Retirement crisis means most will be unable to afford a solid life
It's financial literacy month: Do you know where your retirement is?
CNBC Chairman Mark Hoffman rings the NASDAQ opening bell today to kick off the special month, created in 2003 to teach Americans how to establish and maintain healthy financial habits.
Americans can sure use help with retirement. Baby boomers, in particular, have not saved nearly enough for retirement. They're going to live longer than they think, and if trends continue, many will run out of money before they die.
Just look at the state of the three "legs" of the retirement "stool:" private savings, pensions, and Social Security.
Let's start with private savings. 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.
Some lucky Americans have more than one retirement plan, because they may have had multiple employers. Their picture is brighter than the example above, but it doesn't change the overall picture too much.
The state of those who have pensions are not much better. 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
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.