirement planning is sorely needed.
4. The median net balance for people between 55 and 64 for retirement is $134,000.
The decade before retirement is when savings should ramp up. But for those between 55-64, the median balance is just $134,000. This needs to be higher for most to maintain their standard of living in retirement. More contributions earlier in life and full advantage of employer matches could significantly improve these balances.[4]
5. 26% of retirees have higher expenses than expected.
Even careful retirement planning can miss unexpected costs. Health issues, home repairs, and rising inflation can all increase expenses beyond expectations. With over a quarter of retirees caught off guard by higher prices, maintaining sufficient reserves is essential.[5]
6. 30% of people took money from retirement during the pandemic.
Early withdrawals from retirement accounts should only be a last resort. But 20% resorted to this option during the pandemic lockdowns. Taking out money early usually results in taxes and penalties and reduces future retirement income. Replenishing these accounts quickly is ideal.[6]
7. 25% of Americans are now cutting back on their retirement savings.
Ongoing retirement contributions are crucial, even in tough economic times. But 20% have recently cut back, which will compound the problem of inadequate savings. Trimming current budgets or finding additional income is preferable to reducing retirement funds.[7]
8. Cryptocurrency is gaining popularity in retirement savings.
Close to 44% of US adults who’ve started saving for retirement say they have invested part of their retirement savings in cryptocurrency. Nearly half of these people indicated they had invested a “big” part of their retirement funds in crypto.[8] Cryptocurrencies are highly speculative investments. While some provided significant returns in the past with the right holding time frame, historic volatility makes them high risk. Limiting exposure and not betting retirement savings on this volatile sector is wise for most people.
9. 43% of people are worried about outliving their retirement savings.
Running out of money in retirement is a big fear for many. With good planning, this scenario can be avoided. But the statistics show it is a common concern, indicating people realize their savings may not be enough.[9]
Key Takeaways
- The average Social Security payment provides insufficient income for most retirees without other savings.
- Living paycheck to paycheck prevents many from saving adequately for later years.
- Half of today’s workers are uninformed on how much retirement income they’ll require.
- Savings balances in the decade before retirement are dangerously low for many.
- Unexpected costs in retirement often exceed initial estimates.
- Withdrawing retirement funds early has damaging effects that are difficult to undo.
- Reducing ongoing contributions leaves future retirees underfunded.
- Volatile assets like cryptocurrencies require caution.
- Concerns about outlasting savings are common, signaling inadequate preparation.
Conclusion
The data reveals a bleak outlook for retirement preparation across much of the American populace. Far too many will rely predominantly on an inadequate Social Security check. Inadequate savings and rising expenses create a precarious situation for many future retirees. Planning, recurring contributions, and financial education are essential to reversing the trends. Retirement worries can be alleviated with proper diligence and commitment to increasing savings and investing. But urgent action is required to avoid hardship down the road. Preparation and mindset shifts today can lead to the secure and enjoyable retirement everyone deserves. Urgent action is needed to increase retirement contributions and gain investing knowledge to realize your retirement dreams.