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Americans' Retirement Savings Look Bleak

 In the midst of the Great Recession, the financial positions of millions of Americans have become unstable, to say the least. And the problems aren't just related to high unemployment and falling home prices.

Decades of stagnant wages and lives lived on credit have created long term consequences for vast numbers of people.

As has been the case for most of the past decade, the retirement savings of the typical American isn't healthy or adequate. 

According to the nonpartisan Employee Benefit Research Institute (EBRI), nearly half of baby boomers born between 1948 and 1954 — and now between the ages of 56 and 62 — are at risk of not having enough money in retirement to pay for basic expenditures

According to a survey by EBRI this year, 43% of workers said they have less than $10,000 in savings. More disturbing, 27% of workers said they had less than $1,000 saved.

Many of these workers may have to rely solely on Social Security in their retirement years, or perhaps not retire at all. As it stands, 35% of Americans over 65 rely almost totally on Social Security alone, says Dallas Salisbury, President of the EBRI and the Alliance for Investor Education.

Many Americans put their retirement hopes in their homes, which were expected to continually appreciate until their retirement years. The plan for most was to then sell the home and live off the proceeds. Declining home values have made such plans seem less feasible, and retirees still need somewhere to live.

All of this points to a very humble, if not outright difficult, retirement for millions of Americans. 

Social Security was never meant to be the sole means of retirement income. Rather, it was meant to be just one leg of a three legged support system also consisting of savings and a pension. Yet, the latter are quite rare these days as most companies have stopped offering defined-benefit programs.

The sad reality is that millions of Americans will be relying on rather meager income in their retirement years. At present, the average monthly benefit for the 53 million Social Security beneficiaries is just $1,066. That may go down if benefits are reduced by Congress. Either way, it won't go far.

And with a consumer-driven economy, this lack of funds will ultimately depress the nation's GDP. But that's another concern.

The lack of savings is not just some new phenomena driven by the recession either. 

A 2002 USA Today/Gallup Poll also found that more than one-third of adults had no money saved in any type of retirement account. And half of all households had not saved a penny in the previous year. That was at the height of the go-go years.

Prior to the recession, the median amount held in the retirement accounts of Americans was just $2,000, according to the Bureau of Labor Statistics. It would hardly be surprising if that amount has since decreased.

No matter how you view it, the data just isn't comforting. And the latest research is equally grim.

The Center for Retirement Research at Boston College recently calculated what the average person between the ages of 32 and 64 have saved so far for retirement.

It found that Americans are $6.6 trillion short of what they need for retirement. That works out to an average of $90,000 per potential retiree. 

Unfortunately, they called their estimate conservative. The center assumed a three percent rate of return on investments and it also assumed there won't be any changes to Social Security benefits. At present, neither of those seem like reasonable scenarios. 

Furthermore, the center didn't include what the average retiree spends on health care. The researchers assumed that future retirees would spend every penny they had on retirement, leaving nothing for their heirs.

While that may be a concern for some children and grandchildren, the primary concern for millions of Americans is whether or not they'll have enough just to meet their basic, everyday needs in what were supposed to be their retirement years.

Sean Kennedy is a freelance journalist and author of The Independent Report,a "non-partisan, non-ideological analysis of economics, fiscal, monetary and debt issues, and market events."

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