Retirement is an increasingly worrying subject of debate in the USA. The Social Security System which was never designed to do anything other than support people in their retirement is itself under threat. At present the average monthly benefit is around $1,350, above the poverty line but only just. The increased demand now being placed on the System indicates the present level of benefits may need to drop by up to 25% in the future unless there is a significant injection of money. That can only come from taxes and increasing taxation is unpopular with everyone.

It means that the onus is on the individual to save for his or her retirement. Few have a pension that is guaranteed by their employer. Such plans are no longer part of what employers offer their workers. Instead there is the 401(k) to which employers will make a contribution up to a specific amount but they are not responsible for how the investment grows. In recent years they have tended to perform poorly; after all the recession hit many financial plans and recovery has been fairly slow even though the economy is growing.

Figures indicate that the average family has just $5,000 set aside for retirement and almost half the working population don’t have anything at all if a report from the Economic Policy Institute is to be believed. Closer analysis suggests that even those close to retirement have only $17,000 set aside on average. It appears that there is little appetite among society to save which is truly disturbing. It is difficult to assess why people are almost hiding from reality but hiding they seem to be.

Time

The earlier someone starts to save regularly the more chance they have of a comfortable retirement. At 25 you have 40 years before retirement and it is remarkable how quickly a small monthly amount set aside grows. If you aim for $500,000 in your fund by the time you reach 65 then at 8% you would need to set aside $140 a month. If you leave it until you are 35 that figure would jump to $335 and at 45 $850. That is quite a difference!

Risk

Some seem to justify their lack of saving in their own minds by pointing to the risk involved. Sure, the recession caused problems but investing does not mean going for huge growth; the average will do. Certainly investing nothing in anything makes no sense and interest earned on cash is minimal. In any event risk can never be a justification for spending all you earn.

How Much?

Present figures suggest that a retired couple living without major luxuries will be spending $45,000 a year. Half of that may come from Social Security so the other half needs to come from personal savings. Many financial experts suggest that a couple should aim to withdraw 4% of their fund each year. If the fund is $500,000 therefore that would produce a further $20,000 a year to add to those benefits. It would be wrong to feel satisfied with $500,000 if you have plans for more holidays and a few luxuries; you will need to aim higher and of course if you get a Social Security projection and you are well below the average figure then you must aim higher.

Inheritance

Some people know they will receive an inheritance but that should not be an excuse not to save. There are people who appear to take the view that something will come along often with no sensible reason to expect it. They may be facing a miserable time in retirement and remember people are living longer and hence have more years to fund.

Retiring Later

There is the chance to work past retirement age but again that should not be something you rely upon. Your employer may not want that and your health may dictate that it is not possible anyway.

Affordability

There are varying demands on a monthly pay check from student loans to credit card balance payments. One of the real barriers to saving is credit card debt; you are wasting money. If you resolve to start living by a budget you will have a better chance to save. Pay off your credit cards with a personal loan at a far cheaper rate of interest and avoid unnecessary spending on those cards in the future. With a bit of luck you then won’t have to make up excuses for not saving.