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Are You Saving Enough for Retirement? (Hint: Probably Not)


My last blog post, “Will Older Workers Ever Get to Stop Working?” touched a nerve. Several readers wrote to complain about age bias in the workforce and the difficulty of making ends meet in retirement with interest rates near zero.

Among the comments I received was one from Bud Hebeler, a retired Boeing executive whose web site,, includes tools designed to help people figure out how much they can afford to spend in retirement. Mr. Hebeler is also the author of J.K. Lasser’s Your Winning Retirement Plan.

Here is his insightful comment about the trend towards working later in life:

Anne, you made some very good points.  Let me add another important reason that older people will have to work longer:

They simply have not saved enough.

Before 1985, the average savings was 9% of disposable income for most years following WWII.  After 1985, savings started to decline when they should have started up instead.  The reason savings should have increased:  employers started dropping defined benefit plans.

In 2005, the national savings rate went to a negative 0.5%.  (By using the artifice of chained values, 2005 savings has now been restated to be slightly positive.)  Now savings are up to a little above 5%–a value that should be about 15%.

I have calculated that the lost savings between actual values and a 9% constant savings rate amounts to $17 trillion–more than the national debt.

I remember “economists” criticizing my and other’s warnings because they said that the great increase in stock prices meant that people didn’t have to save anymore.  When the stock market fell apart, they came back saying that people will be able to retire on the greatly increasing equity in their homes.  Well we all know what happened to that bunch of baloney.  These “economists” and their political brethren want us all to spend more.  You can’t spend and save the same dollar.

Survey after survey shows how little people have saved.  As they start to think about retirement, they recognize that they don’t even have enough to pay their uninsured future medical expenses, much less have any savings for a decent income in retirement.  The only solution left is to work longer–or rely on their children as our ancestors did.

But their children hardly realize the problems their parents will have–and they haven’t saved enough either.  Articles like yours hopefully will stimulate them to put more money away and to invest it better.

For more: Adjust your spending expectations using the SmartMoney Retirement Planner. Also read, how to set a retirement budget.


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About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.