Don’t Be A Victim Of The Retirement Crisis
If you think the United States has a retirement crisis, you are not alone. A recent survey found that 79% of working-age Americans believe the same thing. That percentage is up from 67% in 2020. When asked about their situation, more than half of Americans (55%) are concerned about their financial security in retirement.1
The level of inflation we've all experienced over the past few years is taking a toll on the American psyche and how people feel about retirement. That same survey found that 73% of respondents said recent inflation has them more concerned about retirement.1
Generation X is falling behind
For many, the perception of retirement insecurity may be an unfortunate reality. Some middle-class workers appear to be falling short of saving enough for retirement. According to the National Retirement Risk Index, half of U.S. households are not expected to maintain their standard of living when they retire at age 65.2
Generation X, born between 1965 and 1980, is approaching retirement age. The vanguard of this group will begin turning 60 years old in 2025, but many may not be ready for what comes next. Unlike the Baby Boomers before them, Gen X is the first generation to mostly enter the workforce after the shift to company-sponsored retirement plans. While the typical Gen X household has an average retirement nest egg of more than $243,000, the median household has only $40,000 for retirement.2
Almost half of private sector employees—57 million Americans—do not have the choice to save for retirement at work. Some households say their retirement choices are limited without the consistency of automatic payroll deductions.2
Most Americans (87 percent) say leaders in Washington don't understand how hard it is for workers to save for retirement—up from 76% in 2020. Americans also want action to safeguard Social Security, with 87% saying Congress should act now to shore up funding rather than waiting for the future to find a solution.1
What is being done
Congress passed the SECURE and SECURE 2.0 Acts over the past several years to help address the problem. Signed into law in 2019, the SECURE Act was the most substantial retirement legislation passed in over a decade. It contained critical changes to help investors better prepare for the future. Among other changes, the Act raised the Required Minimum Distribution (RMD) age and allowed first-time parents to take penalty-free withdrawals from their retirement accounts.3
To build on the popular aspects of the SECURE Act, Congress passed SECURE 2.0 at the end of 2022. The second Act included new RMD dates, higher retirement plan catch-up contributions, and more.3
While many of the provisions of the SECURE Acts are positive, they do not turn back the clock. If you are concerned about your situation, you may want to consider developing a strategy that considers your goals, time horizon, and risk tolerance.
Taking control
We have helped many clients to prepare for retirement. But before we help our financial planning clients develop a retirement strategy, we inventory their assets to help them see what their retirement might look like 20 or 30 years after they stop working.
Working toward a specific retirement goal can be motivating, especially if retirement is still a ways off. Fidelity Investments has developed a simplified model to help you assess your retirement strategy. According to Fidelity’s guidelines, you should look to have set aside:4
- 1x salary by age 30
- 3x salary by age 40
- 6x salary by age 50
- 8x salary by age 60
- 10x salary by age 67 (full Social Security retirement age)
Of course, these are just general estimates. As Fidelity suggests, these targets help provide a starting point for building your strategy and assessing your progress.
Don’t ignore Social Security
Social Security is expected to remain an important part of retirement income despite concerns about the program. As you consider your retirement, you shouldn’t ignore the role Social Security can play in your overall strategy.
The maximum benefit in 2024 ranges from $2,710 to $4,873 per month, depending on retirement age. You can claim Social Security as early as age 62.However, by waiting until your full retirement age, you can receive 100% of your monthly retirement benefits. There’s no correct answer on when to start drawing benefits because everyone's situation differs. But don’t overlook Social Security as you create your strategy.5
Closing the gap
If you feel like the retirement crisis will hit too close to home, there are actions you can take now that may give you more confidence in the future. Here are a few actions to consider:
- Work longer—delaying retirement for even a few more years can make a difference.
- Evaluate the pros and cons of drawing Social Security benefits closer to full retirement age.
- Put more away for retirement.
- Make sure your investments are working hard for you.
- If you are 50 or older, you might want to consider making catch-up contributions to retirement accounts.
We are here to help
If you have any concerns about whether you will be able to live the retirement you’ve envisioned, we are here to help. We work with individuals and families to create strategies designed for their specific needs. It can be overwhelming to do it yourself. If you would like to review your current retirement savings plans, please contact our office.
1.National Institute on Retirement Security, February 2024.
2.Forbes.com, April 11, 2024.
3.Fidelity.com, November 20, 2023.
