Americans aren't saving for retirement [Commentary]

Do your kids a favor: start saving

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We are headed for a retirement train wreck in this country. Employers continue to shift the burden of post-work income onto the shoulders of their employees, and nobody is saving enough money.

But what is more alarming is this: More than a third of Americans have no retirement savings. None. Zero.

That includes the kids — almost 70 percent of those 18- to 29-years-olds haven't started saving for retirement. But what is really scary is that a quarter of those 50 to 64 years old — people on the cusp of retirement — haven't put anything away. Fourteen percent of those 65 and older have nothing. Nothing.

This is according to a new survey released this week by Bankrate.com, but plenty of surveys have been sounding this alarm. We have a population that is going to live longer and encounter high health care costs, and they don't have much if anything in personal savings.

Those retirement financial burdens are only going to increase for each subsequent generation as pension programs disappear and Social Security fails to keep up with the higher costs of living longer.

What are these people thinking?

Most are thinking they will just work longer. But if their health doesn't give out, their jobs might disappear. Fewer and fewer workers have any control over their employment, much less how long it will last.

There is also the matter of procrastination. People living paycheck to paycheck — and which of us is not? — keep waiting for a little breathing space before assigning precious dollars to a retirement fund. The problem is that breathing space never appears.

Procrastination is even easier when the problem seems too overwhelming. How much savings is enough? $100,000? $1 million? There are calculators out there, but they frankly seem based on a lot of guess work. How long will I live? How much will food and fuel cost? Will I be healthy? Will I need care?

Who knows the answers to any of these questions? Like Scarlet, we decide we will worry about it tomorrow.

Employers — many of whom do not offer retirement savings plans for their full-time employees, much less their part-time workers — could do a lot to remedy this by setting up 401ks and requiring employees to opt out, instead of opting in. But not without a math lesson and some counseling.

For example, $100 a month put aside at age 20 will be $367,000 at 65 (supposing a 7 percent average return over time). That translates into $1,700 a month in retirement income, the Bankrate.com report said.

If however you don't start saving that $100 until 40, you will have only $81,000 at 65 — which is less than $200 a month.

There is some good news in the Bankrate.com survey. College graduates are more than twice as likely as those with just a high school diploma to begin saving for retirement in their 20s. And twice as many 30 to 49-year-olds report they started saving in their 20s.

The best thing you can do for your kids is to save enough money to support yourself in retirement. Social Security alone isn't going to get it done. Even your house isn't the piggy bank it once was.

The next best thing you can do for your children is to convince them to start saving now. Any dollar amount is better than nothing, and having it automatically taken from a paycheck or a checking account reduces the pain — and the need for decision-making. That iPad can be awfully tempting. So can that beach vacation with friends.

Counsel your children, who are probably going to change jobs more often than you have, to roll over their company retirement funds when they leave an employer. Don't be tempted to spend that money.

Tell them not to make any withdrawals. Don't take any loans from your IRA or 401k. Not for houses, not for college for their own children. Tell them to leave the money untouched until they are finished working.

Whatever retirement savings mistakes you may have made — and frankly, few of us in the 50 to 65-year-old category understood when we were in our 30s that pensions would go away — don't let the kids make the same mistakes.

You will be doing your grandchildren a huge favor.

Susan Reimer's column appears on Mondays and Thursdays. She can be reached at susan.reimer@baltsun.com or @SusanReimer on Twitter.com.


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