According to the Boston College Center for Retirement Research (CRR), half of U.S. households will not have enough money in their retirement account to maintain their standard of living when they retire even if they work to age 65 and annuitize all financial assets, including securing a reverse mortgage on their home.
If that sentence is too long-winded, let me make it simpler for you – there is a more than 65% chance you will retire in poverty according to the Boston College Center for Retirement Research.
Now 65% of Americans said they will retire much later because of the effects of Covid-19.
According to their research, the result is consistent across all political parties but there’s a difference between generations.
Millennials and Generation X are significantly more pessimistic about achieving financial security in retirement as compared to Baby Boomers and the Silent Generation.
This is expected. Of course, Generation X and Millennials are so much more worried as compared to older generations. These are the first two generations that are far less likely to have access to pensions, which provide stable income that lasts through retirement.
The Millennials and GenXers who have access to an employer retirement plan are more likely to rely on do-it-yourself 401(k) plans that have become increasingly prevalent since the 1980s.
Here is one thing you need to understand though. 401(k) accounts were not built to carry a full load of retirement. These savings accounts historically have had lower returns than what you will actually need. There’s the real risk that you will outlive your 401(k) savings, especially as inflation is going higher faster than retirement accounts gains.
Don’t count on Social Security either. While Social Security may expand, the reality is that these benefits will be lower. Current retirees already are feeling the pain of changes to Social Security implemented in 1983 to raise the retirement age.
It is possible for Millennials and Gen X to see the reduction of benefits by 30% if you withdraw at age 62.
Add in college debt and the long-term effects of the pandemic and you have an almost guaranteed retirement in poverty.
Going forward, it will be critical for policymakers to find ways to strengthen our retirement infrastructure so these generations can be self-sufficient in their older years.
In the meantime, you can’t count on policies to take care of you when you retire. You can only count on yourself.
Invest. Diversify – stocks, bonds, ETFs, crypto, real estate, and precious metal. Regularly reexamine your portfolio. Recalibrate. Rinse and repeat.
There are more economic downturns that will follow. It may not necessarily be health-related like the covid19 but more will come. Don’t put your investments at risk.
And the best way to do that is to include a hedge in your investment portfolio, an asset that will store the value of your wealth through all economic downturns – gold.
Gold is so stable that billionaires use it to hedge against inflation. Yes, it is the one asset they count on to protect themselves and their family.