4.Fidelity.com, February 14, 2024.
5.SSA.gov, February 2024.
Aviance Capital Partners, LLC (“ACP”) is an SEC registered investment adviser located in Naples, Florida. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that ACP has attained a certain level of skill, training, or ability. While information presented is believed to be factual and up-to-date, ACP does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Not all services will be appropriate or necessary for all clients, and the potential value and benefit of the ACP’s services will vary based upon the client’s individual investment, financial, and tax circumstances. The effectiveness and potential success of a tax strategy, investment strategy, and financial plan depends on a variety of factors, including but not limited to the manner and timing of implementation, coordination with the client and the client’s other engaged professionals, and market conditions. This should not be construed as specific investment, financial planning or tax advice tailored to an individual reader. ACP suggests that readers consult a financial professional, attorney or tax advisory professional about their specific financial, legal or tax situation. Past performance does not guarantee future results. All investment strategies have the potential for profit or loss, and different investments and types of investments involve varying degrees of risk. There can be no assurance that the future performance of any specific investment or investment strategy, including those undertaken or recommended by ACP, will be profitable or equal any historical performance level. The index and sector performance data appearing or referenced above has been compiled by the respective copyright holders, trademark holders, or publication/distribution right owners. Historical performance results for investment indexes or sectors represented are for illustrative purposes only and do not represent actual portfolio performance. The indexes or sectors represented generally do not reflect the deduction of transaction and custodial charges, or the deduction of an investment-management fee, which would decrease historical performance results. Investors cannot invest directly in an index. ACP makes no warranty, express or implied, for any decision taken by any party in reliance upon such index information.
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Aviance Capital Partners, LLC (“ACP”) is an SEC registered investment adviser. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that ACP has attained a certain level of skill, training, or ability. While the information presented is believed to be factual and up-to-date, ACP does not guarantee its accuracy, and it should not be regarded as a complete analysis of the subjects discussed. Account information is compiled solely by ACP, is not independently verified and does not reflect the impact of taxes on non-qualified accounts. In preparing this report, ACP has relied upon information provided by the account custodian. Please compare this statement with account statements received from the account custodian. The account custodian does not verify the accuracy of the advisory fee calculation. Please defer to formal tax documents received from the account custodian for cost basis and tax reporting purposes. The above consolidated and individual account performance information reflects the reinvestment of dividends, to the extent applicable, and is net of applicable transaction fees, ACP's investment management fee, if debited directly from the account, and any other related account expenses. ACP does not maintain any investment monitoring or performance responsibility for unmanaged or unsupervised assets and/or accounts. The client and/or its other investment professionals retain exclusive responsibility for the monitoring and performance of such assets and/or accounts.
All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Not all services will be appropriate or necessary for all clients, and the potential value and benefit of the ACP’s services will vary based upon the client’s individual investment, financial, and tax circumstances. This should not be construed as specific investment, financial planning or tax advice tailored to an individual reader, and ACP suggests that readers consult a financial professional, attorney or tax advisory professional about their specific situation. Past performance does not guarantee future results. All investment strategies have the potential for profit or loss, and different investments and types of investments involve varying degrees of risk. There can be no assurance that the future performance of any specific investment or investment strategy, including those undertaken or recommended by ACP, will be profitable or equal any historical performance level.
Historical performance results for investment indices and/or categories, if included, have been provided for general comparison purposes only, do not represent actual portfolio performance, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your account holdings correspond directly to any comparative indices. The index and sector performance data appearing or referenced above, if provided, has been compiled by the respective copyright holders, trademark holders, or publication/distribution right owners. Investors cannot invest directly in an index. ACP makes no warranty, express or implied, for any decision taken by any party in reliance upon such index information. The S&P 500 is the Standard & Poor’s index calculated on a total return basis. Widely regarded as the benchmark gauge of the U.S. equities market, this index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 focuses on the large-cap segment of the market, with over 80% coverage of U.S. equities, it also serves as a proxy for the total market. The Dow Jones is a price-weighted market index that tracks 30 large, blue-chip companies. The NASDAQ is the second-largest stock and securities exchange and attracts more technology-focused or growth-oriented companies. The Russell 2000 Index is a small-cap stock market index that makes up the smallest 2,000 stocks in the Russell 3000 Index. Bond Aggregate is represented by the iShares Core U.S. Aggregate Bond ETF.
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