Dr. Eric Brucker, professor of economics at Widener University, recently released the results of the Elder Pennsylvanian Survey which was conducted in March of this year. The survey revealed that 62 percent of retired Pennsylvanians report total savings of less than $100,000. Thirty percent said their retirement income was less than half their income while they were working. Respondents to this survey were Pennsylvania residents, but my guess would be that a national survey would have similar results.
We could speculate on the reasons for these results, but another part of the survey holds the key. “Only 11 percent said that they had done an excellent job in saving as much money as they had planned to do. A majority of respondents said that they could not afford to save more, and 35 percent cited economic uncertainty as another reason for not saving enough.” They never disciplined themselves to live below their means in order to acquire the savings needed to retire comfortable. Just for the record, the economy is always uncertain. If you wait for the economy to be less uncertain you will never save anything.
One hundred thousand dollars in retirement savings is not enough. The median household income in the U.S. today is $50,000. Using the 4% prudent withdrawal rule, a retiree would need savings of $1.25 million to replace $50,000 of income. This amount could be reduced if you are content to rely on Social Security and/or pension income. In order to accumulate this amount of wealth on $50,000 of income, you need to start early. Saving 10 percent per year and assuming an 8 percent return will take 38 years to grow a nest egg to $1.25 million. You will need to save more than 10 percent per year if you don’t want to work another 38 years. Time is your best ally for financial success. Don’t waste it.