Retirement In America: Comparison Is The Thief Of Joy? Not In This Case

You’ve heard the term “comparison is the thief of joy”.  I think it’s generally true in many aspects of life, but not always.  As I mention in that post, comparing yourself to your younger self as you continue to get wiser – or more fit in my case – is a good thing. 

The annual Price Waterhouse Cooper Retirement In America report was issued a while back, and check this out. (click to enlarge graphic)

As a reader of this financial independence and early retirement blog, I highly suspect you’re doing better than most Americans.  I could be wrong of course, and for some of you seeing that graphic might indeed be the thief of your joy today. 

But I suspect the graphic will bring you joy because you’re probably doing much better than most in saving for retirement. 

Having only $120,000 saved for retirement in your late 50’s to early 60’s is not ideal, to say the least.  Let’s take a look at some other highlights of the report.

 

Not On Track

From the report:

According to estimates, just 36% of the US workforce thinks their retirement savings plan is on track. Combined with rising life expectancy and increasing healthcare costs, this inevitably calls into question the preparedness of US households for retirement.

Well, at least the majority knows that they’re retirement savings plan is not on track.  The first part of fixing a problem is admitting you have a problem.  It would be a far more dire situation if the majority thought they were on track after seeing the graphic at the top of the post.

Our research shows the median retirement account balance for those approaching retirement would likely generate less than $1,000 per month over a 15-year retirement span. That’s hardly enough for individuals whose financial security is dependent on these savings, not to mention a participant base that is living longer. 

Less than a grand a month.  Ouch.  That’s an income that falls below the federal poverty line.  And that’s only for 15 years, those who live longer would be out of money.

I don’t know about you, but I plan on living (and living actively) well past 80.

 

It’s All About Time

Another graphic from the Retirement In America report:

It appears Millennials and increasingly Gen Xers feel they’ll need to tap into their 401ks and IRAs before retirement.  This is not good. 

I’m a Gen Xer and I never once thought I’d ever have to tap into my retirement accounts, until retirement age of course.  Once that money left my paycheck to my TSP (like a 401k but for federal employees), I knew it was gone to me until at least age 57, and 59½ for my IRA contributions.

I suspect many who fear they’ll need their retirement money early will not and their fears are unwarranted.  But the chart above shows a certain level of “retirement anxiety” which is likely a result of the insufficient funds most have put away for retirement as shown in the first graphic. 

 

HSAs

If you read the full report, there’s another interesting graphic.

It’s clear that the popularity of  HSAs (health savings accounts) has increased steadily, with a big bump in 2019.  If you’re not familiar with an HSA it’s a tax-advantaged account similar to a 401k to save for qualified medical expenses. 

As Investopedia explains

Contributions are made into the account by the individual or their employer and are limited to a maximum amount each year. The contributions are invested over time and can be used to pay for qualified medical expenses, such as medical, dental, and vision care and prescription drugs.

To qualify for one you must have a high-deductible health plan (HDHP), which to me is a bummer as these plans often wind up costing the consumer more annually in out of pocket expenses.  Additionally, many folks who have them avoid annual checkups or routine care because they don’t want to pay the full price.  That can create long term problems such as missing an early cancer detection or chronic condition.   

To be clear I feel that HSAs are a net positive overall if and only if the person who has it uses the tax-advantaged account benefits of the plan. 

And full disclosure, I do not have an HSA.  HSAs came about when I was already well on my way to financial independence.  I would have had to switch health plans to a high-deductible plan, and at that time I had just had knee surgery and a HDHP seemed too risky for me. 

Plus, even though most insurance companies and plans suck in America, mine sucked less than others despite the hassles I detailed in that blog post.  Over the years I’ve generally had acceptable experiences with my provider.  I tried a different provider one year to save money and they were horrid, so I switched back.

 

Compare Away

That’s what I’ve got this week folks, data on retirement in America.  I wanted to bring the PWC report to your attention knowing that you, my dear readers, are likely doing way better than most.   

And when you see the numbers and compare yourself to the average it’ll bring a little joy to your day 🙂