The looming retirement crisis will leave most unable to afford a ‘solid life’

The looming retirement crisis will leave most unable to afford a ‘solid life’

We tend to be data junkies here at Tematica, particularly as they pertain to our 10 investing themes as well as the overall global macroeconomy. In collecting these data points, from time to time, we receive ones that while confirming for our themes do point to problems ahead. In this case, the latest analysis of retirement savings confirms that for the vast majority of Americans, their retirement may not be what they were expecting.

As the collision of our Aging of the Population and Middle-class Squeeze themes intensifies, it is a natural headwind for the domestic economy as retirees adjust their spending to their economic reality.

At Vanguard, the average 401(k) account value for an investor age 65 and older is $192,877 in 2018, but that number is inflated by a small group of long-time super-savers. The median balance among the age group, where half have more and half have less, is a measly $58,035.

Average that out over 20 years — most Americans should expect to live into their 80s — and that is not a lot to pull out on a yearly basis, perhaps a little more than $3,000.

The median private pension was only $9,376 a year, according to the Pension Rights Center (state, local and federal pensions were higher).

That leaves us with Social Security. In 2018, the average Social Security check was $1,422 a month or $17,064 a year.

So let’s add up what our yearly payments are:

  • Personal savings $3,000
  • Pension $9,376
  • Social Security $17,064

Total: $29,440

It’s certainly possible to live on $29,000 a year, particularly if you own your home, have low expenses, and live in a relatively low-cost part of the country.

But it is hardly a robust retirement.

Source: There’s a retirement crisis in America where most will be unable to afford a ‘solid life’

About the Author

Chris Versace, Chief Investment Officer
I'm the Chief Investment Officer of Tematica Research and editor of Tematica Investing newsletter. All of that capitalizes on my near 20 years in the investment industry, nearly all of it breaking down industries and recommending stocks. In that time, I've been ranked an All Star Analyst by Zacks Investment Research and my efforts in analyzing industries, companies and equities have been recognized by both Institutional Investor and Thomson Reuters’ StarMine Monitor. In my travels, I've covered cyclicals, tech and more, which gives me a different vantage point, one that uses not only an ecosystem or food chain perspective, but one that also examines demographics, economics, psychographics and more when formulating my investment views. The question I most often get is "Are you related to…."

Comments are closed.