The Current Situation of the Retirement System - How to Plan Ahead? （1）
Aging in America is not what it used to be.
In a global study, the United States fell to 17th place in the Natixis Global Asset Management Global Retirement index (down 3 points compared to last year). The index ranks 43rd, mainly due to the ability of developed countries to provide secure retirement protection to their citizens. Norway, Switzerland, Iceland and Sweden top the list.
1. Why is America's situation so bad?
The United States has been hit by equality in income, health spending and life expectancy. Although the per capita income of the United States may rank fifth, it ranks sixth in terms of income equality, showing that it is difficult for ordinary workers to save for their retirement. Life expectancy has fallen, but the cost of health care is higher than the index in other countries.
Much of the problem is the population problem. In general, we are living longer - this is not necessarily a good thing.
Natixis cited data from the World Bank according to which by 2050 the world's elderly population will triple more than ever to 2.1 billion people, making retirement protection "one of the most serious social problems." most pressing issues facing the world in the next 30 years ”.
In developed countries, about half of those born today live over 100 years. The current global average life expectancy is 71 years, compared to only 34 years ago a few generations ago. This growth, in a report by Mercer Consulting, pointed out that -0.02% has an impact on health, profession, family, finances and retirement.
“The biggest problem is that we're living longer and retiring earlier and earlier,” said Matt Fellowes, CEO of United Income, a registered investment advisory firm specializing in retirement. “In the last century, the average human lifespan has increased by 30 years…” We predict that it will increase by another 30 years. This is the heart of the crisis. To some extent, our lives will far exceed our ability to work.
There are now a large number of Americans coming into retirement age (you look, baby boomers), and when we retire, we just don't seem ready yet. According to data from the National Institute for Retirement Security (National Institute for Retirement Security), the retirement account balance of all working-age families is $ 2,500, and that of close families the pension is $ 14,500.
According to a study by Merrill Lynch and Age Wave, 10,000 people retire every day, a consultancy that studies the cultural and economic impact of aging. Over 80% of Americans don't know how much money they need to retire, and retirement is our most expensive shopping life.
With the decline in corporate pension plans, individuals are forced to take on more responsibility for retirement savings and planning. The Mercer report points out that this is a major burden because no one knows exactly how much money he needs or how long he can live (he can underestimate for decades), people don't. lack the confidence or skills to make such important financial decisions. People don't trust the financial markets.
Nonetheless, Natixis found that Americans believe forced savings to be positive - 80% of respondents believe employers should require them to provide a plan, and 61% believe personal contributions should also be mandatory.
About 70% of baby boomers (aged 51 to 71) believe that government benefits will be guaranteed after retirement. But in addition to public funds, investors polled by Natixis said their retirement plans would be funded through personal savings (90%), personal investment (79%) and business savings (76%). They also plan to rely on the savings of their spouse or partner (63%) and to liquidate personal assets such as family or business (51%).
A good number of people want outside help, like inheritance (45%), or even beat children for money or to live in a home (41%).
In fact, 60% of millennials surveyed by Natixis said they hoped to inherit a legacy, and 51% of millennials said they wanted the support of their children. The authors of this study seriously pointed out that since young adults may retire in their children's garage, this generation blames them for living too long with their parents. Although unlike baby boomers, millennials still have decades to actively save to avoid this fate.
2. What are the American pension systems?
The US pension system is made up of three main systems: Social Security benefits; pension plans for certain companies and the government; and 401K and IRA for individual contributions.
(1). Social security benefit
The retirement pension for ordinary Americans is the same as Social Security retirement benefits. Normally, they have to pay social security taxes at work. Individuals pay 6.20% of their income. Companies also pay the same proportion. If they are self-employed, individuals must pay 12.40%. The normal retirement age in the United States is 66, but people born after 1960 are 67. To get a pension you need to accumulate 40 points, one point for every 1130 income, but a maximum of four points per year, so you need to work for at least ten years. If the spouse does not work or does not meet the conditions for working years, he may also receive a small pension. If the spouse dies, the other spouse (must reach retirement age) and minor children will also benefit from social security, this is not called a retirement pension.