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Saving for retirement? Not so easy if you have no disposable income

 

Strange as it may seem, those of us who worry about how much of our retirement savings we may have lost in the declining market don’t realize how lucky we really are. According to a study by the Joint Center for Political and Economic Studies, there are millions of near retirement age boomers who never had enough savings to lose.

 

At a recent conference on retirement planning, the experts said that only 51 percent of African Americans have anything saved for retirement and will have to rely entirely on Social Security in retirement. That itself isn’t very good news, since the average social security check would keep people only slightly above the federal poverty line.

 

According to the conference report, almost 10 percent of African American workers and 10.5 percent of Hispancs have no savings. Clerly, you can’t save money if you don’t have any left at the end of the month. Preeti Mehta, director of special projects for the Doorways to Dreams Fund, said the challenge of stimulating savings by low-income families is difficult, even when they know they are close to retirement.

Mehta said that 80 percent of gambling revenues come from people who earn less than $50,000 a year. Another study found that 38 percent of those earning less than $25,000 think the playing the lottery is best way to build their personal wealth.

The lack of a nearby bank may also have some impact on the low rate of savings. Regional and national banks usually don’t have branches in poor neighborhoods, meaning residents  have to travel a long way to visit a bank. Even community banks   rarely operate in inner cities. Also, many poor people live in rural areas where there are few financial institutions nearby.

Because they lack standard financial services, many poor people turn to check-cashing operations or pay-day loan businesses that charge many times what a bank might for the same services.

 

Solutions are not easy. Many believe reducing the costs of health care is the first step to keeping older people financially solvent. Out-of-pocket medical costs make up about a third of the spending for the average senior citizen, and many elders are cutting back on needed medications due to the recession. But, the broader problem of poverty, particularly among the nation's ethnic minorities, may only get worse as poor boomers head into the final years of their lives.