The world’s population is getting old, really old. In the United States, about 10,000 people turn 65 each day. Americans of retirement age will outnumber people 18 and younger by 2035. This has never happened in U.S. history, and it is a phenomenon happening worldwide. This is both astounding and concerning for many reasons.
Historically, when an individual reaches retirement age, 65 to 67, they say goodbye to a long career and move on to enjoy their senior years. This trend is changing. For Americans, reaching retirement age is no longer as pivotal as it once was, and they may continue to work for many years.
Medical breakthroughs have helped seniors to live longer, more active lives. Some seniors enjoy the mental and social benefits they get while remaining engaged. As we have said ad nauseam, people need something to retire to. After working for 30 to 40 years, it is hard to wake up each day wondering what you will do. For this reason, some people may want to continue in their careers, working fewer hours with flexible schedules.
This “gray tsunami” can be a great advantage to businesses. They need these workers and embrace senior employees. Senior employees have many positive qualities – institutional know-how, a willingness to share their experience, complex problem-solving skills, emotional stability, and a strong work ethic, to name a few.
Unfortunately, too many Americans continue to work because they are not financially prepared. Research conducted by Empower, a retirement plan provider, in September 2021 paints an alarming picture. It ranked the average retirement account balance by state. Connecticut came in first at $545,754. Utah came in dead last at $315,160, yes, 51st place (for those saying, “Wait, there are only 50 states,” the research includes the District of Columbia). Many factors play into these numbers; for instance, Connecticut has more millionaires per capita than any other state, so that you would expect higher balances. Different states have favorable tax laws allowing employees to sock away a greater share of the paycheck.
A better indicator of financial preparedness may be the median balance by generation – Boomers: $587,943, Gen X: $303,663, Millennials: $75,745, and Gen Z: $12,016. No matter how you dice it, Americans need to save more.
The good news is that most employers sponsor retirement savings plans, such as 401(k)s, so employees can save for their senior years. Americans can prevent a savings crisis by increasing the percentage of income they save periodically as they receive pay increases, always saving enough to receive the full employer’s match if available.
Financial preparedness is more than just a number. It’s based on lifestyle, income needs, inflation, longevity, and investments. It can only be addressed through financial and income planning, something we are experts at providing. Call us today to talk about your goals and review your financial plan.
