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Why Americans Are Not Ready To Retire

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In today's episode of The Retire One Show,  In today's episode of the Retire Once Show, we dive deep into a recent article that discusses 14 reasons why many Americans are not ready for retirement.

Join us as we explore the various factors, such as:

• Prioritizing short-term savings goals

• Not knowing how much is needed for retirement

• Assuming catch-up is possible later

• Tapping into retirement funds for emergencies

• Early 401(k) withdrawals

• Lack of employer-paid retirement plans

• Misconceptions about retirement savings needs

• Relying on Social Security and multiple income streams

• Lingering effects of the 2008 financial crisis

• Low income and the struggle to save

• Not matching employer contributions

• Overwhelming student loan debt

• Fear of the stock market

Be sure to subscribe to the show and to our weekly retirement newsletter.

Articles Discussed in this Episode

• https://am.jpmorgan.com/us/en/asset-management/adv/insights/retirement-insights/guide-to-retirement/

• https://finance.yahoo.com/news/14-astonishing-reasons-many-americans-150015621.htm

A recent article talked about 14 reasons why Americans are not ready for retirement. So today we're gonna dig into all of those reasons and what you can do to make sure that you are on track to your retirement. All that more on today's episode of The Retire One Show.

Hello and welcome to The Retire One Show, the show designed to help you get to retirement, but most importantly, stay retired. I'm Rose Jonathan Rankin. I'm the founder and CEO of Theorem Wealth, and I'm joined today by my lovely co-host. Hi, I'm Melissa Rankin. Thank you so much for joining us. Thank you for being here.

We are so happy to be back and. Summer's almost upon us. We're ready for this, but uh, we've got a lot to get to today. We've got 14 reasons we've gotta go through here. 14 reasons. So yeah, we're gonna jump into all of that. But before we do, What do we want people to do? Mel, we want you to subscribe not only to the episodes, the channel, but also to our weekly newsletter.

That's right. Join our Weekly newsletter, comes out every single Friday. A lot of great resources in there. You know, our whole goal is to help you achieve your retirement dream. Make sure that it's easier for you to get there. And we're gonna do that one video, one episode, one newsletter, one retirement plan at a time.

But join that. Subscribe and let's, uh, let's dive into this. So, I mean, yeah, like we said, we've got 14 reasons we've gotta go through here. Yeah. We came across this article and it was actually titled 14 Astonishing Reasons Why Many Americans Aren't Ready to retire. Astonishing. Yeah. That is a, that was a very interesting word.

Not to mention the 14. I mean, why not 10? 12. I mean, 14 is a lot, so don't worry. Just seems like yeah, lot. We're gonna make it fly by today so you don't have to leave after, you know, seven, we're gonna make it fly by, you're gonna enjoy it. But yeah, 14 astonishing reasons. This is like the most dramatic season ever of retirement.

If this was in 14 reasons. That's right. So they mentioned how saving for retirement has become less of a priority. And it's interesting because they reciting surveys that indicate about half of Americans. Have less than $5,000 in savings. So that alone is astonishing. That is less, I feel like that fact kind of, well I mean we talked about it last week.

A retirement crisis is upon us and we talked about a new retirement crisis. So hopefully you checked out that episode. Um, but yeah, I guess there is a lot that is getting in the way. So let's just, uh, let's kick it off then. Let's start those 14 reasons. All right, let's do it. Okay. People are more focused on short-term saving schools, down payment for a house, car travel, things like that.

I mean, we talked a little bit about this last week. Yeah, of course. People are thinking about what's going on today. They're not thinking about 20, 30, 40 years down the road, and that's very common. I mean, you, if you have a family, you want to go on vacation, you wanna do nice things. I, I really. I'm gonna blame a lot of that on social media.

I really do. I, I think this is something that, you know, a lot of retirement planners aren't thinking about is the impact that social media has on, on retirement savings. Everybody wants to keep up with the Jones's, if you will. Yeah. I mean, you're scrolling through and you're seeing everybody's on vacation.

