|By Paul Grimaldi, The Providence Journal, R.I.|
"I think everybody is afraid … you never think that there's going to be enough [money]," said Hardendorf, an administrator at Johnson &
As many of her friends have retired over the last few years, Hardendorf began wondering whether it was time to quit her job as the university's director of parent programs and begin a more relaxed life.
"This job is very physical," Hardendorf said, noting that she runs 11 two-day campus tours each summer.
Divorced at 61, Hardendorf sat down with a financial planner to figure out how to save enough to retire. Now 64, she said she has enough tucked away.
"I'm going to be able to do OK," she said.
Many people her age aren't so sure. More than half of all working Americans have saved nothing for retirement, including many in the middle class.
The retirement deficit is a deep, dark hole — measured by the
"Saving for retirement isn't easy," said Joe Ready, director of
The Great Recession damaged the economy and drained 401(k) and IRA accounts for millions, changing attitudes about investing and saving for retirement.
"The recession taught a lot of people … the wrong thing. They got out of the market," said
More information on this calculator
Not only were retirement accounts hit, but during the housing bubble, many people borrowed to buy homes or to pull money out of them by refinancing — only to find themselves owing more than their properties were worth.
"More and more people who are entering retirement are still paying off mortgages," Meschede said. "[Retirement] is definitely more challenging."
The loss of retirement savings and home values, and the inability or unwillingness to save, leaves a large number of middle-class Americans with the prospect of working well past 65 years old.
A third of the middle class expects to work until at least 80 because they have so little saved for retirement, according to a recent
"People are very much aware that they have to work longer, especially in communities of color, because they have so little set aside," Meschede said.
The differences for people based on race, ethnicity and education are evident. Blacks and Latinos lag whites. White households have roughly six times as much saved in retirement accounts, according to a 2013 research report for the
"The prospects are much less secured than for whites," Meschede said.
Laid off from her consumer-lending job at
She earns about
"I'm teetering between the lower middle class and the middle middle class," said the
McCloud, 44, developed back problems that required surgery in 2013; she's waiting to see if she qualifies for a disability pension.
"Disability — it's almost like a punishment," McCloud said. "It's a daily living factor."
As for what will come when she's in her 60s, she has only questions.
"What form of retirement am I going to have?" she asked. "Will I be able to physically enjoy it?
"Will I be self-sufficient, or will my son and my daughter have to support me?"
The safety net
"It plays such a critical role for keeping seniors from falling into poverty," Meschede said.
Still, a third of middle-class Americans say
They shouldn't rely on it, Meschede said. "But the reality shows that a number of them do to a large extent."
More secure futures
They own a home, with a mortgage, and two cars, one with loan payments.
They have two children, and they're putting money away for college.
"We're saving for what's to come," said
The Servidios have things going for them that many in the middle class do not. Their combined income puts them at the top of the middle class. In addition to their teachers' pensions, they both contribute to private retirement plans.
EBRI data show that having a defined benefit (pension) at age 65 increases the probability of there being enough money in retirement by 11.6 percentage points, a "strong impact" within the middle class.
But only 13 percent of all workers were covered by pensions in 2013, according to the
The typical Millennial — born between 1980 and 2000 — has almost nothing tucked away for retirement.
"The problem is not just that young people in general save less than older workers because they earn less — it is that young people today are actually saving less than their parents did at the same age," according to a report by the liberal think tank
After living hand-to-mouth as she put herself through Johnson &
Her annual salary is about
"I am not living paycheck to paycheck anymore like I used to," Rodriguez said.
Still, the youngest of five siblings, she lives frugally.
Rodriguez shares a house near
She puts a little money into a savings account each week but doesn't contribute to a retirement account. She will have to start paying her student loan debt early in 2015.
Retirement, she said, "is a long way away."
Some Millennials are able to tuck away money for retirement.
The two 29-year-olds contribute to 401(k) plans.
The convention bureau makes a financial planner available to its employees.
"It clearly illustrated where I needed to be" with retirement savings,
The couple have been married for three years, and Brian just paid off his student loan.
"I think we're more organized with our finances," said Bethany. "So now we're looking at what that extra money can go to."
Gen Xers, born between 1965 and 1981, have a different perspective on the future. The youngest have time to save for retirement, while time is running out for the oldest.
"Overall retirement-income adequacy prospects for Gen Xers [are] approximately the same as early Boomers and late Boomers," according to the
The nonprofit EBRI has a database of 24 million 401(k) accounts. Along with the
The upside since then has been that consistent participants saw their accounts grow at a compound average annual growth rate of 6.8 percent from the end of 2007 through 2012 — more than enough to make up for that precipitous drop during the recession.
"The research highlights that contributing and investing in a 401(k) plan consistently results in higher average account balances than the average balance for all plan participants," said
People shouldn't look at saving for retirement as storing money in one container but in at least a few and possibly several lockboxes —
The 401(k) has been around since 1980, when a benefits consultant figured out an obscure provision enacted by the
Interactive: Have you saved enough? + Video
Joe Ready, of
The data show that people who put money in a 401(k) will be better off in retirement than their peers who don't. Those that have both 401(k) savings and a pension will do even better.
For example, those respondents to the
What you'll need
Estimates of how much money middle-class Americans have saved for retirement vary. Mostly, it's not enough.
For people nearing retirement, ages 55 to 64, the median 401(k)/IRA balance in 2013 ranged from
How much money people need depends to some extent on whether one assumes they reduce spending in retirement.
Will they need 100 percent of their pre-retirement income? 80 percent? 70 percent?
It also depends on how long people will live. Will they live to age 75, 85, 95?
A male who retired in 2010 at about 65 can expect a retirement lasting 17.9 years, according to
To calculate how much a retiree will need, one rule of thumb is to multiply your annual retirement income from all sources by 22 (actually 21.47), according to the
First, estimate how much you will want to spend annually in retirement, figuring in mortgage payments, if any, insurance and medical bills. You should aim for about 70 percent of your pre-retirement annual income.
Let's assume your annual pre-retirement income is
Then, determine how much you will receive annually from
Do the same if you are lucky enough to be among the 13 percent who will receive a pension. Let's assume
That would leave another
"Most people underestimate what they're going to need," said
"That light bulb needs to go on at 25, not 45."
The financial light went on early for
"I think my wife and I are doing all the right things," said the soft-spoken 48-year-old.
But Servidio said he and his wife worry about the solvency of their pension funds.
"That really gets to the heart of the issue — the economic uncertainty," he said. "When you're ready to retire, will the money be there?"
After a career in the jewelry industry, she started working at Johnson &
"When you're in higher education, you're middle class," Hardendorf said.
Her annual income is between
"I pay my bills, but there's not much left over," said the
That meant socking away money for retirement.
"I've been saving since college," she said. "There's always been a pension plan or a 401(k)."
She'll supplement her savings with
"I'm extremely excited about doing something different," Hardendorf said. "I see myself in a little antique shop."
(c)2014 The Providence Journal (Providence, R.I.)
Visit The Providence Journal (Providence, R.I.) at www.projo.com
Distributed by Tribune Content Agency, LLC
|Source:||Tribune Content Agency|