Will My Retirement Savings Last?

A dreaded question for many is will my retirement savings last?

A great number of people, given the drastic influence of the last stock market nosedive are fearful of the answer. Many older people simply know they are in trouble.

Here are some key findings of the Washington based Investment Company Institute published in June, 2009.

* At the and of 2008, a little more than two months before the end of the stock market decline, total U.S retirement assets were $14 trillion. That was down 22% from $17.9 trillion a year earlier. The major culprit is no surprise: negative investment returns.

* Individual Retirement Account (IRA) assets fell by $1.1 trillion, a drop of 24%. Defined contribution (DC) plan assets shed $985 billion, or 22%. State and local pension plan assets fell $858 billion, a drop of 27%. Private-sector defined benefit plan assets fell by a similar percentage, or $734 billion.

* The only gainers were those in federal government pensions where assets are mostly invested in non-marketable government securities. They added a scant 2% in 2008.

Given these losses, we have every reason to ask will my retirement savings last. The stock market has shown no gain in the past 12 years, years that have seen two severe stock market declines.

Nearly two-thirds of Americans' retirement assets were held in employer-sponsored retirement plans at the end of 2008. In addition, a significant portion of IRA assets began with employer plans and were rolled over into IRAs when employees ceased to work for the sponsoring company.

IRA and defined contribution assets invested in mutual funds amounted to 22% of U.S retirement savings in 2008. About half of all retirement savings were held in these two types of plan at the end of 2008.

The answer to will my retirement savings last depends on a number of factors that include:

* What do you hope to do in your retirement and how much will it cost?
* Were you, and are you now, saving enough money to achieve your dreams?
* How is your retirement money invested?
* Will stocks recover to previous levels and continue their long-term average return of 10% to 11%?
* What investment expenses reduce your rate of return? (Elsewhere on this site we discuss the high hidden costs of many mutual funds.)
* What is your current age and do you have time to recover from the recent setback?
* Can you increase savings, delay retirement or reduce retirement expenses?
* What if anything can you do in retirement to earn money?

There is no one-size-fits-all answer to the question will my retirement savings last. The more time you have before retirement the greater the possibility the recent damage to your savings can be repaired ?provided you don't take all your marbles and hide them in a bank. Look for stocks to recover as history shows they always do.

Return from Will My Retirement Savings Last to Savings for Retirement


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