Americans Falling Woefully Short on Retirement Savings

What It Means for You and What You Need to Do About It


A new study estimates that more than 90 percent of working-age households in the U.S. are not saving enough for retirement. And about 45 percent have nothing saved. In addition, the National Institute on Retirement Security study found that the median retirement savings of households nearing retirement is just $12,000, according to an analysis of data from the U.S. Federal Reserve. The author of the report, NIRS Research Manager Nari Rhee, said families will need to save more and many people will need to work longer, but that won’t be enough. “The gap is so large that families will not be able to fill it alone,” Rhee said. “They will need help from policymakers.” NIRS called on policymakers to strengthen Social Security, improve access to workplace retirement accounts, particularly for low- and middle-income earners, and to look at alternative models — including some in other countries — to help people save for retirement. NIRS based its analysis on age-specific retirement saving recommendations made by Fidelity Investments. For example, Fidelity suggests a 35-year-old should have saved at least the equivalent of their current salary and that a 50-year-old have saved four times their current salary.

Regardless of the extent to which you have saved for your own retirement, the findings of the study have profound implications for you and your family. If you have not saved enough for your retirement, you need to reconsider your savings practices. Even if you are already in your 50s or 60s, perhaps even if you are already retired, it’s not too late to begin a retirement savings plan. The fact that you may be part of the 90 percent who are not saving enough is not a reason to concede defeat. It’s a call to action. Your attitude should be “it’s never too late,” and that “whatever more I can save will put me in a better position than I am now.”

Even if you have done a reasonably good job of saving for your retirement, you need to understand that the fact that so many other people have not poses a threat to your own retirement savings. That’s particularly so as to long-term care, which is far and away the biggest threat to your financial security and to your ability to leave an inheritance for your loved ones. Here‘s why.

The number of people who need long-term care has continued to rise steadily, because we live longer than ever before. As baby boomers age, the number of people needing long-term care will see an even more dramatic increase. Since so many will lack the funds needed to pay for their care, more and more will be turning to government assistance. That will put an ever-increasing strain on government budgets that are already greatly strained. One predictable response, which has already played itself out in laws that make establishing eligibility for government assistance to pay for long-term care more and more difficult, will be even more laws that make establishing eligibility even more difficult.

The single biggest trend in making eligibility more difficult has been an increase in the “look-back period,” the time during which any transfers of assets made in order to get within the asset limit for eligibility will be examined, and more harsh penalties for such asset transfers. As to Medicaid, we have already seen an increase from three years to five. There is legislation currently pending in Congress to establish a three-year look-back period for eligibility for VA pension benefits that war-time veterans and their widowed spouses can access to help pay for care.

Another related trend is for better nursing home facilities to reduce the number of “Medicaid beds” they have available, such that there is, in many facilities, an ever-increasing wait for those beds, with priority for placement being given based on how long someone has already been a resident of the facility. What that means is that, if you want to be cared for in a good facility, you will likely need to be prepared to initially pay out-of-pocket for an amount of time, perhaps a year or two or even longer, to get into a Medicaid bed in your preferred care facility.

Moreover, with so many people receiving care at the reduced rates the government pays, facilities will need to charge more to those who are paying privately for their care, in order to remain able to cover their costs of providing care. As anyone who had priced nursing home or assisted living care in recent years already knows, that trend is already playing itself out.

The implications are clear. If you are counting on your retirement savings to pay for any long-term care you may later need, you may be very disappointed to find that what you thought would be enough savings will turn out not to be, and even more disappointed that, after many years expecting that you would be able to leave an inheritance for your family, you end up losing that ability.

Fortunately, though, there is something you can do about it, which can and will make a tremendous difference in your outcome. You need to put in place an asset preservation plan as part of your retirement planning strategy. It’s the one sure way to bridge the gap between your retirement savings plan, which you will use to create the pool of money you will need in retirement, and your estate plan, which you will use to direct distribution of your estate following your death.

Simply put, neither a retirement savings plan nor an estate plan will protect you against the single biggest threat to your financial security as you age, or your ability to leave an inheritance for your loved ones. You need an asset preservation plan. Through it, you can guarantee that you will never go broke paying for long-term care, and you can guarantee that you will be able to leave an inheritance for your loved ones. Those are two tremendously important goals to accomplish. Think about the peace of mind you can give yourself by having a good asset preservation plan in place.

At Coulson Elder Law, it has been our pleasure and privilege to help clients – people just like you – with asset preservation planning. We’re proud to say that, each year, our planning succeeds in protecting, for our clients and their families, many millions of dollars that would otherwise have been lost to long-term care costs – and we have done so without sacrificing the quality of the care our clients have received.

We have been able to achieve those results for our clients because we have an intimate working knowledge of the complex laws and regulations governing long-term care benefits eligibility programs, a clear understanding of the legal and social trends that have caused and will continue to cause those laws to change over time, and an ability to develop plans that maintain the flexibility to deal with future changes so that they will withstand the test of time, and provide real and substantial help when it is later needed.

We happily work closely with our clients’ financial, insurance and tax advisors, and in many cases even their estate planning attorneys, toward assuring that all aspects of their planning work well together toward achieving their goals and providing the protection they need.

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Coulson Elder Law is dedicated to providing families in the St. Louis area with their Elder Law needs. Our practice areas include Asset Preservation Planning, Veterans Benefits, Medicaid Eligibility, Alzheimer’s Planning, Special Needs Planning, Estate Planning and more. We understand the financial challenges you may face as you and your loved ones grow older. At Coulson Elder Law, our clients’ well-being is our number one priority. For immediate help, call (877)995-6876 or Contact Us and we will get in touch as soon as possible.