- 64% of Americans Aren’t Prepared For Retirement — and 48% Don’t Care
- 64% of Americans Will Retire Broke
- What About Americans With
- Most People Use Savings Accounts for Retirement
- Many Americans Don’t Care About Saving For Retirement
- How Will Millennials and Generation Z Fare?
- Men and Women Don’t Make Enough Money To Save
- The Future of Retirement
- Americans Haven’t Saved Enough for Retirement. What Are We Going to Do About It?
- The Road to the Retirement Crisis
- One Potential Solution
- Why It’s a Good Deal for Companies
- Retirement Crisis in America
- Lack of Education
- Poor Spending Habits
- Action Steps:
- Lack of Emergency Savings
- Carrying Too Much Debt
- Action Steps:
- Not Seeking Expert Advice
64% of Americans Aren’t Prepared For Retirement — and 48% Don’t Care
Shot of a young woman mopping the floor of a coffee shop during the day.
Retirement prospects seem grim for over half of America, according to the latest results of a GOBankingRates survey. The 2019 retirement survey revealed that even more people will retire broke than initially projected.
GOBankingRanks asked over 2,000 respondents about their savings. Sixty-four percent of Americans are now expected to retire with less than $10,000 in their retirement savings accounts, versus the 42% reported back in January.
Yet, the people at risk of a stormy retirement don’t seem to see it that way — nearly half of all survey respondents were not concerned about the size of their retirement savings accounts.
Find out why many Americans are delaying saving for retirement.
64% of Americans Will Retire Broke
When asked to estimate how much money they had in retirement savings, close to half of all respondents — 45% — claimed they had no money put aside for retirement, while 19% said they’ll retire with less than $10,000 to their name.
If these trends hold, that means 64% of all Americans will essentially retire broke. Twenty percent will retire with anywhere from $10,000 to $100,000.
As for the remainder, well, let’s just say they have more wiggle room with their retirement savings.
Zero dollars was the most popular answer choice among respondents of all ages, though that percentage fell as age increased. Unsurprisingly, older respondents have more money saved since they had more time and potentially more avenues to do so.
Men and women tied at 46% when it came to having $0 in retirement savings. However, men have more money than women in nearly all savings brackets. This could be due to men generally earning more than women, as well as the result of an investment gap.
The survey also asked people why they thought they didn’t have enough retirement savings, with the top three responses being:
- “I don’t make enough move to save.”
- “Struggling to pay bills (rent, mortgage, car payments).”
- “I’m prioritizing paying down debt.”
What About Americans With $0?
People with $0 in their savings account have a good explanation for why nothing’s there: They don’t make enough money to save. Of those who fell in the $0 bracket, 45% said they couldn’t save for that reason. Bills are another big obstacle for 24% of respondents with no savings.
Interestingly, 9% of respondents with $0 in their retirement accounts said that they won’t need savings in their golden years, which may imply that they plan to continue working past retirement age.
Read More: 50 Best (and Worst) Places To Retire If You Have No Savings
Most People Use Savings Accounts for Retirement
When it comes to the best way to save for retirement, 46% of people chose a savings account as their primary method, with the next most popular response being 401(k) accounts at nearly 30%. Only 14% of respondents chose individual retirement accounts or Roth IRAs.
It’s disheartening that savings accounts are the most popular option because their growth rate is paltry. The current national return rate for savings accounts is 0.09%, according to the Federal Deposit Insurance Corp. Here’s how that rate stacks up against other retirement vehicles:
|Account Type||Return Rate|
|Money market account||0.19%|
|Certificates of deposit (CD)||0.12%-1.09%*|
|IRA and Roth IRA||6%-8%|
|*Return rate depends on the term length and deposit size.|
It’s harder to gauge the return rate for instruments 401(k) accounts and IRAs because it depends on what assets you invest in through those accounts, how long you invest for and how much money you put into them. Furthermore, you should factor in whether inflation will affect your returns. Luckily, there are plenty of free online calculators to help you figure out what your return will be.
Many Americans Don’t Care About Saving For Retirement
Nearly half of all respondents — 48% — were not bothered by how much they had saved up. What’s even more alarming is that over half of the respondents who claimed they had $0 in retirement savings expressed no concern over it.
According to GOBankingRates’ survey, the younger you are, the less you care about having no savings. However, those who did care were more ly to respond with “I’m not able to save more” versus the alternative response, “I’m going to make changes to save more.” Forty-four percent of those ages 55-64 were concerned about having nothing saved but specified they were unable to save more.
