retirement

Apache is functioning normally

Last Updated: May 26, 2023 BY Michelle Schroeder-Gardner – 51 Comments

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Over one year ago, I published the blog post Money Statistics That May Scare You. In case you missed it, here is a refresher:

  • 68% of people live paycheck to paycheck.
  • 26% have no emergency savings.
  • The median amount saved for retirement is less than $60,000.
  • The average household has $7,283 in credit card debt.
  • The average student loan debt is $32,264.

Since then, I have come across other money statistics that have surprised me.

I do a lot of research as a personal finance writer. I come across money statistics that surprise me, make me sad, and some that make me worried.

The money statistics in this blog post might surprise you, but I want you to be aware of them so that you can be better than “normal.”

However, I do want to note that even if you are doing better than the average person, you can still improve even more.

You should always strive to do your best as sometimes “average” is not good enough for you to live a financially successful life. Keep in mind that the average person is not the greatest with money, and many are wrecked with stress and hardship due to their unfortunate financial situation.

Below are some other money statistics that will hopefully whip you into financial shape. Enjoy!

Annually, an average of $220 per person is spent on the lottery.

In 2014, more than $70 BILLION was spent on the lottery. That’s around $220 per person, including children!

However, in states such as Rhode Island, it’s way above $220, at nearly $800 per person spent on the lottery on an annual basis.

That is a ton of money spent on the lottery.

40% of food is wasted.

This is a crazy statistic.

Just think about it: What if you spent $100 on food each time you went to the grocery store, but when you got home from the grocery store you immediately threw away $40 of it.

That’s pretty much what is happening here.

The average person who takes out a new car loan takes out $27,000.

Plus, the average used car loan is almost $18,000.

To add to all of this, the people with the largest car loans actually had the worst credit scores.

One last car loan statistic, the average monthly payment for a new car loan is $471 and $352 for a used car loan.

The average person wastes their gym membership.

If you have a gym membership, I highly recommend that you figure out whether or not it is worthwhile. According to Statistic Brain, the average monthly cost of a gym membership is $58. Yet, 67% of people never use their gym memberships.

That is a ton of wasted money.

The average student loan debt is approximately $30,000.

Plus, according to US News:

  • Only 41% of college students graduate in four years.
  • The three-year student loan default rate is 15% for recent graduates.
  • Borrowers older than 60 owe $43 billion in student loan debt.

These are some crazy money statistics.

Learn more about how I paid off my student loan debt at How I Paid Off $40,000 In Student Loan Debt.

Women are 27% more likely than men to have no retirement savings.

I found this statistic on Go Banking Rates.

To change this money statistic, please read The Smart Woman’s Guide To Investing Success. Here’s a quick snippet from that blog post:

“Women face different obstacles than men do when it comes to investing in the stock market. Right off the bat, they tend to have less in savings because women often take time off to raise children. With years of not earning a salary, there is no money being saved and compounded upon.

In addition to this, women typically outlive men by close to 10 years on average. Therefore, it is important as a woman to invest in the stock market.”

What money statistics surprised you? How do you compare?

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Source: makingsenseofcents.com

Apache is functioning normally

From 1945 to 1964, Americans gave birth to seventy-six million children.

These seventy million some-odd children, the Baby Boom generation, are now seventy million adults reaching retirement age, or else getting close enough to retirement age that they’re starting to think through financial goals for their golden years.

For Baby Boomers, what financial goals should be most important, especially during these difficult economic times?

1. Eliminate Any Debts

Getting out of debt is important for all generations, not just Baby Boomers. However, for Baby Boomers, with retirement either looming or already starting, getting out of debt takes on extra importance.

Once you’re out of debt – including paying off the mortgage early – you can really start to enjoy those golden years. You’ll have the extra money you need to travel the way you always dreamed of, or spoil your grandkids for years to come. For all ages, debts are a drag on the finances; for people with fixed incomes, debts are especially dangerous.

2. Increase Retirement Savings

For the generation that once said, “Trust no one over thirty,” it’s hard to imagine that retirement is just around the corner. Maybe it was the culture of youth that kept you from saving for retirement in your twenties and thirties, or maybe it was just plain ignorance. At any rate, it’s never too late to start saving and investing to increase the size of your nest egg. Even if you’ve reached your early fifties, you still have close to fifteen years of working life to save for your retirement.

Financial author Dave Ramsey suggests that you save at least fifteen percent of your gross income towards your retirement. While a Roth 401k and Roth IRA retirement accounts are good places to start, they may not be enough if you started saving for retirement late in the game. If you did start saving late, talk to a financial advisor about more aggressive investing.

3. Get Healthy

What does getting healthy have to do with your financial decisions? If you’ve paid a doctor or hospital bill recently, you’ll realize that your physical health has everything to do with your financial health.

Although Baby Boomers might not want to admit it, their body is starting to get older, and that means more health problems are coming. Unless you want to spend that money you set aside for a trip around the world on medical bills, implement a diet and fitness plan now that you can live with. Considering the uncertainty of healthcare in the United States, who knows what will happen to the availability and expenses associated with medical care by the time you reach retirement? Therefore, now’s the time to lose the weight, quit the smoking, and cut back on any other indulgences that harm your health. An investment in your local gym, hiking club, or yoga studio could be one of the smartest investments a Boomer can make.

4. Create a Retirement Budget and Educate Yourself

Although it may sound like a no-brainer, a surprising two-thirds of people nearing retirement age haven’t yet created a budget for their retirement. Creating a retirement budget, along with a strategy for how you’ll draw from your nest egg, is a critical planning step for your upcoming retirement.

