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Are You Part of The 42%?

Dear Wealth Watch Reader,

Are you financially prepared for retirement?

According to new data, odds are probably not. Today I offer a few simple steps you can take to ensure you have plenty of cash for your twilight years.

Read on below…

Americans Are Woefully Underprepared to Retire

Wow, just wow!

I spit up the coffee I was drinking when I read this headline:

Source: CNBC

A new study from GoBankingRates found that Americans are woefully unprepared for retirement. Says the website, “Each age group was asked the same question: By your best estimate, how much money do you have saved for retirement?”

Respondents could select one of the following options:

  • Less than $10,000
  • $10,000–49,999
  • $50,000–99,999
  • $100,000–199,999
  • $200,000–299,999
  • $300,000 or more.

The results showed that 42% of Americans have less than $10,000 saved for retirement. Worse yet, almost 14% of that 42% have NOTHING put aside for their golden years, notes the report.

The answers were eye-popping and disappointing; 13.7% said zero and 28.6% said less than $10,000 (but more than zero).

Source: Yahoo Finance, CNBC

The most common reasons respondents gave for not saving for retirement were:

  • I don’t make enough money” (40%)
  • I’m struggling to pay bills” (25%).

Unfortunately, most retired Americans depend on Social Security as their primary source of retirement income. Among recipients age 65 and older, 50% of married couples and 71% of unmarried people get more than half of their retirement income from Social Security, according to the SSA website.

Even more frightening is that 23% of married elderly couples and 43% of unmarried elderly persons get more than 90% of their income from Social Security.

Sadly, the numbers are even uglier for minorities and women.

Worse yet, a typical Social Security check is pretty darn small. Currently, the average monthly Social Security payment is $1,404, or about $17,000 per year.

I don’t know about you, but I don’t think I could survive on $17,000 a year.

Heck, the average adult age 65–74 spends around $46,000 a year, according to the Bureau of Labor Statistics.

Of course, your Social Security payment could be higher if you have earned above-average wages over your lifetime, but the point is that anyone relying on Social Security to finance the bulk of their retirement income will need to live a very frugal lifestyle.

The reality is that Social Security alone just isn’t going to cut it, and it is up to YOU to save.

Don’t be one of the 51% of Americans that, according to an Edward Jones study, do NOT actively contribute to an employer-sponsored 401(k).

Grab The Free Money!

If your employer offers a retirement savings plan like a 401(k), 403(b), 457 or IRA, set up an appointment with the human resources department today.

Specifically, ask about the company’s matching (free money) and make sure you get that free money. The most common matching program is 50 cents of each dollar you contribute up to the first 6%. In short, you put in 6% and your employer will kick in another (free) 3%, for a total of 9%.

Take a look this example below:

Source: Yahoo Finance

If you’re under 50 years of age, you can contribute up to $18,500 a year to your 401(k) and $5,500 per year to an IRA.

If you’re 50 or older, those amounts increase to $24,500 and $6,500, respectively.

Think about this math: If you’re 50 years old and can max out your 401(k) until you retire at 76, you will accumulate a whopping $755,000 (assuming a 7% average return) on top of what you’ve already saved.

Even if you can’t save $24,500 a year, even saving a modest $400 a month will grow to $197,000, according to USA Today.

And that combined with your Social Security will go a long way to financing a retirement with financial dignity.

Here’s to growing your wealth,

Mike Burnick

Mike Burnick
Chief Income Expert, Mike Burnick’s Wealth Watch

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Mike Burnick

With over 25-years of professional investment experience, Mike Burnick was a Registered Investment Adviser and portfolio manager responsible for the day-to-day operations of a mutual fund. Mike joined Weiss Research in 2002 as an analyst and writer, and in 2008 was named Director of Research and Client Communications at Weiss Capital Management, where he assisted...

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