How Will Millennials and Generation Z Fare?
Generation Z and millennial respondents are the most vulnerable to retiring broke. More than half in both age brackets said they had $0 in retirement savings, with 63% of Gen Zers and 54% of millennials ages 25-34 giving that response.
Furthermore, those generations were the most ly to use savings accounts as a means for retirement, and the least ly to choose more efficient investing tools 401(k) accounts and IRAs.
Neither group is making enough money to save, with 47% of Gen Zers and 37% of millennials agreeing with that statement.
Baby boomers are generally better equipped to handle retirement than their younger counterparts. Only 33% of respondents ages 65 and older claimed to not have anything saved, and 6% said they had $500,000 to $1 million in their retirement nest egg. However, older respondents were also more ly to rely on a spouse for their retirement plans.
Related: These Are the 50 Best Cities for Gen Z To Live Well On a Budget
Men and Women Don’t Make Enough Money To Save
So, what’s the biggest problem getting in the way of retirement savings for both men and women? It’s a lack of money to save with, according to 32% of men and 33% of women.
However, since men earn higher wages than women, on average, that may explain why over half of all male respondents are not concerned about retirement, versus 45% of women. Men were also more ly to say that they’ll make changes to save more.
However, 37% of women said they cannot save more, versus only 27% of men.
The survey revealed that more women than men rely on a spouse as part of their retirement savings plan. This is similar to the findings of a 2018 study conducted by UBS Wealth Management:
- Over half of women — 56% — leave key financial planning decisions to their husbands.
- Similarly, 56% of widows and divorcees find at least one financial “surprise” (e.g., high debt, hidden accounts).
- Nearly 60% of women expressed regret over not taking a more active role in key financial decisions while they were married.
These trends don’t decrease with age. The same report from UBS found that 61% of millennial women are more ly to leave financial planning up to men, versus 54% of women from older generations.
The Future of Retirement
While younger generations still have time to build their savings, there is growing evidence that suggests retirement may no longer be a feasible option for many Americans.
Northwestern Mutual’s Planning and Progress 2019 study found that 46% of working adults plan to work past the traditional retirement age of 65 due to financial concerns.
According to a separate poll conducted by the Associated Press-NORC Center for Public Affairs Research, a quarter of Americans don’t expect to retire at all.
Planning for the future is crucial. The amount of money needed to retire depends on several variables — some not entirely under your control — but most financial advisors will agree that $0 is definitely not enough.
It’s important to put away some amount of money — preferably in a retirement savings vehicle offering a high interest rate, such as a 401(k) or an IRA — regardless of whether you plan to retire.
While there is unfortunately little that can be done for those who want to save but cannot find the extra money, the results of GOBankingRates’ survey may indicate a change in attitudes toward retirement.
More From GOBankingRates
Methodology: GOBankingRates conducted an online poll using Survata and surveyed 2,003 Americans from across the country using the following questions: (1) By your best estimate, how much money do you have saved for retirement? (2) What is the primary method you’re using to save for retirement? (3) Are you concerned about how much you have saved? (4) Which of the following is the main reason you do not have any retirement savings? and (5) Are you relying on a spouse or partner for your retirement? The survey ran from Aug. 27, 2019, to Sept. 3, 2019.
This article originally appeared on GOBankingRates.com: 64% of Americans Aren’t Prepared For Retirement — and 48% Don’t Care
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Americans Haven’t Saved Enough for Retirement. What Are We Going to Do About It?
Each year, BlackRock, the world’s largest asset manager, sends a much-anticipated letter to leading CEOs. This year, chief executive Larry Fink’s focus was on why it is imperative for business to contribute to society. One of the first big issues he highlighted was retirement:
“Many [individuals across the world] don’t have the financial capacity, the resources, or the tools to save effectively; those who are invested are too often over-allocated to cash.
For millions, the prospect of a secure retirement is slipping further and further away — especially among workers with less education, whose job security is increasingly tenuous.
I believe these trends are a major source of the anxiety and polarization that we see across the world today.”
We agree: Over the last four decades, changes across corporate America have put workers and the broader U.S. society at risk. We’ll talk more about the risks in a bit, but first it’s worth outlining how we got here.
The Road to the Retirement Crisis
Ultimately, the shift from defined benefit pension plans to employee-directed defined contribution 401(k)s is the major driver of the impending retirement crisis.
Beginning in the 1980s, this move helped companies reduce their retirement liabilities and better meet their quarterly financial targets, but put an unmanageable burden on employees. For 401(k)s to be effective, for example, contributions must be made consistently throughout a worker’s career.
In practice, people tend to make contributions sporadically. They also struggle in choosing contribution levels and investment options, and avoiding the temptation of using their savings for other needs.
Even when contributions are made, 401(k)s tend to earn subpar returns on average due to limited investment strategies and high administrative expenses.
Employees in defined contribution plans often do not have significant investing expertise and earn rates of return that are substantially below professionally managed pension plans.
When workers near retirement have to decide how to withdraw funds, determine a spending rate, and map out an investment strategy, many lack the expertise to do so effectively.
The result is that many workers are left with insufficient nest eggs for retirement and won’t be able to maintain the economic position they achieved while working.
Among Americans between 40 and 45 years of age, for example, the median retirement account balance is just $14,500 — less than 4% of what the median-income worker will require in savings to meet his retirement needs.
What’s worse, Social Security currently provides a declining percentage of the required retirement income. For a median income worker, Social Security minus Medicare premiums today covers about 29% of their pre-retirement income, down from 40% two decades ago.
In addition, less than four years from now, Social Security costs are projected to begin exceeding revenues until that program’s Trust Fund is fully depleted in 2034. This will put further pressure on Social Security benefits.
these trends, we predict the U.S.
will soon be facing rates of elder poverty unseen since the Great Depression; in fact, one study shows that more than one in three retiring Americans will find themselves in or near poverty in the next 10 years.
This wave of older poor Americans will strain our social safety net programs and budgets as the country copes with providing low-income elder shelter, food, and health care.
This will ly not just have an impact on state and federal governments; it could also tear at the social fabric of America in fundamental and destructive ways.
It’s bad enough that incomes have stagnated for all but the richest Americans; what happens when an entire generation, many of whose members have worked hard all their lives, suddenly have little to show for it? Polls showing that large majorities of the population worry about retirement security should be a warning sign to business leaders and politicians a.
One Potential Solution
The good news is that fixing the coming retirement crisis is possible. It won’t involve reinstituting traditional pensions, however. Why? The first reason is the current nature of competition.
If an individual company tries to ensure their workers have a secure retirement, it burdens them with an added cost not shared by their competitors.
This will make broad adoption much harder than if a level competitive playing field can be established.
More importantly, a company-by-company approach is ill-suited to today’s increasingly mobile workforce.
Employees are increasingly ly to move from job to job rather than make their career at a single organization, and are generally cashed existing 401(k)s by their old employers and have to start all over again.
This doesn’t even begin to tackle the issue of freelancers, contractors, and gig workers who now, more than ever, need a portable pension-type benefit that does not burden employers or taxpayers with unfunded liabilities. We need a holistic solution.
In our book, Rescuing Retirement, we put forward such a plan. It requires no new taxes, does not increase the deficit, and actually reduces the administrative burden on companies that sponsor plans.
Under our proposal, every worker will receive a personal Guaranteed Retirement Account (GRA). Workers maintain ownership of this account as they move from job to job, automatically contributing at least 1.5% of every paycheck to the GRA until they retire. A matching 1.5% is provided by each employer.
To offset the required employee contribution, the plan gives every worker up to a $600 tax credit. This almost fully pays for the contribution for people earning below median income — our most vulnerable workers. We accomplish this in a deficit neutral way by redeploying the existing tax deductions for 401(k) contributions.
Those deductions disproportionately benefit high income employees who are not at risk in retirement.
To achieve higher returns with lower risk, savings in the GRAs are pooled and invested. Workers select a professional pension overseer, which could include government entities such as state pension funds or private sector pension managers.
Pooling GRAs in this way reduces administrative costs and gives GRA holders access to higher returning investment products and the best asset managers.
Upon retirement, the GRA is automatically converted into a government guaranteed annuity their GRA balance which provides consistent, life-long income for the employee and his or her spouse. This way, retirees can never outlive their savings.
Why It’s a Good Deal for Companies
We believe businesses will find the 1.5% contribution rate affordable and attractive for several reasons:
- The cost of employer contributions is substantially offset by relief from the burdensome administration and regulatory burden of existing plans (determining investment options, managing early redemptions and departing employees, negotiating fees, etc.) Many employers will be able to reduce expenses as compared to traditional pension plans or 401(k)s.
- A modest, one-time price increase of less than 1% on their goods or services will fund the entire plan for most employers.
- Aging workers will be better able to retire, making room for younger workers. A 2017 study by Prudential and the University of Connecticut estimates that a one year delay in retirement age by one employee could cost an employer $50,000.
