What is your vision for retirement? Sunny beaches, romantic travels or idyllic sunsets at your ivy covered home?
Sadly, a secure retirement is out of reach for millions. Forbes says that 55 percent of us retire with less than $10,000 in savings and 42 percent retire dead broke. The Federal Reserve reports that 40 percent cannot afford a $400 car repair bill without borrowing money.
The North Carolina chapter of AARP conducted a summit in Raleigh on Oct. 24 to examine why we aren’t preparing for retirement, the public costs of the situation and how we can ensure richer (financially and otherwise) retirement years. The event was both alarming for what it revealed and encouraging as to what we can do.
North Carolina is getting older. In 1960 the median age in our state was 25.5 years. By 2018 it was almost 39 years of age; 20 percent of our population is projected to be over 65 by 2025. More than a third of North Carolinians surveyed by AARP say they feel anxious about having enough money to live comfortably after they retire; 80 percent worry that cost of living expenses will eat up what savings they have accumulated.
A perfect storm is brewing. More of us are getting older, fewer have sufficient funds for a comfortable retirement and Medicaid and other public assistance programs will increasingly be required, costing more taxpayer dollars. Without accompanying tax increases, less money will be available for roads, education and other public infrastructure.
The obvious solution is that we need to save more for retirement, but why don’t we? Saving hasn’t been a part of our culture. We want instant gratification and easy credit allows us to buy what we want. Generations before us saved for what they wanted before purchasing it. Further, the income gap puts increased pressure on middle to lower income families just to get by. But the biggest reason people don’t save is because it isn’t convenient or easy.
Plans sponsored by employers make it easy and painless to have savings deducted from paychecks. We don’t miss it, and there’s added incentive if an employer has some sort of match to contributions. However, 1.6 million North Carolinians, about 50 percent of the 18-64-year-old population, don’t have access to a savings plan where they work. Small businesses lack the funding or the administrative ability to offer retirement plans.
AARP is sponsoring an effort to get more state-sponsored retirement plans, where employees of small businesses can begin saving. Already 10 states have initiated these plans because they benefit both the employee and the state. Craig Galbraith, from UNC-Wilmington, previously estimated that if low-to-moderate-income North Carolinians saved 3 percent of their incomes, our state would save $450 million on Medicaid and nearly $20 million on Special Assistance for Adults between 2017 and 2030.
Our state House has passed a measure to study the best ways to make it easier for our citizens to save for retirement. The Senate has yet to pass the measure, but all of us should encourage our senators to pass this study bill. Not only does it make good “cents,” but it will make retirement years more enjoyable for millions of us.
Tom Campbell is former assistant state treasurer. Contact him at www.ncspin.com.