“Saving For Retirement—How’s That Working Out For You?” sounds like a hip, snarky way of asking someone how their nest egg is coming along. But actually, it’s the title of a new investor advisory put out today by the Financial Industry Regulatory Authority to commemorate National Save for Retirement Week (October 16 - 21).
Finra’s basic message is there’s no better time than the present “to start saving in earnest, to keep on growing your nest egg or to make some positive adjustments to your existing retirement savings game plan,” according to the new alert, which advises investors to start saving specifically for retirement, give themselves annual savings pay raises, continue saving past IRS limits.
Finra also tells investors to “evaluate investor fees” which cost consumers some $33 billion last year.
While it is never too late to start saving for retirement, the track record of many people closing in on retirement age or already there provides a cautionary tale for younger investors. Nearly 30 percent of households headed by someone 55 or older have neither a pension nor any retirement savings, according to a 2015 report from the U.S. Government Accountability Office.
Even people who manage to save for retirement often face a grim reality: Among people between 55 and 64 who have retirement accounts, the median value of those accounts is just over $120,000, according to the Federal Reserve.
And at a time when 10,000 baby boomers are turning 65 every day, Social Security benefits have lost about a third of their purchasing power since 2000.
Polls show that most older people are more worried about running out of money than dying. One in five people have no savings, and millions retire with nothing in the bank.
While this may not reflect the portfolios of most investment advisor clients, even astute investors can benefit from a bottom line discussion, especially as seniors contemplate major financial decisions such as helping adult kids or purchasing second homes, which can drain their retirement accounts. Clients’ adult kids, millennials and Gen X and Y clients can certainly benefit from a discussion of retirement shortfalls and an action plan to address them.
Finra’s common sense advice “to make retirement saving work out for you” includes four proactive steps any investor can take:
Start saving specifically for retirement. This tip is especially directed at young workers. “Any amount you save at a young age can pay huge dividends down the road through the power of compound interest. A 22-year-old who saves $200 a month—just about $50 a week—at a 6 percent annual rate of return will have more than $76,000 saved towards retirement at age 40. That puts you well ahead of the $54,054 that is the average level of savings for those aged 35 - 44, according to Vanguard’s How America Saves,” Finra says.