I don’t want to sound like Chicken Little, but the sky is falling on retirements in the U.S. And unless the average consumer becomes much more prudent about spending and saving their income, along with meaningful public policy reforms and innovative financial products or services, our current notion of life after work will never be the same. Put another way: Retirement will be unattainable for most Americans and considered an anomaly or blip on history’s radar.
There are a number of reasons why that could turn out to be the case. Let’s start with some sobering numbers. As I wrote in a 2009 blog:
“Most experts on the retirement-planning topic suggest that workers will need to salt away more than $1 million in order to live comfortably after they quite working, which these days could last as long as 30 years considering advances in medical science that have extended the average lifespan. About 25% of those dollars will be spent on health care bills, which have been rising faster than the rate of inflation for many years.”
As many as 68% of millennials who are eligible to participate in a 401(k) plan don’t, according to a recent T. Rowe Price survey that suggested these young workers should be saving about 10% of their annual income for retirement.
But here’s the rub: Many of them are drowning in debt. The average graduate holds about $28,950 in student loan debt, according to the Project on Student Debt. Americans now owe more than $1 trillion in outstanding student loans based on various federal government estimates.
From an anecdotal perspective, we all know people or friends of friends who are paying off more than $100,000 they had to borrow for a college degree. Can you imagine entrants to the workforce thinking about retirement when they need to work off a mountain of debt? Student loan refinancing programs are being called the new 401(k).
Another factor to consider is the sharp rise of robotics, which could render a number of jobs obsolete in the years ahead. Couple that with work continuing to be outsourced abroad in a global economy mired in unfair trade practices and it’s a perfect storm for social chaos.
Finally, for those American who are fortunate enough to actually retiree, University of Michigan researchers have found that fewer of them are “very satisfied” with life after work and a growing number are “not at all satisfied.” Apparently, the higher someone’s net worth the higher their retirement satisfaction, which also plummets with poor health. No surprise there.
But I also believe that ageism will be another factor that delays or eliminates retirement right alongside inadequate income streams. In addition, there always will be a growing share of Americans whose identities are tied to their work, and therefore, they will voluntarily decide that retirement just isn’t for them.
Whatever the case may be, it will be interesting to see how these trends play out.