Fidelity recently surveyed recent retirees, asking them what they wish they would have done before retirement. When they asked the question, “What advice would you give to a family member or friend who’s within a year of their retirement?”, the most common answer was to seek guidance from a professional advisor to help with the transition.

Does your employer offer any resources that might help educate you for your upcoming transition? In Fidelity’s survey, 32% of the people who turned to their employer for guidance said they couldn’t have made the transition into retirement without the extra help.

5. Start Dreaming Now

If you’re a Baby Boomer in your late forties, fifties, or sixties, you owe it to yourself and to your family to stop procrastinating and take these financial steps now. Even if retirement hasn’t hit yet, it will come sooner than you think. You want your retirement years to be trouble-free, giving you the freedom to live where you want and how you want, whether that means selling your house and getting an RV to tour the country, or buying that beachfront property or cabin in the mountains.

Source: goodfinancialcents.com

Apache is functioning normally

When you first enter the workforce you have many decisions to make in regards to how you will fund your retirement years.

After years of earning an income, soon-to-be retirees also have some major decisions to make regarding how their retirement funds will be distributed once they are no longer in the workforce.

For individuals who have a pension plan in place, the decision of how they will take their pension is an important one with significant consequences.

Lately, I have met with several clients who are faced with a very important question,

“Should I roll my pension into an IRA or take the lifetime payments?”

See, pension plans can be distributed in one of two ways;

  1. Through regular installment payments received throughout your retirement years or
  2. Through one lump sum payment (which can be rolled into an IRA)

There are benefits and drawbacks to each option, therefore it is important to weigh each option carefully before making your final decision. Here we evaluate the pros and cons whether you should or should not take the lump sum option on your pension.

Control of the Pension Distribution

One of the potential benefits of opting for the lump sum is the additional control you have over pension funds. This can be beneficial in that most pension plans do not account for inflation when establishing what your monthly annuity payment will be in the years to come. When you choose the lump sum option, you have control over your pension funds and can invest them as you see fit, which can result in additional growth throughout your retirement years.

Control is the largest driving force that have led to most of my clients choosing to roll their pension money over. Most recently, I had a client that said, “I’ve worked for the company 31 years on their terms, now I want to take my money on mine.” Could not have said it better myself.

When you roll it over, you decide when you want your money on your terms. If you want a little extra to spoil your grand-kids on a trip to Disney World, you have the power to do it.

Having control does come with its risks.

You have to be careful to not go on a spending spree and run the risk of spending down your retirement too soon. By choosing the annuity method, you have a guaranteed paycheck for the rest of your life and possibly your spouse if your pension plan allows for it. For some that have a harder time managing money, not being able to have access to the principal may be a good thing.

I have had cases where the client opted to take the lump sum option thinking they could control their spending. Alas, they could not and blew through their entire savings in a short amount of time. Now they have little savings and only Social Security to depend on during retirement.

Security of the Pension

Choosing to get your pension in one lump sum payment, eliminates the security of receiving a monthly check for the remainder of your life, however you do know exactly how much money you are getting. Consider for example, if the company funding your pension annuity payments finds themselves in financial trouble, this may result in problems with your pension payments. There is a Federal agency; the Pension Benefit Guaranty Corp) that may make up for companies that file for bankruptcy, however there are limits to how much money you will receive.

As of 2009, the PBGC has insured pensions up to $54,000 for those that retire at the age of 65. If you’re pension is for more than that and your company goes bankrupt, you might be regretting that you hadn’t taken the lump sum.

As I mentioned above, security of having all your money up front can be reassuring, but; if you mismanage it, you can go through it quickly leaving you with no security in retirement. It’s important to do a self assessment of yourself and your spending habits to make sure you don’t make this mistake.

Estate planning: Don’t Forget the Kids

Annuity payments will cease once you and your spouse have departed. By choosing to receive your pension in a lump sum payment, you can plan your estate to include beneficiaries of retirement funds that are unused during the lifetime of you or your spouse.

In essence that means that if you unexpectedly passed away and your spouse wasn’t too far behind you, all the money that you had paid into your pension goes back to the company.

Another Example of When You Don’t Take the Lump Sum

As mentioned in the first point, it can be attractive to have control of your money when you want it. I had a client meeting years ago that with a gentleman who was a state employee. He was nearing retirement, but still had a few years left. In an effort to entice some of the employees to retire early, the state was offering early buyouts to those that would retire immediately. In his case, the offer was in the neighborhood of $180,000.

At the time, he was dealing with credit card debt and some medical bills, so the offer was enticing. I reminded him that he takes the check, that he would be giving up his guaranteed paycheck in retirement. If he worked just a few more years till age 55, he and his wife were guaranteed around $2,500 per month with the pension. Just a quick calculation using simple interest revealed that in about 6 more years would be the break even point for taking the monthly payments.

Otherwise stated, that after 6 years, he was in far better shape taking the lifetime annuity payment for he and his wife. No question. In this case, taking the lump sum was not the right decision.

Should You Choose the Lump Sum?

The decision as to how you will receive your pension is one that should not be taken lightly. There are several factors to consider and the decision you make today will outline your quality of life for your remaining years. The benefits listed here could also be considered drawbacks if handled incorrectly, therefore be certain you are capable of managing your lump sum payment to ensure you will have financial security in the years to come.

If you feel you cannot properly manage your funds or simply don’t want the hassle of dealing with investments and long term planning, annuity payments might be the better option for you and your family. What is beneficial to one family may not be perceived the same for another, so make sure your decision is based on your unique situation and future needs. If you’re still not sure, be sure to meet with a qualified financial planner to asses your needs and see what direction is best for you.

Source: goodfinancialcents.com