It’s Not Too Late to Save for Your Retirement from Ground Zero!

What??!!! Did You Think You’d be 18 Forever?

us forever young


Age is creeping up on many of us. In fact, age creeps up on ALL OF US. Yet so many of us live like we’re gonna be young and 18 forever. Oops, I mean, young AND having an income forever.

I was surfing the web restlessly, yea, as though I were 18 years old and had all the time in the world to waste away. Anyway, I came across something that’s quite interesting. WASHINGONTON POST REPORTED THAT ALMOST 20% OF PEOPLE NEAR RETIREMENT AGE HAVE NO RETIREMENT SAVINGS.


us old no money


Actually, the statistics released in a report by the U.S. Federal Reserve were scarier than this. Overall, a whopping 31%(!) of people said they have ZERO money saved for retirement. That included the 19-20% of people between the ages of 55 and 64, or those closest to retirement age (currently 65 in U.S.) As more Americans are made responsible for their own retirement, most are just not saving nearly enough.

Since I live life like I were 18 years old, I continued to surf the web for more related reading. ONE THING led to ANOTHER, and I was soon reading on the state of retirement planning for Americans.

The Center of Retirement Research at Boston College recently released its latest study HOW MUCH SHOULD PEOPLE SAVE?. The study included key statistics like how much people need to save to retire comfortably, and also how the Americans fare in terms of retirement planning. Mighty interesting reading!
Here’s what I’d found out:


1) We’ll be happy to live with about 70% of our income during our retirement years.
In determining the target replacement rates, the study sensibly calculated the rates for different types of households, taking consideration high, middle and low income earners, single or married, one-or two-income earner couples, homeowners or renters, etc. So generally, the study was looking at approximately 70% target income replacement rate, i.e. for Americans to look at sustaining on around 70% of pre-retirement income level during their retirement years.


Source: Center for Retirement Research at Boston College


2) Many people are at risk of not saving enough for retirement!
The study found “half of today’s working families are ‘at risk’ of not being able to maintaining their standard of living once they retire.” As you can see from the table below, the National Retirement Risk Index (NRRI) went increasingly higher as time went by.


Source: Center for Retirement Research at Boston College


3) So, how much do we need to save? Is it too late for me?
The six million dollar question is really how much we need to save. And for those who have not saved enough or have not saved at all for retirement, is it too late? Viola! the study has smartly worked it all out for us!

us required savings rate

Source: Center for Retirement Research at Boston College

Here are the assumptions: (1) We start saving at 35 years old, and (2) We retire at 65 years old.

The 15% required saving rate is what we need to achieve if we start saving for retirement from 35 and if we stop working at 65. And oh, I should also point out that the study assumes the savings will earn a real return of 4% (real return means actual return after inflation). So we can’t just park the money into a bank account and expect it to work for us. We will need to invest wisely.

Remember I’d mentioned two variables above? The age we start saving, and the age we retire. So, the game changes if we vary one or both of these. See table below:

us savings for medium earner

Source: Center for Retirement Research at Boston College


For a medium income earner, you will need a saving rate of 15% if you start saving from 35 and if you retire at 65. But the saving rate goes down to 12% if you choose to work a couple of years more and retire at 67 instead. And it goes down to just 6% if you work till 70.

Given that our lifespan is now much, much longer these days, I would imagine many of us would choose to carry on working. Even if not for the money, continuing to work also ensures that we don’t just wilt away in front of our computer screens, and also helps us keep in touch with the society.

It doesn’t take a genius to notice the massive benefits of saving earlier and retiring later, ya? Even eight years of difference in terms of retirement age can have such a significant effect on the required savings rate. And of course, the earlier you start saving, the better.


4) If left on our own, there is a very high risk that we will not save enough to retire comfortably.
Probably a universal problem that challenges all government in the world. I suppose it will take a combination of various methods and investment tools to ensure that the majority of the population are adequately covered for retirement, including more education, some form of social security or forced savings.



Here at home in Singapore, one of the hot issues is also on retirement adequacy. A survey by HSBC showed these findings:

• Over half of the Singaporean respondents felt their financial preparation for retirement was inadequate: 44% felt their preparations were not enough, while 12% were not preparing at all.

• People ran the risk of living long beyond their retirement savings: On average, Singapore respondents expect their retirement to last for 17 years, but their retirement savings to last for just nine years.

So… What??!!! Did You Think You’d be 18 Forever? Better start doing your retirement planning soon!

us savings


There’s a lot for us to learn from the U.S. study. Most of us like to think we have plenty of time in future to save for our retirement. We tend not to think much about it until much, much later. But the later you start, the harder it might be as it will require us to put away more of our income every month. But all is not lost, since we can always start NOW. If we can’t make up for lost time by putting away more money, we CAN work for a few more years. As shown in the U.S. study, what a difference even two years can make!

In my mind, it’s not a bad thing for the government to raise the retirement age. By raising the retirement age, we are giving everyone a CHOICE of whether or not they want to continue working. If you wish to retire earlier at 60, 50 or even 40, by all means, do it. But if you wish to remain in employment, then at least the option is there. The act of raising the retirement age is to protect the workers, so that employers cannot ask a worker to leave based on age. It does more for the workers, and the workers still have the flexibility of retiring earlier if they so wish. Incidentally, local blogger Aspirant has shared a rather informative piece on this as well HERE.


THE TAKEAWAY Since THE MOTLEY FOOL ARTICLE summed it up so well, I’ll just quote the author here:

“At times, it’s easy to convince ourselves that we have plenty of time to comfortably save for retirement and don’t need to think about it today. But no matter where you find yourself today, it’s critical to know what a monumental difference just a few years can make when it comes to starting both saving for and beginning retirement.”



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