What’s Keeping Most People From Saving for Retirement?

The dream of every American is to retire comfortably and securely. After decades of working in an office, at a factory, or in a school or hospital, people want to be able to relax and enjoy their golden years in retirement, seeing the sights and having the experiences that they didn’t have time for while they were working. But for more and more Americans that dream is moving further and further away from reality. Why is that occurring, and what can Americans do to help themselves save for retirement?

Stagnant Incomes

Many people are aware of the vast amount of economic data that shows that real (inflation-adjusted) wages have remained largely stagnant since the 1970s. That’s obviously not conducive to being able to save up a large enough amount of money to retire on. But stagnant wage growth isn’t terrible if investors are able to overcome that through excellent investment growth.

That’s just what happened during the stock market boom of 1982-2000, in which annualized stock market returns averaged about 15%. So even though real incomes weren’t increasing that much, great stock market returns helped workers who did save and invest to build up large nest eggs.

Since 2000, however, markets themselves have been largely stagnant. Had they seen the same growth since 2000 as they did from 1982-2000, the Dow Jones would now be over 200,000 points. Instead, it’s only about 1/8 of that. Stagnant incomes combined with subpar investment growth means that for the past two decades Americans have found it incredibly difficult to save for retirement.

Rising Cost of Living

Along with stagnant incomes comes a rising cost of living. Price inflation as a result of the Federal Reserve System’s loose monetary policy has meant that the cost to maintain the same standard of living continues to rise. And official government statistics often under-report the actual cost of living for most Americans.

Consider too that we live in an age that is more complex and that features more technological goodies and gadgets than in previous generations. Computers, the internet, more complex cars, all of these things combine to make it more expensive to live today than it was 30 or 40 years ago. While you might have been able to get by 20 years ago without the internet or a cell phone, those are almost indispensable tools nowadays. That technology isn’t free, so the baseline just to be able to function in society is getting more expensive.

What Can You Do?

If you feel like you’re stuck between a rock and a hard place, with a stagnant income and rising cost of living, you’re not alone. But that doesn’t mean that it’s impossible to build up and maintain a nest egg to allow you to retire comfortably. It just takes a little bit of discipline and effort to make sure that you’re able to save enough money to live comfortably in the future while still ensuring that you can live comfortably today.

Start Saving Early

There’s no substitute for saving early. The earlier you start putting money away and putting it to work for you, the better off you’ll be. But even if you’ve gotten a late start to saving, it’s never too late to save. You may have to save more of your paycheck if you get a late start, but you can still manage to save enough to retire on.

Invest in the Right Assets

Whether you’re able to save a lot or a little, investing in the right assets is key to making the returns you need to accumulate enough money to retire comfortably. And while stocks can serve a very valuable purpose in accumulating wealth during boom times, they’re not that great during times of financial downturn.

Remember that when the dotcom bubble burst many stocks lost three-quarters or more of their value, with some of the worst performers declining to nearly zero. And during the financial crisis the major stock indexes lost over 50% of their value. If you’ve managed to make it through those two crises and are looking forward to retiring, you can’t afford to suffer through another market crash that will cut your retirement savings in half.

Many investors looked to gold to see them through the financial crisis. While stock markets were declining, gold rose over 25% and it kept on climbing after that. Gold has been trusted by investors as a store of wealth and hedge against currency collapse for centuries, and it will continue to play that role in the future.

In July 1971, before President Nixon closed the gold window, gold was officially valued at $35 per ounce. According to the government’s official CPI statistics, $35 back then has the same purchasing power as $216.83 today. But gold is trading today at nearly $1,200 per ounce, nearly five-and-a-half times what it “should” be if it had merely kept pace with inflation. And since 2000 gold’s rate of growth has been nearly double that of stock markets.

That makes gold an ideal asset for investors looking to protect their retirement savings against the likelihood of another financial crisis. And with the ease of a gold IRA investors can even roll over existing retirement assets tax-free and continue to enjoy the tax benefits of traditional retirement accounts. But as market events this week have made clear, you can’t delay. If you wait too long to protect your assets, you may not have very much left to protect.