Retirement has the highest average price tag when stacked up against life’s other biggest expenses. What is worse, with the recent bad job market, the financial support millennials receive from their parents siphon off whatever retirement funds they had likely saved. The average cost of retirement is over $700,000. That’s about 2.5 times that of the average home. The average cost of a home is $278,300.
Even with this staggering price tag, the Merrill Lynch and Age Wave report says 81% of Americans don’t know how much they’ll need for their retirement. What’s more, many younger people today think they’ll need to personally fund a greater portion of their retirement, relying less on their employers or the government. Millennials believe that 65% of their retirement income will come from personal sources. Longevity is increasing, and more individuals will be personally funding lengthier retirements. They will be much longer retirements than their parents or grandparents.
Some experts recommend that you look at retirement as purchasing something in your future, so that it alters the dynamic of how you plan. In other words, you’re trying to accumulate the assets and the ability to purchase a fantastic future.
The study examines the reasons why people aren’t saving more. It discovered that people have a variety of reasons for not saving for retirement. However, the most frequently mentioned in the study are not having enough money left after paying basic expenses (41%) and paying down debt (38%).
The study also found that there is a significant “intention-action gap” in how Americans are saving for retirement. It looks like Americans know they should be saving more, but they’re not doing it.
People have good intentions, but the study found that there’s a big difference between intentions and actions. Americans, on average, said they think they should be saving about 25% of their disposable income each year. However, they are saving just one-fourth of that. They’re actually saving 5.5% of their disposable personal income. The savings rate has inched up from a low of 3% during the recent recession. Nevertheless, it’s still less than half the peak rate of 13% in the early 1970s, the study says.
Reference: Credit Union Times (February 17, 2017) “Retirement Is ‘Life’s Most Expensive Purchase’”