Retirement Income Insufficient in 49 out of 50 States

not-enough-retirement-incomeInterest.com1 analyzed data from the 2013 American Community Survey that was conducted using the Census Bureau data and found an upsetting statistic about American retirement incomes. “Nationally, the replacement income ratio for those 65 and older climbed to 59.6% in 2013, up from 57.4% in 2011.” According to interest.com, replacement income is the approximate amount of money you’ll need compared to your pre-retirement income. The general rule of thumb is 70% of your pre-retirement income.

The study asked both retirement (age 65 +) and pre-retirement (age 45-64) groups to share their sources of income. Income types included government assistance, income from jobs, and retirement income from IRAs, 401(k) plans, pensions and the like. The percentage of people over 65 who are still working has increased steadily over the last 20 years. The study showed that today is no exception. Almost 20% of retirement age Americans are working. There is a silver lining to the study. Because so many older Americans are working, they are less dependent on their retirement sources of income. The bad news is many of these workers are working because they have no other choice to make ends meet each month.

As mentioned above, the general consensus among experts is that current retirees will need 70% of their pre-retirement income to live comfortably during retirement. According to the study, Nevada is the only state where retirees are making 70% of the pre-retirement income or more. In twenty seven states retirees make 60% to 69% of their pre-retirement income and twenty states report retirees earn 50% to 59%. Retirees in Massachusetts and North Dakota are earning less than 50% of their income before retirement.

According to Anthony Webb, a senior economist at the Center for Retirement Research at Boston College, the median amount in American retirement accounts is less than $120,000 for those within 10 years of retirement. This equates to about $400 per month in retirement income. At the beginning of 2014, the average Social Security benefit was just $1,249 per month. This often isn’t enough to afford basic necessities like housing, medical, food and utilities for many seniors. It can be even harder for those with less in savings or with fewer investments.

In recent years, some homeowners have had to tap into their retirement and savings accounts in order to make it through difficult economic times. However, there may be a better solution for homeowners who have sufficient equity in their homes and who are at least 62 years old. For some retirees, their home is their largest asset and obtaining a reverse mortgage may be the right choice for them.

A reverse mortgage loan is available for qualified senior homeowners. The loan proceeds can be received as a lump sum, monthly payments or as a line of credit. The homeowner keeps the title to the home and must continue to pay property taxes, HOA fees and homeowner’s insurance. They must also maintain the home and complete necessary repairs to keep the home in good condition.

The borrower can use the funds from the loan any way they would like. Many borrowers choose to make updates to their home to make it more accessible or energy efficient. Some borrowers pay for medical expenses and others save the funds for a rainy day.

Retirement should be a time to relax and enjoy friends, family and hobbies, not a time to worry about how bills are going to be paid. If you are one of the many seniors who are not making 70% of your pre-retirement income, and would like to see if you qualify to take advantage of a reverse mortgage loan, call 866-751-6105.