For most, later in life, the retirement decision creates uncertainty as to “just where is the income going to come from”. Whether we are 26 or 56, the eventuality of the question is always there. “What do people do for money”. Here is a quick take on the answer.
The First source is pensions... some (but not all) have a pension plan that pays a fixed amount of money for life or a lump sum at retirement. While pensions are disappearing from the landscape, they are still viable for the lucky ones who have em ! These include defined benefit plans and defined contribution plans.
The Second source is government “entitlements” (aka Social Security or similar)....While there will undoubtedly be changes in the future, they are the most used of any source for income in retirement. The average persons Social Security check, according to SSA,gov is $1500 per month with a monthly range of $1000 to $3000. Not an insignificant amount but clearly not enough to fund a comfortable retirement.
The Third source is individual savings. Be it savings in a 401k, IRA, or similar or just plain old money in the bank. The third leg of the stool is ones own savings. Again, the statistics here aren’t good either. The national savings rate in the US is 7.6% (as reported by the St. Louis Federal Reserve). The calculation itself is arguable but the message in the numbers is not. As a society, we need to do better.
That’s it. Short of having a rich uncle leave you a pile of cash, that’s where it comes from. Pretty simple yet many fail to plan or even address it. According to a study in 2019 by Ramsey Solutions, ONLY 40% of all Americans over the age of 35 have spent ANY time working on their retirement plan. Scary but true !
Its never too early to start looking and planning your own numbers. Pension projections (if applicable) can be obtained from your employer. Social Security estimates can be gotten from SSA.gov. Projecting your own savings can be done by using conservative estimates of growth and adding to the pile over time.
Early detection is, as they say, the best route to a cure. A little knowledge can go a long way towards a better future.