All my friends are on vacation. Everybody's at the beach. Why don't we go to the beach? We just talked about that this morning. Let's go to the beach. And then, you know what, there's thousands of dollars that get in the way of. Saving for retirement. So it isn't always a focus, you know, to look at what's going on today, but you still wanna keep in mind, you know, at some point you probably wanna stop working unless you just don't.

But if you don't want, but most likely, most likely, there's always going to be that point in life where the realization comes, it goes, I really don't know if I wanna do this forever. So I get there are always going to be short term things that come up. Houses travel, like we talk about cars, you know, you might have repairs on your home that you might need to do.

There's always gonna be something that can, you know, divert savings or money into. In as opposed to retirement. So I mean, there's also some, like the mentality that comes behind it, that's future self's problem. Yep. I mean, I feel like a lot of people kind of do that. Well, what we talked about last time with people changing jobs, of course there, you know, a lot of people cash out their 401k because when you start a new job, the last thing you're thinking about when you start that new job is when you're gonna leave, when you're quitting that new job.

So I get it, but you still want to have something that's, you know, It doesn't necessarily have to be outta sight, outta mind, but try to have something that's there for the future. Okay. The next one, they don't know how much they need for retirement. Yeah. We've seen many studies that talk about how, you know, I think it was 40 to 50% of people have, and it might even been more, they have no idea how much they need for retirement.

They haven't done those, uh, they haven't started planning yet. They haven't ran the numbers and. Really makes sense. And I, I was doing some research. I found, uh, JP Morgan came out with their yearly guide to retirement. They have a number of great charts, and this one here, it, uh, it talks about the income replacement needs and how they vary by what your household income is.

So when you're looking at this chart, if you're listening to this, maybe listen on Spotify where you can watch it or on YouTube. But, uh, if you're listening to this, there's a purple line that shows what your income replacement rate. Is likely going to be based on your income that you're ha that you have pre-retirement.

So if you're making, in this scenario, we'll use $70,000. What this chart is showing is that $70,000 will, you'll need to replace about 92% of that. Now, there is going to be changes in expenditures, taxes, and pre-retirement savings. That's going to, that's the reason why it is at 78. I'm sorry, uh, 92%. Yeah, social security's gonna make up a big chunk of that.

But then you see that 37% of your income is going to have to be made up from either private or employer sources, whether that's a pension or your own savings in 401ks or, uh, 4 0 3 , you name it. Uh, so, you know, figuring out what your income replacement needs to be doesn't have to be a complicated thing.

You wanna at least start looking at. Okay. Am I, am I in line with this? If I'm, where do I fall on this craft? Yeah. If you're making a hundred thousand dollars a year, it says you need to replace 86% of your income are, are you on track to that? And so, uh, it doesn't mean that you have to have a, you know, a certain amount in savings.

It's just, are you on track to be able to replace that income And we'll get to the savings in just a bit. Um, they assume that they will catch up later. Yeah, this is always an easy thought. It kind of, to me goes back to the thinking about short-term goals. If you're thinking about short-term goals, it's because you think, well, at some point I can do that.

You know, I remember as a kid, you know, you, I imagine that our kids are gonna go through this where you tell 'em, Hey, you've got a big project or a big test coming up, and you know what? I'm gonna go outside and play. I can eventually study for that. Or I can eventually, the night before, yeah, I can eventually do the project.

Mom, come on now. I can get that done last minute, but, Retirement is like, it's like running a marathon. You, there's no, it's not a sprint. No, there is no last minute catch up. You know, if I wanted to run a marathon tomorrow, if I haven't been training for it, that's not gonna be a good scenario when I hit the track.

No, you may die. I might die. You know, retirement might not be that dire where you're gonna die, but being able to catch up at the last minute is, is really hard. And these charts by JP Morgan really show the impact of that. Uh, what they show is. What your annual savings rate needs to be if you started today, and it goes based on what your current age is and your current household income.

