Five Reasons Not to Despair About Retirement

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Photograph: Getty Images

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Photograph: Getty Images

Few Americans boast about how comfortably they're going to live in retirement. More common are those too scared to bring up the topic. Told the U.S. faces a retirement apocalypse, they try to avoid thinking about their financial future.

Here's a little something to lure them out of their mental bunkers: From wages and debt levels to health-care costs, some of the scariest financial trends are reversing. That doesn’t mean Americans can stop saving. But they may want to take a break from all the worry and self-flagellation to enjoy some actual good news on the retirement front.

SAVINGS SNAPBACK

The Old News: The financial crisis vaporized $3.8 trillion worth of retirement assets in 2008, according to the Investment Company Institute (ICI). The S&P 500 stock index plunged 44 percent from its peak.

The Good News: While only about half of workers have access to a retirement plan at work, those who were able to save in a 401(k) throughout the recession did well. If a worker steadily contributed from 2007 to 2012, their balance rose by an annual average of 6.8 percent. That estimate, from a new study by ICI, the fund industry trade group, doesn’t reflect U.S. stocks’ double-digit surge in 2013.

COST SLOWDOWN

The Old News: Medical care costs have risen more than double the inflation rate since 1990.

The Good News: Costs are slowing way down. Medicare spending per beneficiary didn't rise at all from 2012 to 2013. While no one is sure how long the trend will continue, the government now estimates the Medicare trust fund won't be exhausted until 2030, six years longer than it estimated two years ago.

WAGE OPTIMISM

The Old News: U.S. employers have been stingy with raises for decades. Adjusted for inflation, the median U.S. household earns the same amount it did in the late 1980s – about $51,000.

The Good News: There are signs of more workers getting raises. The Census Bureau's employment cost index rose 0.7 percent in the second quarter, the largest increase since 2008. Especially promising: more hiring for middle-income jobs, which had been left out of a recovery that's favored low- and high-wage occupations.

DIMINISHED DEBT

The Old News: The statistics on Americans' debt loads are scary. The Urban Institute looked at data on the 91 percent of people with credit histories. It found 77 million Americans, more than a third of adults, have a debt in collection. The average debt of Americans is $53,850.

The Good News: Americans shed much of their pre-recession debt. Credit card debt dropped $206 billion to 2013 from its 2008 peak of $866 billion. Debt delinquency rates are the lowest since 2008, with the 90-day-plus delinquency rate at 4.8 percent, down from 8.7 percent four years earlier.

LIVING ON LESS

The Old News: About half of Americans risk not having enough money to maintain their standard of living in retirement, estimates Boston College's Center for Retirement Research.

The Good News: Many retirees find they can happily get by with less. When T. Rowe Price surveyed 1,500 retirees, 85 percent said they didn't need to spend as much as before they retired to be "satisfied." And two in three said they liked the freedom from "keeping up with the Joneses."

More stories by Ben Steverman:

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