In a Washington Post op-ed, economist Robert Samuelson concurs, noting that in 2010:
- 80% of households headed by someone aged 65 to 74 owned their homes. 50% had fully repaid their mortgages.
- Median home equity for all homeowners was $120k. Retirees can borrow against their home equity if they need to supplement their retirement income.
- Nearly 75% of households ages 55 to 64 had some combination of individual retirement accounts (IRAs), 401(k)s, and defined benefit pensions. Of IRA and 401(k) accounts, the median value was $100k.
This research contradicts much of what The Motley Monk has read and discussed elsewhere. The picture painted by many of those sources is that many Baby Boomer retirees will have to turn to family members or to the government to support them. For example, Boston College's Center for Retirement Research has reported that 50% of Americans are not saving enough. This research suggests that retirees should save enough to generate 80% of their pre-retirement income in order to match their previous living standards.
Samuelson disagrees, noting:
- Expenses change after retirement. Retirees no longer pay Social Security or Medicare payroll taxes, the equivalent of 7.62% of wages.
- Many retirees don't pay commuting and parking costs or the costs of a work wardrobe.
- Most retirees' children are no longer in the home
These "savings," Samuelson asserts, should significantly reduce costs for retirees.
The Motley Monk is no economist. But, he has spoken with enough economists and certified financial planners to know that while the public polls indicate that many older Americans feel better about their financial situations than any other age group, the level of their retirement savings would be sufficient only if there was zero (or moderate) inflation and no decline (or only a moderate decline) in the equity and bond markets where most of those savings are invested.
As The Motley Monk posted here, $1.2M seems to the experts to be the dollar amount Americans should aim at saving for maintaining their current lifestyle in the retirement years and, hopefully, decades.
Let the discussion begin...
To read Robert J. Samuelson's op-ed in the Washington Post, click on the following link:
"Are We Under-Saving for Retirement?"
To read The Motley Monk's post "How much do I need for retirement?", click on the following link: