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PERSONAL FINANCE
Retirement

Your retirement won't be a dream if you don't get real

Peter Dunn
Special for USA TODAY
Comparing what Americans want in retirement with what reality holds is a sad — if not devastating — exercise.

At nearly every speaking engagement I’ve had over the last five years, I’ve given the audience three choices for their desired retirement lifestyle. They can either have a better lifestyle in retirement than they are living right now, a lesser lifestyle than they are living right now, or the exact same lifestyle. The hands in the air are as predictable as they are cringeworthy.

Usually, about 25% of the room expresses a desire to have a better lifestyle in retirement than they are living now. Of that 25%, the look on half of their faces conveys the same feelings I convey when the guy at the auto parts store asks me if I understand his instructions on how to rebuild my engine.

Less than 10% of the audience indicate they desire a lesser financial lifestyle in retirement, which, based on statistics, is exactly what most of us will have. Then, 60% of the people in the room choose, what I call, the default. This majority want everything to be the same in retirement as it is now. And if you did the math, the remainder of the people in the room didn’t answer, because they are too cool to participate. Never bet against apathy.

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By my observation, nearly 85% of Americans expect their lifestyle to be the same or better in retirement than it is now.

Comparing what Americans want in retirement with what reality holds is a sad — if not devastating — exercise. A 2016 Economic Policy Institute report finds the median retirement account balance for people who have any savings at all, is $60,000 — meaning half of people have more than $60,000 and the rest have less. But that's literally only half the story, because nearly 50% of Americans don't have a penny saved for retirement. If you include all those people, the median retirement savings plummets to just $5,000.

Peter Dunn, aka Pete the Planner, writes a weekly financial-planning column for The Indianapolis Star and Fox59.

A look at the average of all Americans' retirement savings tells a much more sinister story. The average balance is $95,776 — and that figure includes all the people with balances of zero. What that means is people with huge retirement savings accounts have jacked the average way up.

The only acceptable reaction for someone upon hearing these, is to grab their head and scream something mildly inappropriate. Any other reaction doesn’t convey understanding of the problem.

Feel free to interpret the data any way you like, but here’s what it means to me: There’s a massive wealth gap. A small group of people will successfully retire, but the majority will not. Don’t get me wrong, I’m not upset at the small percentage of people who have built wealth, I’m just concerned for the people who haven’t, by their own choice or otherwise.

The excruciatingly sad reality is that the modern retirement planning journey for a majority of Americans isn’t about preparation. It’s about a lowering of expectations. The current set of retirement savings data suggests Americans are more willing to lower their expectations than they are to change their savings strategy.

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Fortunately, the retirement plan industry has deployed techniques such as auto-enrollment and auto-escalation to assist those individuals. These “forced savings” techniques are sure to have a positive impact on retirement account balances.

The bottom line is, you can either change your actions or change your expectations. At some point, lowering expectations is no longer a viable strategy. Action (saving more money) puts time on your side. Inaction seals your fate.

So, I put the question to you. Would you rather have a better lifestyle in retirement than you are living right now, a lesser lifestyle in retirement than you're living right now, or the exact same lifestyle in retirement as you are living right now? Oh, and what are you going to do about it?

Peter Dunn is an author, speaker and radio host, and he has a free podcast: Million Dollar Plan. Have a question about money for Pete the Planner? Email him atAskPete@petetheplanner.com

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