Retirement Savings Crisis Getting Worse, Not Better by Gary D. Halbert
by Gary D. Halbert

December 8, 2015


  1. How Debt & Denial are Changing Retirement Lifestyles
  2. Three Investing Misconceptions Among Many Retirees
  3. How Much Do I Need to Save For a Secure Retirement?
  4. WEBINAR With YCG Investments Tomorrow 3:00PM Eastern Time


As long-time readers know, one of my continuing themes over the years has been saving, and in particular saving for retirement. Record numbers of Americans are retiring every year and, unfortunately, most have not saved nearly enough for the retirement lifestyle they envisioned.

Even worse, more and more Americans are retiring with debt – mortgages, car payments, credit cards, etc. It used to be that you planned not to retire until you were out of debt and with a comfortable nest egg. Not so anymore.

Today we will look at some recent retirement findings from the Transamerica Center for Retirement Studies  which are very concerning. We will also look at a recent survey by the Teachers Insurance and Annuity Association – College Retirement Equity Fund, which researches retirement trends. The results are alarming.

And finally, we’ll look at the question of how much you need to save to have a comfortable retirement. Unfortunately, this is a complicated subject that depends on several variables such as how much you have saved already, at what age you plan to retire, the lifestyle you wish to have, etc., etc. It’s a very important topic, so let’s get started.

How Debt & Denial are Changing Retirement Lifestyles

Retiring comfortably has gotten a lot more complicated in recent decades, much of it due to our increasing longevity – a welcome development that is largely out of our control.

However, unwelcome developments that are within our control are increasingly contributing to the retirement challenge too, including heavy debt and what appears to be blissful denial of the costs of their “Golden Years” by many who are nearing retirement or already retired.

Let’s look at some facts and statistics about retirees in a recent report from the Transamerica Center for Retirement Studies (TCRS).

One in five retirees today has a mortgage that competes for limited resources for basic living expenses and healthcare costs, according to the report. A third (33%) of homeowners 65 and older had a mortgage in 2011, up from 22% in 2001, the Consumer Financial Protection Bureau recently reported (leave it to the government to report old data).

And these seniors’ mortgages were bigger: a median $79,000 in 2011, up from an inflation-adjusted $43,400 a decade earlier. The number of households headed by someone at least age 65 with a mortgage rose to 6.1 million from 3.8 million over the same decade, the Bureau found.

One in four retirees have high credit card balances, and paying them down should be a priority. These findings echo earlier research showing an alarming trend toward quitting work while still in debt, long held to be a retirement taboo.

Only 16% of retirees strongly believe that they built a sufficient nest egg. Total household savings in all retirement accounts among retirees at the time of their retirement was just $131,000 in 2011.

Almost nine in 10 say Social Security is a current source of retirement income, and 61% expect it will be their primary source of retirement income for the rest of their life.

They typically began taking Social Security at age 62, the earliest possible age – which is usually a big mistake. Only 1% waited until age 70, when they could collect the maximum monthly benefit.

Many retirees left work before they intended: 60% left unexpectedly, often due to being fired or laid off or dissatisfaction with their job, or for health or caregiver reasons. Only 16% retired early because they already had enough savings.

Some of the blame rests with the Great Recession, when those nearing retirement may have been compelled to use their home equity as a lifeline. But in the years before the crisis millions of homeowners used low interest rates to acquire bigger houses and second homes or refinanced and took cash out of their primary residence. A decade later, these decisions are coming home to roost.

Surprisingly, most retirees show few signs of regret, according to the latest survey. They typically expect to live to age 90. Seven in 10 say they are in good health and 94% say they are happy, TCRS found. Some 84% enjoy a strong sense of purpose. Maybe retirees are finding that they do not need as much money to be happy. But it’s also possible they are in deep denial.

That appears evident in the advice today’s retirees have for young workers, the TCRS survey found. Three in four retirees wish they had saved more on a consistent basis; 68% wish they had been more knowledgeable about investments; and almost half (48%) said they waited too long to get involved in their own financial security.

But are younger Americans listening? Probably not.

Three Investing Misconceptions Among Many Retirees

When investing we all make assumptions about the right criteria for choosing investments and the best way to manage risk. Unfortunately, many investors’ core notions about investing are often seriously flawed or flat-out wrong.

In this section, we will look at some recent findings from the Teachers Insurance and Annuity Association – College Retirement Equity Fund (TIAA-CREF) which regularly surveys investors. The TIAA-CREF is the leading retirement information provider for people who work in the academic, research, medical and cultural fields.

Retirement Savings

Here are three examples of misguided thinking identified in the latest TIAA-CREF survey that you should avoid if you want to invest effectively for retirement or any other financial goal.

Misconception #1: Short-term results are the best barometer of performance:

When researchers for the TIAA-CREF asked 1,000 investors what time period was most important for evaluating an investment, more than half (52%) chose quarterly or annual performance rather than spans of three, five or 10 years.

Nearly half (47%) of those polled also admitted that they had bought an investment based on how it fared over the previous year rather than over the long term.

That’s not surprising, I suppose, considering the inordinate amount of attention the financial media lavishes on short-term gyrations of the market, and the fact that in January of every year financial sites are full of lists highlighting the best- and worst-performing investments for the previous year.

But when you consider that in most cases you’ll be investing money you won’t tap for many years, if not decades, looking at performance over the last year alone can be disastrous. Yet that’s what many investors still do, according to the latest TIAA-CREF survey.

In the case of retirement accounts, choosing a stock, mutual fund or ETF on the basis of how it fared the last six or 12 months makes little sense. If nothing else, applying such a short-sighted yardstick could leave you with a portfolio skewed toward whatever investments happen to be most popular at the moment, which are most likely to be overpriced.

A better approach: Instead of focusing on any single time span, consider how an investment has performed versus its peers over the course of several market cycles that include both bull markets and bear markets.

It’s really not that hard to do. Simply plug

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