National Institute on Retirement Security shared some startling information about the retirement readiness of American workers:

  • 1/3 of all people between the ages of 55 and 64 haven't saved anything for retirement.
  • 38 million working age households in the United States have yet to start saving for retirement.
  • The average retirement savings for people 10 years away from retirement is $12,000.

Most of these workers may have limited ability to save or prepare for retirement. They also may not be in a position to hire a financial adviser to guide them. During my work with retirement plan participants over 25 years, I have met with many people who are close to retirement but have no retirement savings. What do I tell them?
Continuing to work needs to be a part of your retirement plan.

Most individuals close to retirement with no retirement savings are not particularly surprised to hear this. Many have resigned themselves to working as long as they can. Very few, however, understand that they probably will not be able to continue to work for their current employer for as long as they wish.

Debt is not your friend.

Throughout their working lives most of these individuals have not been afraid to take on debt. Financing purchases and spreading payments over many years were the only way they could afford to buy homes, cars, furniture, electronics, etc. However, that perspective needs to change since earnings during retirement may not be sufficient to fund loan payments.

You may have to sell your house.

Those that were able to purchase a home and accumulate equity in it may face the uncomfortable fact that one of their only resources to fund living expenses in retirement may be the equity in their home. Down-sizing to an apartment to free-up home equity may be the primary retirement strategy.

Save more and spend less by making a budget.

Most of the individuals I talk with have never created a household budget. When I ask them what they spend their money on, many say "it just goes." If I ask them to be more specific, generally it is hard for them to share how they spend their money. Like most Americans, they live check-to-check. Many people are not financially confident or competent and the addition of a little structure, via a budget, can make a big difference in their lives.

Make good decisions about Social Security.

As the National Institute on Retirement Security study outlines, there are 81 different options for married couples thinking of applying for Social Security benefits. Collecting as soon as possible may not always be the best strategy.

The situation is not hopeless for these individuals, however, time is not on their side. The sooner they begin a planning process, the better.

Contributing Editor Robert C. Lawton is President of Lawton Retirement Plan Consultants, LLC a Registered Investment Advisory firm helping retirement plan sponsors with their investment, fiduciary, employee education and compliance responsibilities.  Mr. Lawton has over 25 years of experience working with corporations on their retirement plans and is a Chartered Retirement Plan Specialist (CRPS) and Accredited Investment Fiduciary (AIF).  Mr. Lawton was named as a Top 100 Retirement Plan Adviser by PLANADVISER and a Top 300 Retirement Plan Adviser by 401(k) Wire.  Mr. Lawton may be contacted at mailto:bob@lawtonrpc.comor 414.828.4015.

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