So in this scenario, if you are 40 years old and you make $90,000 a year and you're just starting out saving today to hit that income replacement need that we talked about in the previous slide, you need to save 19% of your income per year to hit that now. I'm just gonna go on a limb and say that if anybody is starting, you know, later in life, Putting away almost 20%, if not more.

Come on to be very difficult. Going, going from zero to 20% is very, very hard. That's a huge chunk. It is. And that's why, you know, people talk about doing, you know, starting early, doing auto-escalation where. Maybe you start putting away two or 3%, but every year it steps up by another percentage point to, you know, kind of warm you into that.

What does that, uh, you know, if you put a frog in a boiling water, they jump out. But if you, you know, if you boil 'em slowly over time, I guess, sorry to be grim. I was just gonna say talk about Caruso, but that's what they talk about. You know, you can. It's a Wade Frogs oil. I, I, okay. Okay. All right. Sorry.

This is a retirement show, not a, not a cooking show. Not a cooking show, but that is, or science experiment, whatever. Yeah. I hope kid doesn't have to do that science experiment. But that is, that's the case. If you start saving today and you take an immediate 20% pay cut because it's going into your savings, it's a, that's a lifestyle adjustment.

It's a lifestyle, and I mean, it's. It's a way of thinking, like it goes to, you would think somehow that you just got, I don't know, pay decrease. Yeah. There's no way you would look at it like, I'm doing this for the future. I mean, if you waited that long to start anyway, I feel like that's pretty unlikely.

Well, yeah. I mean, you look at someone who is 50 years old who just starts making $125,000 a year, needs to put away 53% of their income. I mean, at that point, retirement is a lifestyle adjustment. At some point you're going to, if you're retiring and you haven't started saving and you're 50 years old, the reality is retirement's going to be a, an adjustment from what your lifestyle is today.

Because I don't know of anybody, I've never been anybody who can spend 50% less just like that. Just Yeah. Overnight. So, um, very interesting. It's, it's important to just start that early. The earlier the better. Absolutely. So the next two are kind of similar. They already used their retirement savings for an emergency and or they took an early withdrawal from their 401k.

Yeah, we talked about this before with, you know, especially with how many people are taking out money or cashing out their 401ks altogether when they change jobs. I mean, we, to talk about 9.9 jobs on average that people go through. So, you know, taking out money out of a 401K or using retirement savings for emergencies is very common.

But you gotta look at what that long-term effect can be. And this chart from JP Morgan really shows that this shows if you took two loans that were $10,000 a piece and one withdrawal that was also $10,000, that resulted in you having 26% less money. Just those alone. And a lot of people think of taking a 401k loan or a withdrawal that I'm paying myself back or I'm using my own money.

But it's the time. It's the time that you're, you know, in the savings amount that is going to be impacted down the road. You can't make up, you know, those years later on, you know, when you're retiring. That's it. That's it. And so you wanna make sure that you hit that retirement with as much as you can. So if you don't have an emergency fund set set up, you gotta get that set up first.

And I know we've talked about in the previous episodes, but making sure that. Retirement savings should hopefully be your, you know, last resort when tapping into savings or for loans. And so, I mean, I think the keyword there too is emergency. Yep. You've gotta keep that in mind. It's really gotta be. You need it.

Yep. The next one, they don't have an employer paid retirement plan. Now if your employer doesn't have a 401K or 4 0 3 B or some sort of retirement savings vehicle, That doesn't mean you can't save for retirement. It's gonna mean a little bit more work for you. You know, you have options, whether it's a traditional IRA or Roth ira or if you're a independent contractor.

You've got solo 401ks and set ira. So there are ways that you can save. But you have to go that extra mile and want to save. You have to be a little more ambitious. And yeah, and very rarely on social media do you see, you know, here's how, where you should put your money into this step, IRA or solo 401k.

It's really, here's where you should go on vacation. So, you know, you think about you've gotta go the extra step. It's not going to be right there in front of you at all times. But that doesn't mean that just because your employer doesn't have one, that you can't start saving on your own so that you shouldn't have one.

Yeah, you really want to start, whether it's a traditional IRA or a Roth ira, and if you're married and your spouse doesn't work, there's also the spousal option as well. So lots of choices there. The next one, this one's just crazy. They don't think they need a retirement savings. Who, who is this? Who doesn't think they need this?

Yeah, I would love to. I would love to talk to that person who think this is the astonishing one for me. Yeah, that is true. I mean, the fact that some Americans don't feel they need to set aside anything for the future, I, I don't know. I don't know how you live life like that. That just seems reckless. Well, and honestly.

And I'm just gonna say this, and I think our viewers will agree that if you don't think you need retirement savings, you're probably not watching this. So I really don't have much of a, uh, of a reaction to that. Okay. I think that if you're watching this, you know that you need retirement savings. But I guess this is a, this is the astonishing one.

That this is where the word astonishing came from. So yeah, there's, there's that part because I really don't have much to say on that, dude. No, that one's crazy. So we'll just move right on. Yeah. Um, they depend on social security checks. Yeah. I found, uh, a statistic from the Bureau of Labor Statistics and they talk about how adults 65 and older on average spend $52,141 a year.

Now, social security number, social Security, if you max that out at age 70 isn't $52,000 a year. So, If you're going to depend on social security to be your full retirement income, you might need to be adjusting your lifestyle. And I know we talk about all the time, when do you take Social Security? Is it 62, full retirement age 70?

You know, uh, JP Morgan has some great charts on. The impact and trade offs for the timing of that, that we'll share here. And they, they also have this lovely decision tree. If you're having a hard time determining when you should take social security, you can follow their decision tree, which for some reason, I don't know why, it reminds me of the game of life.

It really just does. You spin the wheel, you start here. He says that every time I, these decision trees, I just. Eight out. No, I can see why. Now looking at it with that, you know, the game in in mind, I feel like I can see it a little. I've gotta say, I don't know why. Maybe it's just me. Every time I see a decision tree, I don't start where it says start here.

I always start at the end. I go, okay, what are the options? And how do I go backwards? How do I get to that option? I do for every decision now. I know they have a like the opposite of the distance. A big purple circle that says start here. But I mean, I don't know. I guess when I look at the map in the mall, I don't look at the you are here thing.

I go, okay, where are the exits and where's the restroom? And then I find out where I'm at or where's the store I want to go to. So, um, I gotta start looking@thebigpurple.in the middle there, but, uh, great resources if you need help on figuring out when you should take Social Security. We're not gonna dive into that decision today because we talked about it a lot on this channel.

So, um, previous episodes, that's right. If you, if you haven't caught those, hit the, you know, there's a playlist there. You can watch 'em all stream, 'em all. I mean, who needs Netflix? Paramount Plus H b o Max, whatever it's called. I think it's called Max Now. Who needs cable? Get YouTube, just stream us. Just Yeah, absolutely.

Binge us. Binge watch us. That's what, you know, we got a long weekend coming up for Memorial Day. There's your Memorial Day weekend right there. Absolutely. Spend, you know, highly recommend that. That's right. Saturday morning through Monday afternoon, Monday evening. Just sit in bed and you know, put us on the YouTube.

Sorry. Moving on. Sorry. They rely on multiple income streams. I found this interesting because from the article they say whether it's from rental income or passive income streams they built during their working years, some Americans are confident they will be able, they will be, uh, comfortable on their passive income during retirement years.

Now we've helped hundreds and thousands of people plan their retirement, and it's not the majority of people who have passive streams of income. No. No. At least not that we've come across. No, I mean, it's, it's definitely, I mean, yes, there's a, there's a big percentage that do. But I would say that percentage is 20 to 30%, maybe.

Yes. Much, much lower than, and so I found that, you know, by this being one of the astonishing reasons why people aren't ready, because they're relying on some other income source, I wonder if this is, you know, the new age of, you know, I, I rent out my home for Airbnbs while I stay with a friend, or, you know, I don't know.

