EBRI (Employee Benefit Research Institute) just released it's 2015 study of the longest running national survey of retirement confidence on Tuesday. And, there's good news....well, sort of.
The 25th annual Retirement Confidence Survey said that 37% of workers are "very confident" about the ability to live a retirement on their own terms that's double the amount from 2013 and another 36% were "somewhat confident." Terrific.
Reality is however that little has changed in the way of underlying data to conclude that those dramatic rises in confidence are based on anything other than "hoping it to be true."
The data shows that 57% of workers have an aggregate value of less than $25,000 in savings and investment. That's frighteningly low.
So, how do we get to the dramatic rise in optimism? Well, frankly, it's a mere extrapolation of of data and you can pretty much pick the data you'd like to delude yourself into believing. If the price of homes in your neighborhood has shot up recently, simple, just assume that that meteoric rise continues. Even though it won't.
Stock market up 32%? Let's assume that'll continue, even though it can't.
Unfortunately, there's no substitute for answers.
We can fool ourselves all we want, but in the final analysis, the joke's going to be on us.
I asked a potential Client the other day; "If I have $5,000,000, do I have enough money to retire on?" The answer was an enthusiastic, "absolutely!"
I followed it with the following: "If I have $5,000,000 and plan on spending $6,000,000 do I have enough to retire on?" The answer was, as you'd expect, of course not.
So it isn't about what you have. It never has been. The commercials about your "magic number" were at least partially accurate...there IS A NUMBER and IT ISN'T MAGIC.
In the parlance of wealth management, the question is, this.......
"Does the net present value of all your projected future spending and taxes result in a number that is greater than or less than, the projected future value of your assets and income, adjusted for inflation and predicated on the fact in whole or in part that the returns on your assets will be random?"
Complicated question. One which I can assure you with almost precision like certainty, only a handful of people "know" the answer to.
Of this we can be sure;
- having "things" like a 401k and an IRA are nice, they're retirement assets but they don't assure you of anything
- having more than the $25,000 than the typical EBRI survey respondent is also nice, but that doesn't assure you of anything other than your retirement will likely be better than theirs and yet fall way short of your ideal
- having a lot more than the typical EBRI respondent assures you of nothing, other than you'll have a retirement better than them and the guy or gal next to them and the one, after that and the one after that.
But if you're all still falling short, who's the winner.
Quick recommendation here....get the math done. Not some math, not sorta math, your math.
It's your retirement, you own the outcome.