Mid-income households ill-prepared for retirement
By Paula Aven Gladych
Here’s more bad news from the retirement front: Even households that earn between $60,000 and $105,000 a year do not have enough wealth to retire securely and maintain their current standard of living, according to a study by the Society of Actuaries.
The median household in their 50s and 60s earned $60,000 a year in 2010 but only had $100,000 in savings, according to the report. That’s why, for pre-retirees with limited assets, delaying retirement, being strategic about when they claim their Social Security benefits and reducing spending may be the only options for improving retirement readiness, the society said.
Phasing strategies can help reduce the amount of wealth accumulation needed to retire successfully.
Instead of retiring fully at age 66, a person could continue to work part-time until age 70, but begin claiming Social Security at age 66. For a household making $60,000 a year, that saves about $80,000 in the accumulated wealth needed to retire securely.
Reductions in spending can have a major impact on retirement readiness, the report found.
Without reducing expenses, the $60,000 household needs $388,000 to retire at age 66 and $288,000 to retire at age 70 to be 90 percent confident of meeting their cash flow needs.
By reducing discretionary spending by 30 percent, the $388,000 target becomes $205,000 and by reducing discretionary and housing expenses by 30 percent it changes the target to $183,000, according to the study.
Originally published on BenefitsPro.com