Our approach is even beneficial for small businesses not currently offering any retirement plans. Small businesses are families, where owners know personally and care deeply about their employees. And yet, in 2016, less than 20% of companies with fewer than 24 employees sponsored any kind of retirement plan.
This doesn’t mean they don’t want to help; a 2016 Pew survey found that small firms would welcome an easy solution to their employees’ retirement problems.
The simple to administer GRA model would enable many small employers to do what they have wanted to do all along: take care of their workers in retirement without the cost, complexity, or liability associated with the other alternatives.
Most executives care about their people. They understand the basic idea that employees are the foundation of their company’s success, and deserve dignity and financial security in their old age.
No leader wants to see someone who loyally dedicated his or her career to a company ending up in poverty.
And yet due to the current set of short-term pressures placed on today’s business world — where a CEO is only as good as the last quarter’s results — executives have offloaded volatile retirement liabilities onto workers who are ill-equipped to bear that burden.
To be sure, the solution doesn’t rest entirely on the shoulders of executives; public policy plays a huge role. But business leaders should be coming up with ways to help address the burden created in large part by pension changes they helped usher in. We’ve offered one potential approach; what will be yours?
Retirement Crisis in America
In Retirement Savings, Retirement Tips
There is a growing retirement crisis in America. Financial experts are alarmed, and even Congress has taken up legislation to “fix it.”
According to a Bankrate survey earlier this year, one in five American adults have nothing saved for retirement or emergencies.
20 percent of Americans have saved 5 percent or less of their annual income to meet certain financial goals.
And less than a third have saved at least 11 percent or more.
It’s a bleak outlook for millions of Americans.
Despite these discouraging statistics, unemployment is currently at a near 50-year low and wage gains higher than they’ve been in a decade.
And we’re currently experiencing the longest bull market in U.S. history. This begs the question:
With a culture that values more is better, poor spending habits and crippling debt have become the norm.
Couple that with the cost of living increasing and skyrocketing healthcare costs, and it’s the recipe for a perfect storm.
In this post, we’re breaking down what’s contributing to the retirement crisis and what you can do to get your finances in order and be better prepared for retirement.
Lack of Education
Sadly, our industry is systematically disconnecting investors from their money. People are told it’s difficult to really understand investing and money in general.
The lack of education financial institutions provide is astounding.
We aren’t teaching it in schools either.
So, it’s no wonder that, in late 2018, less than a quarter of voting-age Americans “were ‘completely confident’ about their ability to navigate through economic ups and downs.”¹
We at 401k Maneuver™ want you to know that it’s not as difficult to understand your investments as you’ve been led to believe.
And it doesn’t take a finance degree to learn how to better manage your money and financial future.
The first step is to educate yourself. Do what you can to learn about your investments.
If you have a 401(k) and are unsure exactly what you’re invested in, start asking questions.
Seek third-party advice.
Read books on the topic. Attend a master class on how to maximize your retirement savings. And keep reading blogs this one.
We cannot stress this enough: It’s up to YOU to make sure you’re financially prepared for retirement.
The sooner you start, the better off you’ll be. And the more ly you are to have a retirement lifestyle you desire rather than scraping by.
Poor Spending Habits
A Bankrate survey conducted in February this year shows that 40% of respondents aren’t saving for retirement because they have too many other expenses.²
The same survey reported that 1 in 5 adults cannot cover their current monthly bills.
And auto-loan delinquencies that are 90 days or more past due skyrocketed to 4.69% earlier this year–just below the peak delinquency level during the Great Recession in Q4 of 2010.³
The situation many Americans find themselves in and the subsequent retirement crisis in America boils down to this: overspending and poor money management.
With the rise of social media, fighting the urge to “keep up with the Jones” is harder than before.
We now see what our friends and neighbors are doing in daily photos and posts, and we often want what they have.
That trip to Iceland. That new car. Trying out that new, expensive restaurant in town.
Not to mention all the ads that inundate us on everything from to and TV to billboards telling us we need a bigger house, faster car, better life.
It’s human nature to want to expand, have an adventure, try new things.
And it’s difficult to be strong against the urge to have the newest thing. It’s hard not to get caught up in the culture of more is better–especially when it seems everyone is doing it.
The culture of consumerism and always having the latest gadget is what’s causing crippling debt among consumers, and hindering their ability to save for retirement.
What your friends’ social media posts and those TV ads don’t show is the true cost of owning that new thing or taking that trip.
Some people may be able to afford it. Others might have saved for a year.
