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Retirement savings reality check

Posted on July 13, 2017

Did you know that nearly 75% of a group of taxpayers recently surveyed by a well known financial management company said they’re counting on family support to help fund their retirement? That is pretty interesting when you consider that 40 percent of boomers don’t plan to leave any inheritance because they don’t think they’ll have any money to pass down. And yet, almost two-thirds of today’s millennials think a financial inheritance will be “an important part” of their retirement.

Obviously, there’s a lot of misguided thinking when it comes to retirement savings. Here are some facts to consider from the CPAs at Teipen Selanders Poynter & Ayres:

The 2017 Retirement Confidence Survey reports that only 35 percent of workers age 55 and over have $250,000 or more in retirement savings. The same survey states that $250,000 isn’t enough to fund a lengthy retirement and will most likely get used up completely on retirement spending, leaving little behind for medical or other emergencies.

What do you need to save for retirement?

For most boomers (those born from 1945 – 1965), it will take at least $500,000 to $1 million in savings to fund a lengthy retirement of their own – never mind having money left over for an inheritance. Unfortunately, these savings amounts are way beyond the resources of most Americans.

Even though only about one-third of boomer and millennial investors expect Social Security will be an important source of retirement income, the fact is that Social Security will be the most important source of retirement income for the vast majority of workers. It is expected to provide 75 percent to 90 percent of the total retirement income for workers with less than $500,000 in retirement savings – which is the vast majority. In fact, Social Security is the most popular federal program ever. As long as Americans vote and workers pay their taxes, chances are very good that we will have Social Security.

Be realistic about retirement age. Realistically, all age groups should expect to work into their mid to late 60s or early 70s with no expectation of inheritance.

Yes, selling your home will likely help you retire. Half of all Americans, including 60 percent of millennials and 43 percent of boomers, say they’ll rely on cash from the sale of their homes to afford retirement. This makes sense, given that middle-income Americans tend to have more home equity than retirement savings. 

Be smart as you face retirement, especially when it comes to the following:

Teipen CPAs agree that both boomers and millennials need a retirement reality check. To make the best of retirement, start planning and saving early – and wisely.