When I heard the average American faces a 28 percent retirement shortfall, I didn’t panic. I’ve been saving for retirement for most of my 20s, 30s and now into my 40s. Besides, 28 percent isn’t that much. According to a recent article by The Motley Fool, the gaping hole that is in my future retirement budget will be brutal. In fact, The Motley Fool suggests the shortfall will translate into about $1,650 to $2,100 a month for an average household. That’s twice as much as I pay for my mortgage. I’m not too excited about the “solutions” that await retirees who don’t have enough: credit card debt or an early death. To prevent a retirement shortfall, I can make a few changes today without being selfish as the article suggests. If I had to live on a $2,000 budget shortfall right now, I’d be in a desperate situation.
Investing more aggressively
I don’t mind investing more aggressively, but I’m not going to put my retirement before other financial priorities such as helping my elderly parents or young adult children. I’m tired of hearing the advice constantly dolled out to Generation X about saving for retirement before saving for a child’s college. Since I’m not retiring for another 20 to 25 years, I can afford to choose a mutual fund that is heavy on stocks. I can’t tolerate watching my children accumulate tens of thousands of college loan debt.
Saving even without the perks
I am also frustrated by the financial advice that assumes everyone receives a match to employer-sponsored retirement plans or even have access to such a plan. I am still contributing to my 401(k) even though I don’t get a company match. To make up for the lack of a match, I contribute to a Roth 401(k). I pay more taxes now, but will need the tax free income when I’m old. I also resent hearing how people shouldn’t spend their pay raises. For those of us dealing with pay cuts or pay losses, that’s not a valid solution to dealing with a retirement shortfall.
Giving up the mortgage, not the house
I don’t agree with the advice to downsize in retirement or just before retirement. It’s also laughable to advise people to charge their young adult children for rent and utilities. Most children in their early 20s don’t want to live at home. If they had the extra money, they’d have their own apartments. Instead of charging my children rent or downsizing to a smaller home, I’m paying down my mortgage so I’ll be mortgage free by age 50. I can deal with a 28 percent retirement shortfall if I don’t have to pay for housing.
Even if everyone from Generation X and the younger generations started saving more for retirement, the future is still uncertain. The current group of retirees who are baby boomers will break the Social Security safety net because of their massive combined weight. I expect the economy will be vastly different when I retire in another 25 years. I just hope it’s different in a good way with a booming economy that benefits all age groups and social classes.
More from this contributor:
Being a Credit Deadbeat
Getting Finances in Order Before a Layoff
Cutting up my Dozen Credit Cards