I, I don't know. There's this whole, I think they call it the hustle culture, where they're trying to get all these multiple streams of income. This is all new to me. Uh, to, to think like that. This, yeah, this is an interesting one. I mean, yeah, I guess it makes sense to be in there, but it's, eh, different, a little different.

Um, the next one, they're still recovering from 2008. Yeah. They mentioned, you know, people who, obviously there were a lot of foreclosures in 2008 and savings rates were impacted, but really what they were also talking about is just the. The, the mindset. The mindset of being scared of losing money again. So focusing more on taking care of current bills than, you know, whether it's bills, mortgages, and living expenses focusing on today.

Because, you know, in 2008, a lot of people's today was drastically impacted. And you know, I know that assets have, you know, obviously come back quite a bit since 2008, but it's the mindset. And people are still reeling from it. I mean, yeah, I mean, you think about, I think about people that are in their, you know, now, probably in their forties and fifties, who went through the.com bubble.

So they were saving, they went through that crash and then just about recovered, got their house, got everything, settle, and then went through another crash. Yeah, that's gonna be like, it's gonna be a little. Timid I, that would make me a depression baby. I mean, at that point, like I would be telling our kids, like, you eat everything out of the can of soup.

Like you just, we don't waste anything. So I get it. Um, but there is that thought that, you know, people are still recovering from 2008. Okay. Uh, so the, the scared one there. The scared one. Yeah. The next one they don't make enough to save. Yeah. Honoring enough income, obviously. You have to put food on the table.

I get that this isn't, we're not, you know, uh, people who don't understand that you gotta put food on the table first. You're not gonna sacrifice your retirement for just scrounging around in the trash to get food. But when you look at, you know, this chart from JP Morgan that shows the impact of just $200 a month.

Now, you know, that could be, I always go back to streaming services or Melissa's car wash. It's a throwback to episode one. So you go back and watch that. Um, You know, $200 a month. Ha. Just saving that every year or every month for decades can compound over time into quite a bit of money. And so this isn't saying that you have to start immediately and just start saving the maximum.

You can start somewhere, somewhere. Just start somewhere, start early, and just make it a habit. Getting that mindset of, okay, I can save. Yeah. And then hopefully these other 13 reasons don't affect you as much. Right. Um, they aren't matching employer contributions. Yeah. This was interesting to me that research has shown nearly 30% of people are not taking full advantage of their 401k match from their employer.

Which, hey, going back to the last one. I get it. If you gotta put food on the table, you gotta put food on the table. But this is leaving money on the table. Yes. And so, absolutely. Yeah. If you have an employer who's matching, try to get up to that point, you know, that's free money essentially. Yeah. This isn't saying you have to max out your 401k, just get whatever they're giving you.

I mean, absolutely. Yeah. If they were giving you a bonus every single year, you wouldn't want it just to take, you wouldn't ask them, you know, and only gimme 60% of that bonus. Yeah. I don't think I need it all. No, I just, I'd rather, I'd rather not. So, uh, try to get up to that match. If you're in that 30%. The next one, they have student loan debt.

I know this is a big one and you know, in all honesty, don't really have much to say about that one. Uh, if you have a large amount of student loan debt, Budget what you can try to save, where you can try to pay those off. I know probably a big chunk of them are hoping for this Biden plan to go through. I don't know, this isn't a political show as we've talked about many times.

Not at all. Um, but if you have a lot of student loan debt, yes. That is something that you've got to make sure, but also that, that's astonishing. Yeah. That is astonishing. So I see where that comes into the title. I guess there's a few of them where it, it makes sense that is right. Um, they're afraid of the stock market.

Yeah. I. I get that, especially after last year. I mean, you go through bear markets and Yeah, they are very scary. It kind of makes me think of the people who were scared about 2008, right? But I love this chart. I found this chart where it shows the probability of a positive outcome. And so when you look at going to a casino, you know that a lot of people think of investing as gambling, and that's why they're afraid.

They think of. I'm gonna invest and I'm going to lose money. Going to a casino, you have less than a 50% likelihood of having a positive outcome. But when you look at the stock market, whether it's on a one month, three year, five year, 10 year, on a 10 year basis, you have a 97% probability of a positive outcome.

