What it comes down to is each individual taking personal responsibility and putting a plan into action.
More Americans spent less time in the last year planning for an IRA investment for their retirement years than choosing a restaurant, flat screen TV or tablet, according to an annual survey by TIAA-CREF.
From my experience people fall into two types of savings categories: Casual or Deliberate.
Mr. Casual goes along hearing how important it is to save and invest but doesn't follow through. He may have taken the time to create a savings plan and put a thousand or two into an IRA but he will fall well short of what is needed to retire. He is seduced by current wants and consuming his money on vacations, cars, house projects, etc. There is no immediacy to adding to a retirement account and believe social security, the stock market or growing their business will dig them out of their poor savings habits.
Ms. Deliberate takes the opposite path. She has a savings and investment plan but she follows it. She values each and every dollar and does her best to take advantage of compounding interest. She meets or talks with her financial planner regularly to bounce ideas around and receive professional advice on all her financial matters. She can delay gratification until she knows her financial goals are taken care of.
In simple math, to have income of $50,000 a year from age 65 through age 92 a person needs to have saved $1.4 million. That doesn't account for how inflation erodes your purchasing power or potential investment gains during those 28 years.
Social Security, if you can count on it with current rules, will provide roughly $20,000 of retirement income. That is assuming you are earning $50,000 a year in wages and or salary.
That means, in retirement, you have to come up with at least $30,000 of income each year from savings, retirement accounts, and or investment accounts. To cover 28 years you need roughly $840,000.
Simple math monthly savings to accumulate $840,000 at age 65 if you are starting with $0 at each decade:
Age 30: $2,000 monthly
Age 40: $2,800 monthly
Age 50: $4,667 monthly
Age 60: $14,000 monthly
This is a great illustration why it is important to be Deliberate with our savings habits.