Long contending with the ‘ole “Keeping Up with the Joneses” mentality, only 66% of American workers have saved for retirement according to the Employee Benefit Research Institute’s annual Retirement Confidence Survey. Even worse, only 57% of workers are currently saving for their Golden Years. This is down from about 65% in 2009.
While you would think the Great Recession of 2007-2009 taught Americans a lesson about saving, the fact is the economy and job growth have not been strong enough to help people save. Actually, the recession forced nearly one in three workers to tap their savings accounts to pay for basic expenses in the last year.
Not surprisingly, income level affects American’s savings rate. The decline in those who are saving is almost entirely from households with total annual income of less $35,000. Households making at least $75,000 have continued to save for retirement. If you exclude home equity values and pension plans, more than a fourth of all workers have less than $1,000 in total savings and investments. Almost a scarier fact is that 57% of workers have less than $25,000 saved.
Gender/Age Based Savings Comparisons
Of those aged 25-34, 75% have less than $25,000, while 90% have less than $100,000. Only a third contribute to a workplace retirement savings plan. Unfortunately, the statistics do not get better with age. More than 50% of those who are within 10 years of retirement age have less than $50,000 saved. About 60% have less than $100,000 saved. Less than 40% of workers within 10 years of retirement contribute to a work-place retirement savings plan. Shockingly, 52% of workers 55 and older have less than $50,000 in savings.
On the bright side, more workers today are seeking advice on how much they’ll need to save for retirement than did 10 years ago. The biggest jump came from those 55 and older, with 54% running calculations compared with 42% only 10 years ago. However, workers age 25-34 have apparently been disillusioned by the economy, with 32% now having run calculations versus 42% 10 years ago. Somehow, 30% of all workers believe they can make it through retirement on less than $250,000 in savings. More than half of those surveyed believe they can make it on less than $500,000.
This may be a problem for the 52% of workers aged 55 and older who have saved less than $50,000, and the 57% of workers in the 45-55 age range with less than $50,000. Only 24% of workers 55 and older have more than $250,000 in savings. Only 12% of all workers have achieved this level of $250,000 in savings.
Research shows that men and women are the same when it comes to saving, contributing to workplace retirement plans, and having an IRA. But they differ in expectations of their need of savings to retire, with 54% of women saying $500,000 or less will do, whereas only 47% of men saying $500,000 will be enough. About 22% of men say they’ll need at least a million or more, while only 15% of women assume they’ll need that much. These numbers are kind of alarming, because women are expected to live longer, and thus, face higher health care expenses. The difference in expected savings needed may be a result of women expecting a pension plan and Social Security to be significant sources of income in retirement. Men are much more likely than women to think they have enough money to live comfortably, or at least take care of basic expenses during retirement.
Retirement Expectations and Changing Attitudes about Social Security and Medicare
The economic struggles of the last five years have certainly made workers rethink the age at which they might retire. In 2006-2007, about 5% of workers expected to retire later than originally planned. In each of the last five years, at least 20% of workers expect to delay their retirement. Today, 36% of workers plan to retire after 65, and 7% don’t plan to retire at all. Just 20 years ago, only 11% of workers planned to retire after 65.
More than 20% of survey participants blamed the poor economy for their inability to retire, while another 20% claimed a lack of faith in Social Security or the government. Finally, another 20% just simply said they can’t afford to retire.
More Americans are planning to stay employed, as more than two out of three expect to work, at least part-time, after they retire. Unfortunately, nearly half of retirees are not at all confident about finding paid employment in retirement. When nearly 70% of workers don’t expect the Social Security system to continue providing benefits of at least equal value to today’s, it’s not too surprising more people are planning to work after they retire. Yet, more than 75% of retirees say they will rely on Social Security for retirement income. To us, this indicates retirees are expecting to have to reduce their spending.
Unfortunately, with Medicare, it’s the same story. More than two-thirds of workers and more than half of all retirees don’t believe Medicare will continue to cover healthcare expenses at a level similar to today’s benefits.
Overall Retirement Confidence
Given what we’ve gone through over the past five years, it’s really not surprising that there’s been a large jump in Americans that are not confident they have enough money saved for retirement. In 2007, about 29% of workers were not confident, but today, that figure is closer to 50% of all workers. In the same vein, over that period, the percentage of Americans who were “very” confident they had saved enough plunged by more than half from 27% to now only 13%.
We believe the volatile stock market played a large role in Americans’ uncertainty about retirement. There is still a lot of fear surrounding the markets, despite the market being up about 100%. Think back to March 2009, when some individuals became victims of their own fears, because many investors sold their stocks at the bottom.
Of those already retired, the 2007-2009 market downturn undermined their confidence. In 2007, when markets were peaking and home values still holding up, 41% of retirees were “very” confident they had enough money. Today, that figure stands at 18%.
Despite the negativity of the survey, there is some good news from the report. More workers and retirees have lower debt levels than five years ago, indicating that they have been able to pare down expenses.
At Henssler Financial we believe you should Live Ready, which includes taking the necessary steps to secure your future retirement. If you have questions on how much you may need to save to retire comfortably, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
