Today's workers face many challenges in their pursuit of a secure retirement. Learn what those challenges are and the benefits of using workplace retirements plans, such as 401(k)s, and IRAs to help close the retirement savings gap.
Have you heard the phrase “not your grandparents’ (or parents’) retirement”? It’s often used by industry professionals and the media when describing how today’s workers envision their golden years. Gone are the rocking chairs, replaced with a more active lifestyle that may include second careers, delayed retirements, philanthropy, and other endeavors. But this phrase also accurately reflects the current state of retirement planning.
Generations ago, the American dream consisted in part of working for the same employer for 30+ years and then retiring at age 65 with a comfortable pension that provided a stream of income for life. Combined with Social Security, these pension payments gave many retirees the confidence that they would be able to maintain their standard of living.
However, over the past 30 years, the landscape has shifted, leaving many people worried about their financial security and the possibility of outliving their savings in retirement. According to a 2017 survey from The National Institute on Retirement Security, 76% of Americans surveyed are concerned about their ability to achieve a secure retirement. And 88% believe the nation is facing a retirement crisis.
What’s to blame for this more pessimistic outlook? Several factors, including:
The impact of these obstacles is most evident when looking at retirement savings trends for 2017, which seem to indicate a large percentage of Americans may be falling behind.
FIGURE 1: 2017 RETIREMENT SAVINGS TRENDS.
Sources: RothIRA.com, "What are the Retirement Statistics," August 17, 2017, and Bureau of Labor Statistics’ National Compensation Survey for 2017.
As mentioned above, 55% of Americans are saving for retirement using traditional bank savings accounts. And while using a savings account is better than not saving at all, it shouldn’t be the only option or the primary one because it could actually cost you money. Over time, inflation may erode the purchasing power of your savings and your net return may be lower than you think. Consider this, bank savings account interest rates currently range from less than 1% to 1.8%; inflation is running near 2%.
A more effective option may be to participate in your employer’s 401(k) or other retirement plan and/or contribute to an IRA. Through these vehicles, you usually have access to a broad range of investment choices that could potentially help your savings grow and outpace inflation. But more than that, retirement accounts can offer:
FIGURE 2: RETIREMENT INCOME CALCULATOR
Ultimately, while it’s true today’s workers may face different and potentially bigger challenges than past generations, armed with knowledge and a financial plan that aligns with their goals, many should be able to enter retirement with a certain level of confidence.
And there’s no better time to get started than National Retirement Planning week, April 9 -13. We’ll be right there with you offering resources, such as the Retirement Income Calculator, and insights to help you stay on track.
Life's complex. Setting your financial goals doesn't have to be. That's why we offer a complimentary goal planning session with one of our Financial Consultants to help get you started with setting up an actionable plan for your future.
Find out more about the four easy steps to goal planning.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
All investing involves risk, including loss of principal.
TD Ameritrade, The National Institute on Retirement Security, and the Employee Benefit Research Institute are separate and unaffiliated firms, that are not responsible for each other’s services or policies.
TD Ameritrade does not provide tax advice. We suggest you consult with a tax-planning professional with regard to your personal circumstances.
Educational resources are provided for general information purposes only and should not be considered an individualized recommendation or advice.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2020 TD Ameritrade.