Are You Ready to Retire?
Angela Foreshaw-Rouse, Manager, State Operations and Community Outreach, AARP Pennsylvania
If you’re female and a Gen Xer (age 35 to 54), chances are you’re nowhere near having enough money for your future golden years. A recent GoBankingRates survey found that a mere 26 percent of women have saved more than $50,000 for retirement while more than half of Gen Xers have either no retirement savings or less than $10,000.
Yet you can’t depend on Social Security alone: the average monthly benefit last year was $1,342. Clearly, it’s critical that Pennsylvanians—180,000 of us will turn 65 in 2022, up from 114,000 in 2010, according to the Pennsylvania Independent Fiscal Office—plan and save for retirement and ensure that we can do so easily.
When Your Job Doesn’t Offer Help
A convenient way to save is through a 401(k) plan or other employer-provided retirement plan. Yet about 44 percent of Pennsylvania’s private sector employees, ages 18 to 64—roughly 2.1 million—work for an employer that does not offer one. These employees could open an individual retirement account (IRA), but they are unlikely to do so. Only 5 percent will open their own IRA, whereas they are 15 times more likely to save if their jobs offered a plan—increasing saving rates by a staggering 1,300 percent.
The inability to participate in an employer-provided retirement plan spans all levels of education and income: Almost half a million employees in Pennsylvania who do not have access to a retirement plan have bachelor’s or higher degrees and about 190,000 employees without retirement plans earn more than $63,500. Of course, whether your workplace offers you a retirement plan depends on a number of factors, including the size of your employer. People who work for small businesses, for example, are less likely to have an employer-provided retirement plan than people who work for large companies: In fact, 63 percent of workers employed by businesses with fewer than 100 employees do not have a pension or retirement plan.
How AARP Is Looking for Solutions
Small businesses are the backbone of America’s economy, and recognizing the financial insecurity many face as they prepare for retirement, AARP has worked with elected officials in other states, including California, Illinois and New Jersey, to enact plans that provide retirement security options within the workplace that benefit both small business owners and their employees.
For example, small businesses could benefit from a retirement savings option that allows employers to offer an IRA to their employees without having to sponsor a plan, provide matching contributions or be subject to ERISA requirements. Small business owners would not be responsible for managing the investment nor would they have any fiduciary responsibilities. Giving employees greater access to financial security, small businesses would be more competitive with larger companies who offer retirement packages as well as be able to increase employee retention.
What You Can Do Today
Our aging population presents many fiscal challenges in the years ahead. While AARP, policy makers, and local and state officials continue exploring ways to help people save for a secure retirement, here are three tips to get you on track:
- Get a personalized snapshot of what your financial future might look like. There are many online tools, including the AARP Retirement Calculator, which can help you determine the amount of money you will need to retire when you want.
- Consider what age would be best for you to retire. Factor in when you would like to stop working, when you should take Social Security (benefits increase the longer you delay), health care costs and your personal finances. For more information, check out this article that could help you achieve your retirement goals.
- Visit AARP for more information that can help you achieve financial freedom, including living on a budget, saving and investing, managing debt and much more.