A lot of people ask me, how do they know
if they're on track, to be ready for retirement?
If you want to maintain
your living standards that you have now
or you'll have throughout your life... in the American system,
by the time you're 30,
you should have about one times your current salary.
by the time you're 40, you should have about two
and a half or three times your salary.
in your, sixties, you should have 8 to 10 times
your annual salary.
What's your reaction to that?
You can see I'm laughing
because who could save that much?
I'm sorry.
I think those numbers are very abstract.
Okay.
All right.
So I have some work to do.
And the reason I'm wincing when I say these numbers
is that I know that real Americans just don't have it.
The math of what you're supposed to have
and what people actually do have, is a huge gap.
At the median
people have saved approximately $45,000.
That means half the population
have saved less than $45,000.
And that also means that there's quite a few people,
that haven't saved anything
What is your work status right now?
Retired.
Totally retired.
I was a nurse.
my income was probably 100,000...120,000...around there.
Retirement, it's probably around the same thing,
so my annual income is 140,000
I lived in the UK for six years
our retirement savings was put into a pension,
now it's about 15 - 16,000. In my current job
putting away for my 401(k)
and putting a little bit aside for a Roth IRA.
With the playwriting I can make
between 40 and $50,000. But often I make zero, bupkis.
The professor job.
I make about 135 (thousand.)
So that's not bad.
And then in savings, I have about a quarter
million there, which isn't so bad.
Plus, I have a TIAA Cref
if I keep working for a few more years,
it'll get to a half million.
So I'm close actually, now, now that I think about it.
I earn $105,000 a year.
So right now I only have two plans,
as far as I know. I have the one for my first job, my 401(k),
and the one from my current
my current job, which is a pension.
The reason why a coal miner and a lawyer
could expect to retire is because of the design
of our pension system, which we don't have anymore.
Your employer would put money aside for your retirement
and that money couldn't be accessed by you.
So the dollar that the employer put in
on your behalf was put into a big pool of money
and it was professionally invested
And at the end of your working life,
that money would be translated into a lifetime benefit.
We had unions negotiating it.
And then that all changed about 40 years ago.
We changed the federal pension laws
so you had the traditional pension
becoming less attractive to employers.
At the same time,
at the end of the 1970s,
Congress passed a law
that allowed people to effectively make a choice
whether they want to receive some of their wages as wages
or defer those wages into a savings program.
We now call it a 401(k). It was supposed to be
a secondary saving system for mainly higher
income people in big firms. A 401(k)
plan is sponsored by an employer.
So it's tied to your job.
Your employer can make contributions
or you can make contributions.
And what you receive at retirement
is what you've saved into that individualized account.
an individual retirement account is just for individuals
and it's only funded by individuals
At the same time, worker power decreased.
I'm talking to you in 2024.
Half of the people are covered by a retirement plan,
But the vast majority, if they have a retirement
plan, are covered by a 401(k).
the American system just breaks down
on the three basic design elements.
And the first one, the most important one
is that we don't have universal access.
half of workers don't have a way to save for retirement,
and that means they miss out on all that accumulated savings.
every other country who is our peer, have automatic enrollment
in a pension plan in different ways.
You're in a union or you're in a government plan, whatever.
the detail that matters is they are automatically enrolled
and everybody who works gets access to it.
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Now back to the video.
Not all of us have training to be a professional investor,
and it shows. How to set up a retirement account?
how much money to put in it?
when should you make those contributions?
Should you do it every week? or once a year? and then
where are you going to invest that money?
There are literally thousands of investment choices
within an individual retirement account
if you open it at a mainstream financial institution.
That's why the money is sitting in a savings account,
because I don't know what percentage
is supposed to be in the stock market,
or a Roth or any of that.
usually whenever I start a job,
if there is a retirement option,
there is someone who is a specialist who could give advice,
but usually it would be either coworkers
or doing my own research to see what I think is best for me.
I navigated my twenties
and my finances pretty much in a vacuum.
And I made some mistakes and, you know,
stumbled along the way.
I think that's really the key difference...
what other societies have learned versus
the experience in the United States.
Investments are chosen for you.
The point is that
if you don't want to educate yourself --and some people do --
but if you don't,
choices will be made for you to make it easy to save.
The United States, unlike every other country
that has their workers accumulate money
for their retirement...we let people take money out.
Having to dip into it all the time
because I was paying two mortgages.
That was very difficult.
because I feel like it wiped me out.
Between the ages of 22 and 26,
wasn't thinking about what was I going to need at 68
when I was just trying to pay my rent.
oftentimes when I would leave one job,
the little bit of money that I had in a 401(k)
that can be used to pay off a credit card debt
or used to help me pay pay down a student loan.
When you need money,
You don't care that this might be earmarked for your retirement.
If you have a crisis today,
you need to take care of that crisis.
And that's just a basic violation of design,
Long-term savings should be attached
to long term accounts and to safe accounts.
what people want the most
is a time where they can control the pace
and content of their time while they're still healthy.
and people want to pay for it when they're working,
but they want to look forward to that time.
I go to senior centers and do different things.
Sewing.
I'm learning to crochet.
Dance.
I'm sort of fixated on retiring.
It's kind of all I think about.
I guess I plan on working in a bookstore
and going to a lot of baseball games
there are social assistance programs
and income programs. However, for a lot of folks
who might have been earning a certain amount of money
it could very well mean that they are not going to receive
that kind of money in retirement
And so they might need to go to other sources
such as living with family
or, relying on the kindness of others or charity.
I could see myself maybe wanting to do
like part time engineering
or maybe I'll double down into my creativity.
I know I like to keep busy.
Yeah.
So I'll figure it out eventually.
If you're 40, put a whole bunch of money in that account.
If you're 19, just start saving 5%.
But it's got to be protected.
from your younger self.
I would love to teach, I would love to do charity work,
I would love to probably retire in my early sixties,
Gives me another 30 years to worry about
how am I saving for retirement.
I hope that's enough time.
I hate to say you have to have or you should have a certain
multiplier of your salary at a particular age.
I think the important thing is to keep contributing,
and take advantage of employer matches
and do the best you can given your circumstances.
Because that's really what the research shows:
that you do better when you consistently,
over time -- a period of decades, really -- make contributions.