Recent studies by the National Institute on Retirement Security (NIRS) confirm some alarming facts about retirement savings that many working men and women may not have realized – Americans in nearly every state do not have enough in savings for a retirement they desire. In fact, the report affirms that Americans “will fall far short in meeting their economic needs in retirement.”
The numbers in the study are an important wake-up call to workers. According to the NIRS report, The Continuing Retirement Savings Crisis, the median retirement account balance for all working age households (ages 25-64) is just $2,500. That amount dropped from a median of $3,000 in 2010. One of the primary factors in such an astonishingly low median of retirement savings is the fact that 45 percent of those working age households have not acquired retirement account assets such as an IRA or 401(k).
The severity of this emerging problem for working individuals is not only a realization for those struggling to save for retirement. Key findings from a 2015 NIRS poll found that 86 percent of Americans believe there is a retirement crisis. Moreover, it found that 75 percent of those polled “remain highly anxious about retirement outlook.”
Fortunately for IUPAT members, our retirement is not entirely dependent on Social Security, a 401(k), or IRA. We have a defined benefit pension plan, and that puts us in a rare class of working men and women, since only 40 percent of working individuals have a pension plan. If you are age 25-34, then as an IUPAT member, you are among only 28.5 percent of the total workers in your age range who have a pension.
However, having a pension plan is not the only source of income you should count on to fund your retirement. Sources of income in retirement are commonly referred to as a three-legged stool. One leg represents Social Security, one leg represents your pension, and the third leg is made up of your personal savings (e.g. 401(k) or IRA). As you know, each leg is needed for the stool to solidly stand.
As a union member and participant of a pension plan, you have the rare advantage of having that second leg via your pension, while your non-union counterparts without pensions have to manage an often uncertain financial balancing act. However, you also need to feed a personal savings plan to maintain your own balance. If you have not already taken steps to initiate a personal savings plan, now is the time to start, especially if you are young and just starting your career.
Personal Savings Solutions
Fortunately, thanks to the research and efforts of the NIRS and other organizations like it, the urgency of the retirement crisis is being addressed by state and federal legislators. Different measures are being taken to make savings plans available to working individuals who do not have one provided by their employers. Additionally, some lawmakers are even exploring ways to make pensions available to those who do not have access to one. Some states (Massachusetts, California, Illinois, Washington, and Oregon) have already made substantial progress on the personal savings front, and organizations such as NIRS are continuing to work with legislators throughout the country to keep the savings momentum moving.
The retirement crisis is real. Make certain you are prepared for it.