“It’s a midlife retirement crisis,” Prudential Investments new research reveals. A significant number of middle-aged Americans are falling short in saving for their future with retirement savings targets often missed. The rule of thumb? By age 55, eight times your annual income should be tucked away for your twilight years.
The reality, on average, is a mere $47,950 in retirement savings for 55-year olds. Add to this rising costs of living, suboptimal pension schemes, and increased life expectancy, and it’s no wonder that fears over outliving savings are rife. In fact, 67 percent of 55-year-olds share this fear. This apprehension extends to 59 percent of 65-year olds, and even 52 percent of those aged 75.
Such stress over financial security seems to bite at women more than men. A concerning 70 percent of females worry about outlasting their retirement funds, while this fear only affects 62 percent of men. Yet, despite these rising concerns, a mere 36 percent of individuals have begun crafting a financial plan for the future.
Why does this matter? Poor retirement savings can force many to work beyond the usual retirement age. In fact, nearly half of those aged 55 plan to continue working due to inadequate savings.
Struggles of middle-aged Americans with retirement saving
Furthermore, financial security is necessary not only in retirement but throughout life. Without adequate savings, individuals might struggle to cover unanticipated expenses—about 35 percent of 55-year olds say they would struggle to muster up $400 in case of an emergency.
The impacts of poor retirement savings can ripple beyond those approaching retirement. Gen Z and Millennials, who often rely on their parents for financial aid, might be forced to reverse their roles. Reportedly, 24 percent of individuals aged 55 expect to need financial assistance from their families after retirement, a significant rise from 12 percent in those aged 65 and 75.
This financial strain is neither desirable nor sustainable for younger generations. Not only do they have to handle their financial responsibilities, but they also risk having to financially support aging parents. This situation may hinder younger generations’ ability to invest in their futures, potentially compromising their quality of life – think housing and healthcare.
Given these challenges, early and strategic financial planning seems the only recourse. As Prudential’s Executive Vice President and Head of U.S. Business, Caroline Feeney puts it, these issues are complex. They need an approach that balances immediate needs and future planning. With this approach, it may be possible to reduce the stress on the younger generation, promote the view of retirement as a right and not a risk, and ensure happy, worry-free retirements for all.
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