Can we ever retire?
It used to be that a million dollars was a lot of money. Save a million before you retire, use the interest to supplement Social Security, and you were set. But that was before ultra-low interest rates, extended lifespans, and aggressive healthcare inflation. Now a 65-year old couple with a million dollar nest egg that spends 4% per year has a three-quarter chance of outliving their funds.
But that’s not the real problem. The real problem is that most people don’t have a million dollars. The median household retirement account for Americans between 55 and 65 is $120 thousand. So, with Social Security, the average household’s retirement income will be—around $45 thousand. That’s around half of what the average household makes. So a lot of people are in for a big surprise when they realize that a lifetime of work will have prepared them for—a working retirement.
Given the choice between saving more or spending more, Americans opt to spend. The solution is to save more. But I sure don’t want the government doing it for me.
Douglas R. Tengdin, CFA
Chief Investment Officer