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How to retire on just $25,000 in the bank
In a recent survey, more than half of U.S. workers saving for retirement have less than $25,000 in the bank for the golden years. That's not a lot of money -- how do retirees survive on that?
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Don Easton knows he needs to save for retirement. But he’s been out of work for five years and so instead of putting money into his retirement accounts, he’s been pulling it out. There’s food, gas, and credit card debit.
“Dental care’s a big issue,” he says. “I need a new crown.”
Easton hopes to return to work soon and has been picking up side work painting houses and doing handiwork. He’s optimistic that he’ll again be able to save. But he says if he hits retirement without sufficient savings, he’s lucky to have a safety net—his family.
“I would move in with my sister,” he says. “She has kids and they all enjoy having me around.”
He’d also try to delay retiring by simply working longer.
Those strategies are common solutions for American workers who have not saved enough for retirement.
It’s not that people don’t want to save, says Nevin Adams, the director of education at the Employee Benefit Research Institute. It’s just that there are often more pressing economic concerns.
“Retirement’s down a really long list of things people are trying to worry about,” he says.
More than half of respondents to a EBRI survey released Tuesday reported they have less than $25,000 in savings, excluding their houses and pensions.
Therefore, like Easton, people could lean on family. They can work more. But the biggest chunk of the retirement pie will be Social Security.
“For people who have their whole lives been in, let's say, the bottom third of the pay distribution, Social Security is going to replace a very large chunk of their pre-retirement earnings, thereby relieving them, potentially, of the need to save a whole lot more,” says Olivia Mitchell, the executive director at Pension Research Council and a professor at the University of Pennsylvania.
They’ll also likely lean on Medicaid, Medicare, and Supplemental Security Income (SSI) benefits.
For middle income households, Social Security offers a smaller percentage of what they’re used to living on.
“It’s really the middle class I think is potentially most in trouble,” says Mitchell. “Working a few extra years could well make the difference between having enough and running out.”
For those approaching retirement who haven’t yet saved enough, she has this not-so-cheery mantra: “Work longer, save more, and expect less.”
Retiring on modest savings would be a helluva lot easier if we had universal coverage for basic healthcare and dental/optical service. Paying rent and a modest food allowance is enough for most people who don't plan on vacationing in the Caribbean twice a year.
Of course, given the Tea Party penchant for opposing anything rational, I guess that means the chances of Don Easton getting his teeth fixed is a long shot. Those multi-billionaires MUST have their tax breaks, after all.
When I was younger, I really hadn't thought much about retirement because I've seen so many recessions and layoffs. Now I don't think about retirement at all. I'm going to have to work as long as I can... that's if I can find work. The recent and current financial policies allow only the rich to have the option to retire. Anybody still left in the middle class are only fooling themselves if they think they can retire comfortably. If Paul Ryan gets his way, we'll have vouchers for health care and many middle classers will just end up dying before they can retire because they won't be able to afford the inflated premiums.
I agree with both comments. It is so sad to think that what I was brought up to believe, that America is the greatest country, is so wrong when it comes to caring about others and basic human needs. I am seriously researching how I can move to another country to live out my remaining years. I am 58 and expect to have to work forever. Maybe I'll get lucky and die young? Thanks, Republicans.
During the last election, I wanted to put a sign on the back of my pickup that said:
"Republicans have a solution to the country's fiscal problems: I give my money to the rich, then they cut my Medicare so I die young and don't collect social security."
I did not do that because I live in a rural area where too many of my neighbors are tea Party/NRA members who would probably shoot me.
The further plan is to die young. None of My family has drawn social security since my great grand father who did not pay into the system but was seventy years old when it started and so drew for two years. The rest died too young from work related illnesses, and cancer. My own generation realized long ago that the "Greatest Generation" had benefits that we will never achieve. The leisurely retirement for the middle class is as illusory as lifetime employment or even a linear career. A paid off home, and a modest savings is the most that my class can hope for. Most of us will die in our traces, working to the end.
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