How to Face These 7 Scary Facts About Retirement Saving

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Articles warning about our lack of retirement preparedness are a dime a dozen, and maybe that's part of the problem. We hear the warnings so often that we've become numb to them.

Maybe packing the scariest statistics into one article will have more impact and motivate more of us to get in the retirement savings game. That's what this article is designed to do. But brace yourself: The picture isn't pretty.

1. You might not be saving enough

According to the Employee Benefit Research Institute (EBRI), about two out of every five workers today (44 percent) are not saving any money for retirement. None.

Even among today's oldest workers — those closest to retirement — many have far too little saved for their later years. Among workers age 55 or older, 45 percent have less than $100,000 saved.

If these folks really kick their savings into gear — let's say they end up with $250,000 by the time they finish their career — that still won't provide much to live on. A standard retirement rule of thumb says you can withdraw 4 percent of your nest egg every year without having to worry about draining your account before you die. At $250,000, that translates into just $10,000 of annual retirement income. (See also: 10 Signs You Aren't Saving Enough for Retirement)

2. You might outlive your money

Among the many risks financial planners talk about is longevity risk; the danger of living a long life. It may sound kind of funny to frame that as a risk since most of us would like to live a long life. However, running out of money before you run out of time wouldn't be very funny at all.

A man who is 65 years old today can expect to live another 19.2 years, according to the Social Security Administration's Life Expectancy Calculator. A 65-year-old woman can expect to live another 21.6 years.

Are you on track to save enough to cover your retirement expenses that long?

3. If you're young, you're probably not saving aggressively enough

Many millennials — people with the best opportunity to take advantage of compounding interest — are investing far too conservatively. A 2014 UBS Investor Watch survey found that millennials were almost as likely as baby boomers to describe their risk tolerance as conservative. The same survey found millennials holding over half their assets in cash.

When you're young, the riskiest thing you can do with your investments is to play it too safe. Doing so will make it hard to outpace inflation and you'll miss out on much of the growth that compounding can provide. (See also: 5 Facts Millennials Should Know About Retirement Planning)

4. You can't count on Social Security to fill in much of the gap

As of July 2017, the average Social Security retirement benefit was just $1,325 per month. Even scarier, the Social Security Administration notes that Social Security provides 90 percent or more of the income received by about one in five elderly married couples, and two in five elderly singles.

A big part of the problem is that many people claim benefits as soon as they qualify — age 62. That guarantees the lowest possible monthly benefit. Waiting until full retirement age (67 for anyone born in 1960 or later), or even better, age 70, will boost monthly benefits substantially. (See also: 6 Smart Ways to Boost Your Social Security Payout Before Retirement)

5. You shouldn't count on working for pay in your later years

Plan B for a growing number of today's workers is to retire after the typical retirement age of 65. For many, it isn't that they love their job so much; it's that they know they'll need the money.

But their aspirations don't match reality. According to EBRI, 52 percent of today's workers expect to retire after age 65 or never retire, whereas just 14 percent of today's over-65 crowd actually retired that late or never retired.

In fact, 48 percent of today's retirees left the workforce earlier than planned — mostly due to health issues or the need to care for a loved one.

6. You may have no idea how much you should be saving for retirement

EBRI found that just 41 percent of all of today's workers have tried to figure out how much they will need to have saved by the time they retire in order to live comfortably. Those that have run the numbers tend to save more for retirement. (See also: This One Thing Could Be the Key to Retiring Rich)

7. You may not be able to afford your later life health care costs

A recent Fidelity study found that a couple retiring this year would need $275,000 to cover their health care premiums, copays, deductibles, and out-of-pocket costs for prescription drugs over the course of their retirement. (See also: 9 Unexpected Expenses for Retirees — And How to Manage Them)

What that figure doesn't include is long-term care, and yet, today's 65-year-olds have a 70 percent chance of needing some type of long-term care before they die, according to the U.S. Department of Health and Human Services. And that care is costly. Genworth's latest annual Cost of Care survey found that a private room in a nursing home cost nearly $7,700 per month in 2016, or over $92,000 per year. (See also: Is Long Term Care Insurance Worth It?)

If these scary statistics have convinced you to take action, here are three of the most important steps to take: Run the numbers to figure out how much you should be saving for retirement, make saving a priority, and wait at least until full retirement age before claiming Social Security benefits.

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