I mean, even in a one month scenario, you can go to Vegas for a month, you're never gonna, I don't think you're gonna have anywhere close to a 62% probability of being positive. No. And for over a 10 year period, I don't think you're gonna be even close to a 97% probability. Uh, yeah, I wouldn't think so either.

I would imagine. I would think that the odds of the casino go down the longer you're there. That's just my opinion. I mean, I feel like that's how it's been. Every time we've gone, you go, and for some reason, if you're there for, Three nights as opposed to two for some reason, start to think that, you know what, it's gonna come back.

So it it, it doesn't, it doesn't, it never does. No, never does. And so, you know, I understand the, the need to be fearful when markets are volatile, but you gotta think retirement is a long time. Retirement planning is going to be needed for a long time. If you, depending on your age today, you might need to be saving and planning for a 40 or 50 year future, even if you're, you know, 65 years old today.

There's still probably a 20. People are living longer. We've gone through this before too. Yeah. So I understand that it's concerning to watch the investments go down, but over a long period of time, you have a much higher degree or higher probability of having a positive outcome by just investing in a long term portfolio.

So you always have to be thinking long term when you're thinking about retirement, even if you're retiring right now. And so, uh, you know, cause retirement's not just a one year thing. Absolutely not. So now that we've gone through the 14 astonishing reasons, what are some of the main takeaways? So I, I think there are three main takeaways.

The first one is always, there's always reasons to not save. We understand that. But you have to think about the long-term ramifications. The earlier you can start the better. And if you're watching this, you've probably started saving for retirement. So congratulations. I hope that it's going well for you, but continue that, and not only just continuing that rate, but trying to increase that savings rate is, is important.

Um, talked about planning and starting earlier, but making sure that. If you haven't started, if you're watching this, you haven't started saving, start now. Just whatever you're doing, stop what you're doing. $5 anything. Press just pause on your binging session for Memorial Day weekend. Hit the pause button and make sure you start saving something today.

Start as early as possible and just create a long-term portfolio that you're going to be disciplined and investing in. And the last one is plan, because if you start seeing how your actions today impact your future long term. It might make it easier to want to save. I think about if, if I eventually want to lose 10 pounds, but every time I ate something I was able to see, well, if you eat this, this is what it's going to do for you.

You know, to, in six months from now, I probably would have a, you might rethink it. I might rethink what I'm eating. You know, like I said, it reminds me of, you know, I looked at some cookies the other day and. A cookie said 200 calories. However, that was for half a cookie. Who puts half a cookie? They shouldn't be able to do that on a nutrition label.

Sorry. I know this is not a food channel. I know that we're not a cooking show or a nutrition show. However, that really bugs me because I've never met anybody who takes a cookie out of a pack and Jo eat half the cookie and then puts it back. So that's my fourth takeaway is that don't do that if you're making cookies.

Okay. So those are the three takeaways. You know, find a reason to save, find a reason to save early, be disciplined in your long-term investment strategy, and start planning today. Uh, if you haven't started planning and you need help, or you just wanna make sure that you're still on track to your retirement goals, there's a link in the description below.

Schedule some time with our team and we'd be happy to start walking you through what your retirement looks like. And with that, I'm Jonathan Rankin. And I'm Melissa Rankin. Thank you so much for joining us.

Registered Representative of Sanctuary Securities Inc. and Investment Advisor Representative of Sanctuary Advisors, LLC.– Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. –  Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. – Theorem Wealth Management is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC. This communication has not been reviewed for completeness or accuracy, does not necessarily reflect the views of Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and is not a recommendation or endorsement of any product, service, or issuer. Third party posts do not reflect the views of Theorem Wealth Management or Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and have not been reviewed for completeness and accuracy. All further communications from this representative must be sent from and received by johnathan@theoremwm.com. For additional information, please refer to one of the following consumer websites: www.FINRA.org, www.SIPC.org.

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