I just returned from a week in Cuba on a fact-finding mission with a group of Oxford Club Members.
It was a fascinating trip.
And what I realized was that many Americans may have to retire to Havana.
It’s not because of the cheap cost of living… or the beaches or hot weather. It’s because they are completely unprepared for retirement in the United States.
- 28% of Americans have less than $1,000 in savings.
- 57% of Americans have less than $25,000.
- 35% of retirees have less than $1,000 in savings.
- 53% of retirees have less than $25,000.
So that means if they don’t have a pension plan, they’re relying on Social Security to pay the rent, buy food and supplement Medicare.
Additionally:
- 24% of retirees own a home with debt.
- 41% of retirees don’t own a home.
The average Social Security benefit is $1,335 per month, or $16,020 annually. The average monthly rent in the United States is $905. That leaves $430 for food, utilities and healthcare.
[ad#Google Adsense 336×280-IA]A retiree with only Social Security income would likely qualify for food stamps.
The average per-person benefit is $127. According to the United States Department of Agriculture, a 71-year-old man who is on a low-cost budget for food would spend $227 per month on groceries.
Now we’re down to $330 left over.
That doesn’t leave a lot for utilities, transportation to doctors, healthcare costs, clothes and other basic necessities.
A retiree in Cuba receives at least free housing and medical care. And as residents will tell you, no one in Cuba starves. Now, that doesn’t mean they’re eating well. The island is desperately poor. Apartments that were once beautiful are crumbling and not fit for inhabitants.
Yet at the very least, retirees in Cuba know they have a roof (probably leaky) over their heads, some rice on the table and no medical bills.
The shocking statistics about the lack of retirement savings in the U.S. make a Cuban retirement sound luxurious in comparison.
If you’re not saving enough for retirement, but don’t want to have to ask Raúl Castro for a handout, here are some steps to take immediately:
- If your employer offers a 401(k), enroll immediately. If you don’t, you’re an idiot. Not only will enrolling save you money for retirement, but you also will pay less in taxes. And if your employer offers any kind of matching, it’s free money.
- If you don’t have a 401(k) available, save in an IRA or Roth IRA. An IRA is funded with pretax money. It will grow tax-deferred and you’ll pay the taxes when you take the money out. A Roth IRA is funded with after-tax money, but you won’t pay taxes later on when you withdraw the money for retirement spending. I don’t care how much you’re currently forced to stretch your budget. You can find a few dollars to start saving more. When I was 22, I was making $18,000 per year and living in Manhattan. I saved $2,000 per year in my IRA. Of course, I was living on Ramen noodles in a disgusting walk-up apartment… but I found a way to get the money in the IRA
- Drop your cable TV. You’re probably spending upward of $100 per month. If you’re not saving money for retirement, watching Housewives of Hoboken is a luxury you can’t afford. Switch to an online content provider like Hulu.com for $7.99 per month or Netflix streaming for $7.99 per month. Or better yet, go to the library and get some books.
- Buy discounted gift cards. There are various sites like Raise.com where you can buy discounted gift cards. Currently, you can buy a $95 Home Depot card for $91.67, a $350 Bealls Outlet card for $255.50 or a $100 Jack in the Box gift card for $81.04. Those are some significant savings that can be put right into a retirement account.
Cuba was a terrific trip. The people were friendly and it was incredibly interesting. But I don’t think you want to retire there.
However, if you don’t save enough for retirement, a decaying apartment in Havana might be your best option.
Hoping your longs go up and your shorts go down,
Marc
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Source: Wealthy Retirement