CNBC had a nice summary of how Americans have saved money for retirement. We encourage you to click the link and read the article. We took some of the data in the article to make a point in this post and created our own table.
American Savings By Age Group
| Age 40-49 | Age 50-59 | Age 60-69 |
| 41% have less than $50,000 | 37% have less than $50,000 | 28% have less than $50,000 |
| 18% have $50,000 to $99,000 | 16% have $50,000 to $99,000 | 10% have $50,000 to $99,000 |
| 27% have $100,000 to $500,000 | 32% have $100,000 to $500,000 | 36% have $100,000 to $500,000 |
| 7% have $500,000 to $999,000 | 6% have $500,000 to $990,000 | 14% have $500,000 to $999,000 |
| 7% have $1 million or more | 8% have $1 million or more | 12% have $1 million or more |
The time frame for the data is 2020 and we are interested in looking at the age group of 50-59 because in 2030 this group will largely reach social security age. According to the data, nearly 40% have less than $50,000 saved for retirement. The second group of 32% has between $100,000 and $500,000 in savings. We aren’t concerned with the next group because they seem to have well over $500,000 in savings and likely won’t have any issues in retirement barring major catastrophes.
It’s no surprise that 40%+32% = 72% or nearly the classic 80%/20% ratio of the Pareto principle are the group that will struggle while the top 20% will have little or no issues in retirement. The data is nearly the same in the other groups but we want to focus on the outcomes of the 2030 cohort.
From the data, it would seem that the vast majority of boomers retiring in 2030 will only have a bare amount to get by at the current rates of inflation but inflation is expected to be far higher over the next decade. Let’s be generous and say 80% of boomers in the 50-59 age group have $500,000 in savings. According to the Annuity expert advice site, a $500k annuity can provide about $3000/month in income. With Social Security benefits expected to be around $3000/month then it would seem retiring boomers will have $6000/month in income to spend as they please in 2030. Now $6000/month in 2022 sounds like a great deal of money but if inflation is running 6% or higher over the next few years then it will have a purchasing power of $3300/month in 2030.
If 80% of 70 million boomers and elderly are expected to survive on the equivalent of $3300/month in 2030 then we may have a serious problem. Rent, utilities, taxes and health care costs are likely to way exceed $3300/month in 2030 for most boomers. Keep in mind that we assumed all boomers would have $500k in savings when we know that 40% actually have less than $50,000! If you aren’t scared yet, you should be!
Once again, it is imperative that everyone have an income generating portfolio to merely survive into 2030.
Stay tuned and stay solvent.