We recently went to a live showing of “The Tonight Show,” and in his monologue, Jay Leno joked that the average life expectancy of Americans is now 78.2 years — but we’ll have to work 78.3 years to retire. In spite of his staff busily working the crowd, the gag received muted applause, and for good reason.
Most Americans do not have a pension plan. In fact, most Americans just don’t have a plan. And there seems to be a growing enmity about the good fortune of those who do. Who is responsible for your situation?
In the 1980s, half the country’s private workers had a pension plan, also called a defined benefit plan. Now less than 20 percent do. Mine was converted to a 401(k) — a defined contribution plan — in the early ’90s. Defined contribution plans cover about 35 percent of workers, leaving 45 percent of workers not covered by any employer-sponsored retirement plan.
Take a deep breath before you blame the employers. Of those who do have access to company-sponsored 401(k) plans, 25 percent don’t participate and only about 10 percent max out contributions. Even plans with matching contributions don’t have 100 percent participation rates. What? Free money for retirement and we leave it on the table.
Last, men have lower participation rates than women. No wonder we don’t live as long — we run out of money.
One last outlet for the golden years, Social Security, is reaching a tipping point and will require modification soon if this social contract is to be fulfilled. This is no retirement plan anyway. Thirty-five percent of Americans over the age of 65 live on Social Security alone. That puts them in the poverty level, so waiting for Social Security is no plan. But what should we expect? Social Security is not an investment and was never designed as a retirement program. Those who have contributed maximums into it may very well be means-tested out of any return.
Is that fair? Is it fair to have any Americans starve amidst plenty? What’s the dividing line and who determines it? Good gravy, it sounds like a health care debate, and the politics of it all makes my head ache.
Two deep recessions in less than 10 years have left retirement portfolios with yawning gaps between the promise and the delivery. What bothers me most is not that folks will have to work longer, but we are living longer. It is the fraying of our social fabric, our national unity, our sense of responsibility about our future. If I haven’t saved any money, how is that everyone else’s problem?
Increasingly, employers and the government are holding us responsible for our own health care decisions through taxation, incentives and penalties, and wellness programs. Set up your own economic wellness program. This isn’t medicine, you can diagnose your own problem — you don’t have enough savings.
I will give you a prescription back to health now. Save more. Here’s a rough calculator to get you started: you will need 15.7 times your annual pay to live like you now do in retirement, if you are debt-free. Online, calculators to refine your numbers are widely available. Google it.
Resist the urge to let immediate desires interfere with your long-term needs. And get an hourly professional planner to lay it out your plan using Roth and individual IRAs.
George Foreman, of all people, said, “The question isn’t when to retire, but at what income.”
It is your future, not someone else’s. Save a part of all you earn, consistently. It is never too soon or too late to start saving the cheese that will get you out of the rat race.
We owe it to each other to be fiscally prudent, to maintain solvency. Life serves up lots of lemons, so make some lemonade on the way to your retirement.
Mark Sandstedt (sandstedtm@gmail.com) of Grand Junction is a recently retired pharmaceutical representative.
