Americans Confront the Reality of Retirement

There were several reports this past week about American’s lack of preparation of preparation.

According to a study by Hewitt Associates, a global human resources consulting and outsourcing services company, employees will need 15.7 times their final pay when factoring in inflation and postretirement medical costs. Of the 15.7 times final pay, Hewitt estimates that Social Security will provide 4.7 of it, leaving employees responsible for making up the remaining 11 times final pay. This will likely have to come from company-provided plans and personal savings. But of the more than 2 million employees at 84 large U.S. companies it examined, Hewitt’s study found that only 18% of these people who are expected to work a full career will meet this goal.

TD Ameritrade released a survey indicates that 57% of Americans feel they are either a “little behind” or “far behind” in their planning for retirement. The majority (56%) indicated that they started saving for retirement later in life. The survey found that Americans are concerned about health care expenses, working longer than anticipated, outliving savings and managing their retirement savings.

There is an interesting parallel between what is currently happening in many European countries and the plight of many Americans. Greece, Spain, Portugal, and Italy (among other Euro countries) are dealing with the reality of excessive debt levels and government budget deficits. These countries can no longer finance their debts at sustainable levels. Further, they are no longer able to spend more than they take in. These countries are being forced to take austere measures to reduce debt, cut spending and balance their budgets.

Sounds remarkably similar to what many Americans are experiencing …