Summing Up The Retirement Crisis
Is there a retirement crisis for baby boomers and Gen Xers? “It depends!” says Jack VanDerhei, research director with the Employee Benefit Research Institute in Washington, D.C. The probability of NOT running short of money in retirement ranges from a low of 17% to a high of 99% depending on three main factors: your pre-retirement income level, what percent of expenses you aim to cover, and whether or not you factor long-term care and home health costs into the picture. For Gen Xers, the number of years of future eligibility in a 401(k) plan also plays a huge role.
VanDerhei summed up 10 years of research on retirement readiness on two Power Point slides reproduced below that he presented at EBRI’s 2014 annual policy forum. While policy experts and members of Congress are struggling to define the retirement crisis and hashing out proposals to fix it, the bottom line is that your retirement is in your hands.
For Gen Xers who are not lucky enough to work for an employer with a 401(K), they only have two chances out of five, or 40%, of having enough retirement wealth to cover 100% of expenses. That jumps to 61% for workers with one to 9 years of 401(k) eligibility, 73% for workers with 10 to 19 years of eligibility and 86% for workers with 20-plus years of eligibility. “They still have significant period of time before retirement to save,” says VanDerhei. Take advantage of it!