And probably a majority have put it on a credit card, racking up more and more debt.
It doesn’t matter how much money you make–whether you’re a $50,000 or $200,000 income household.
Overspending and lack of planning for emergencies and for your financial future plague all income brackets.
And it’s not always bigger purchases that are causing money to fly out the door.
Take a moment to answer these questions:
- If you stopped going out to lunch four times a week with co-workers and instead packed your lunch, how much could you squirrel away after 30, 60, or 90 days?
- What if you didn’t buy that new phone/computer/tech gadget this year, and instead, paid off debt with the money saved?
- How much would that be? Add it up. money more closely? Take a look at the past 6 months of fees, and add them up. That’s how much you could save in the next 6 months if you budgeted better.
If you do this exercise, you’ll see that it’s the little things that make a big difference in the long run.
No matter your household income, quality of job, or current financial situation, it’s time to take control of your financial future.
- If you don’t already have a budget, create one.
- If you have a budget, go through it line by line and see what you can cut.
- Pay yourself first. Make sure you set aside 10% of your paycheck for retirement savings.
- Set aside another 10% for an emergency fund.
- Pay your bills.
- The remaining money left over is spending money.
Lack of Emergency Savings
According to the US Federal Reserve Board’s Report on the Economic Well-Being of U.S. Households, 4 in 10 adults would not be able to cover $400 worth of unexpected expenses, such as a car repair or broken appliances.⁴
This is down from 2013, when half of adults could not cover a small, unexpected expense.
Of those not able to cover a hypothetical $400 unexpected expense, 43% would carry a balance on a credit card to pay for it.
26% would borrow the money from a family member or friend. And 19% would sell something to come up with the money.
If a medical issue arose, 1 in 4 adults would skip medical treatment because they could not afford it!
Without basic savings to cover emergencies, it makes it harder to recover if you have to borrow the money or carry a balance on a credit card.
Because now, you have to pay that back, and you’re unable to work on paying down the original debt, paying monthly bills, or saving for retirement.
It’s a vicious cycle too many people find themselves in, and it’s contributing to the retirement crisis in America.
The good news is that, with a little effort and determination, you can build an emergency account so the next time the AC breaks or you have to rush your dog to the vet, you can easily pay in cash.
Carrying Too Much Debt
Debt is also a contributing factor to the retirement crisis in America.
Student loans and maxed-out credit cards…
Auto loans, outstanding medical bills, and mortgages…
Debt not only prevents you from maximizing your retirement savings, but it may also affect your retirement lifestyle should you carry that debt into retirement.
A recent survey by T. Rowe Price showed that 69% of parents want to put money toward college before saving for retirement, and more than three-quarters say they are willing to delay retirement to pay for kids’ schooling.⁵
Add to that the $4 trillion in consumer debt Americans now owe ($1 trillion of which is revolving debt such as credit card debt), and it’s not surprising the retirement savings outlook is bleak.
It’s not just younger people carrying debt: people over the age of 60 owe one-third of the $1 trillion, according to the Federal Reserve Bank of New York.⁶
The more you owe, the less you have to pay yourself and save for retirement or fund your emergency savings account.
And if you carry debt into retirement, chances are you’re going to have to work longer and will have less income to spend.
- Add up all the debt you owe and the interest, and create a plan to get that debt paid down. Make sure to review this monthly to track your progress.
- If you aren’t sure of the best strategy to pay it all off, do an internet search or use debt pay-off calculators to figure out which bills to pay down first.
- Review your monthly budget and see what you can cut. If you have to cut a monthly subscription, do it. If you have to take a side-hustle, do it.
Remember, this is your money and your future. If you don’t take your financial future into your own hands now, no one is going to do it for you.
Not Seeking Expert Advice
With crippling debt, cost of living increasing, healthcare costs soaring, and lack of savings, how are people going to survive retirement?
If you apply the advice in this article and get third-party help, you’ll be in a much better position.
In fact, a recent Morningstar report showed that participants who received expert guidance had as much as 40% more income during retirement versus those who received no help at all.⁷
Just think about the difference a potential 40% increase in your retirement income might do for your retirement! How much could that be, and how would you use it come retirement?
It doesn’t matter how much or how little money you have saved for retirement, or how much debt you are carrying…
A third-party expert can help you create a plan to get debt, fund your emergency account, and maximize your retirement savings.
Make the best decision for your financial future. Download our no-cost guide on how to understand The Different Types of Licenses Financial Advisor Have and What They Mean to You.
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