10 Forces Conspiring Against Your Savings
BOSTON ( MainStreet) -- Expert after expert, study after study, sing the same chorus: People are just not saving enough for retirement.
BlackRock(BLK) , like many other financial firms, has stressed the disconnect between what savers do versus what they should be doing and the implications of not saving enough for their golden years. A BlackRock survey found that even though relatively few U.S. workers anticipate having to work during their "retirement," defined-contribution plan sponsors think that's exactly what they will need to do.
More than half of plan sponsors (55%) said most of their participants will have to work either full or part time in retirement. Just 15% of those workers, however, anticipated needing to work. Only 43% of sponsors were confident that workers are saving enough to get the monthly income they need for retirement; by contrast, 67% of participants were confident they are saving enough.
What's often overlooked amid the mantra of "save more" is that external, uncontrollable forces are also at work to erode retirement security.
The following are 10 beyond-your-control problems that can derail even the best-laid plans of diligent savers:
Few would argue against the notion that the nation's staggering debt is setting up an economic disaster. The remedies, however, could prove dangerous for your retirement strategy.
Already there is vigorous debate on how to cut or modify Social Security and Medicare. Also under the microscope: tax incentives to help save for retirement.
A national survey late last year by Lake Research Partners and Public Opinion Strategies -- commissioned by Americans for Secure Retirement -- found that 88% of voters view tax incentives to help save for retirement as important. That included 81% of self-identified tea party supporters, 83% of Republicans, 86% of independents and 94% of Democrats.
Nevertheless, Congress is considering proposals to change the tax preferences for employment-based 401(k) retirement plans. According to the Employee Benefit Research Institute , changes to allowed tax deferrals could result in an average reduction in 401(k) account balances of 6% to 22% at Social Security retirement age for workers now ages 26 to 35.
It isn't just our domestic debt problems that can hurt your retirement portfolio.
The ongoing debt crisis faced by European and Mediterranean nations will likely remain a drag on our stock market here at home, creating volatility, uncertainty, market drops and even, potentially, the threat of recession.
The antidote is to reduce risk and head for "safe investments" such as bonds and cash. That strategy, however, offers a Catch-22: You reduce risk at the cost of forgoing upward returns, mired instead with the low rewards of inadequate yields. Cash will offer safety, but leave you with dead money.
One of the great benefits of retirement savings is having a long time horizon that, combined with the power of compounding interest, can multiply your nest egg powerfully.