The Retirement crisis deepens as millions of Americans struggle with rising costs and savings shortfalls

As the U.S. faces a growing retirement crisis, millions of Americans are at risk of financial insecurity in their later years. The combination of inadequate savings, rising living costs, and the shift away from traditional pensions has left many unprepared for retirement.

Reports from both the 2024 National Institute on Retirement Security (NIRS) and July 2024 USA Today article highlighted that more than half of U.S. workers are not financially ready to retire.

Generation X, now approaching retirement age, is particularly vulnerable, with many having saved only a fraction of what’s needed to maintain financial independence after their working years.

The Shift from Pensions to 401(k)s

The growing reliance on 401(k) plans, instead of pensions, is a significant factor in this crisis. While 401(k)s offer some tax benefits, they were never intended to replace the guaranteed income provided by pensions.

In fact, as reported by CBS News from April 2024, economist Teresa Ghilarducci argued that the 401(k) system has failed to deliver secure retirement outcomes for many Americans.

Without the stability that pensions once provided, the average 401(k) balance falls dramatically short of what’s required for comfortable retirement, forcing workers to either delay retirement or rely on inadequate savings.

According to NIRS, most Generation X workers approaching retirement have only a few thousand dollars saved, which leaves them vulnerable to poverty and dependent on public assistance.

Inflation and Rising Costs Compound the Problem

Beyond inadequate savings, inflation and escalating costs for essential services are exacerbating retirement worries. Health care, housing, and long-term care costs continue to rise, placing additional pressure on workers’ ability to save.

A large majority of Americans—73% according to NIRS—say that inflation has made them more anxious about retirement

The cost of long-term care is a particularly acute concern, with 80% of Americans worried about affording nursing care in their later years. Many workers fear they will need to rely on family or public programs just to make ends meet in retirement.

What Does All This Mean for HSV?

To answer some of the more strenuous questions left from the research and data above, and to discuss some of the solutions, HBJ sat down with Brian Hinson, CFP, CPA/PFS, ChFC, Managing Director and Financial Owner at Savant Wealth Management Huntsville.

Brian Hinson has worked in the finance industry for more than 28 years. He is a graduate of the University of North Alabama graduate, where he double-majored in accounting and finance, and played tennis on the UNA Lion’s Men’s Tennis team.

Hinson was born and raised in Decatur, Alabama. For Hinson, much of his personal and professional growth has come from his experience in north Alabama.

“I am a north Alabama guy. Working in north Alabama, especially outside college when I graduated, really brought out that passion for growth in a career centered around Finance. I was able to transition into wealth management while the industry transformed around me, and I found a firm that I believe was ahead of the curb with ample resources for both me and my prospective clients to grow,” said Hinson.

Hinson is of course referring to what is now Savant Wealth Management, where he has worked since the company was initially Bridgeworth Financial.

Hinson sat down with the Business Journal to address some of these challenging questions that many Americans, both locally and nationally, have about retirement in 2024.

Brian Hinson, CFP, CPA/PFS, ChFC, Managing Director and Financial Owner at Savant Wealth Management

For Hinson, there is never a time where thinking about retirement will be “too early” for any individual, regardless of age.

“What I think of immediately is the idea of Compound Interest. The earlier that you can think of a career, an industry or even a company that will provide growth over the length of an entire career, and the earlier you take into account the benefits that companies provide, the better off you will be as an individual,” Hinson said.

Hinson quoted Einstein, who compared the idea of compound interest as a wonder of the world: “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”

Hinson mentioned that it’s not necessarily the age. He mentioned that there is a benefit of starting this mindset when you get to college, but the major idea is that Retirement is more on the individual level than ever before.

“It really depends on the individual, on the employee nowadays, to consider your options and to take advantage of resources available around you, especially in the case of what is no longer historically offered,” Hinson said.

Hinson pointed to the fact that pension plans have essentially evaporated as a norm for companies nationwide. As the CBS News article from April of this year pointed out, pension plans are mostly limited to municipal or government-linked jobs, and even those might be freezing up.

“Careers that will allow you to have longevity is important, because now we cannot rely on a de facto pension plan, you essentially have to shop around, and research really, into the best benefits and retirement plans offered by companies,” Hinson said.

In a way, retirement is linked to work-life balance more now than ever. Instead of looking towards the future for work-life balance to become a major question, prospective employees, even at college age, need to be thinking about how their work-life balance will affect their career choices in the present and future.

“At a certain point, it is not just about finding the career, but finding the right career to be able to balance your professional and personal goals right now. It is not something you can wait on, retirement decisions are a form of long term investments. Do not just look at the salary now,” said Hinson.

Hinson mentioned that at Savant specifically, prospective employees are made aware of the total compensation package, not just the salary.

“Do not just focus on what you need today, but try to look at what the benefits can give you in the future. Health care is often looked at as the most important as well, but retirement can help benefit future health benefits,” said Hinson.

Locally, as inflation and rising rent or housing costs have started to affect many Hunsvtillians, Hinson has similar advice. The rise in inflation has also come with a rise in growth for the city. As more dollars move into and out of the city, more businesses and companies continue to flock to the city.

“There are a lot of companies and industries moving to Huntsville. Look at those companies, and see what they are offering. Position your career growth with the overall compensation package that they provide long term. Bring that to the negotiating table when you talk salary,” said Hinson.

Again, Hinson points to the individual. He urged locals to “do their homework.”

“It’s on the person to look at their opportunities, but also to be mindful of what you as an individual have as resources in the area, whether that be what we have at Savant or elsewhere,” Hinson concluded.

The retirement crisis facing millions of Americans is a multifaceted challenge driven by inadequate savings, rising living costs, and the decline of traditional pensions.

As Generation X approaches retirement age with significant financial shortfalls, the need for early and strategic financial planning is more critical than ever.

Local financial experts like Brian Hinson emphasize the importance of individual responsibility, urging workers to leverage compound interest, prioritize comprehensive benefits, and carefully evaluate career and retirement options. With rising inflation and a changing economic landscape, proactive planning is key to securing financial stability in retirement.