I love shocking statistics. Especially when they relate back to personal finance. So as I was reading a recent column by the always thought-provoking Scott Burns, this line jumped out at me:
“The fastest-growing population group in America isn’t the young: It is people at least 100 years old.”
A hot topic in personal finance circles these days is whether this recession will result in lasting changes in consumer behavior. Much has been made of the rise in our nation’s savings rate to it’s current 5.7%. While this is a step in the right direction, the statistic above suggests it may not be enough. The way the math works out, you need to save at least 10% for retirement year in and year out (plus ideally another 5% for other big-ticket expenses you’ll incur along the way…) if you want to have a fighting chance of maintaining your standard of living in retirement. (Oh, and invest that retirement savings wisely – more on that another day).
With our longer life spans, many people in their 20s, 30s, and 40s today will spend as many years in retirement as they did working. Think about that. For each year you work – you’d conceivably need to be saving to support yourself for a year of retirement. This requires some serious planning and trade-offs. Alas, while younger consumers may be trimming back on their entertainment and clothing budgets – I’m worried that the types of longer term changes necessary to prepare for this reality are decisions that many have yet to make.
A June survey by Charles Schwab & Kelton Research revealed that 4 out of 10 Americans are still not saving anything for retirement while a whopping 6 out of 10 Americans have not readjusted their thinking about their retirement plans despite the swoon in global financial markets and prolonged recession. The reason this is noteworthy is that we appear to be in the midst of one of those rare, defining moments – where as a society we can re-think our beliefs about spending and saving. Our longer life spans will require us to be even more vigilant than in years past about our personal finances. The collective consumptive wake-up call that has been this recession may prove to be the gift that keeps on giving… if we pause and recalibrate our thoughts, especially about the inter-related forces of longer life spans and retirement.