The middle-class, in case we didn’t already know, is in trouble. But it is suffering particularly when it comes to retirement saving, which it Just. Isn’t. Doing.
The fifth annual Wells Fargo Retirement Study found that 34 percent of middle-class Americans aren’t putting money away at all — whether it’s for a 401(k), an IRA or some other retirement vehicle.
Among those ages 50-59, the number is worse: 41 percent aren’t saving for retirement. Almost a third (31 percent) say they won’t have enough money to “survive” in retirement, and when it comes to folks in their 50s that percentage rises to nearly half (48 percent).
Depressed yet? Wait. If you thought saving for retirement was a challenge, you’re far from alone, with 68 percent of respondents saying that it’s “harder than I anticipated.”
Forget pensions, retirees better off with 401(k)s, ICI says:
In 2013, one-third of retirees received some retirement income from plan-sponsored assets, either their own or a spouse’s. More than half (55 percent) say they’re going to save “later” to “make up for not saving now.” Among those in the prime age range for saving, 30-49, 59 percent are banking on that procrastination plan, while 27 percent just aren’t contributing to a retirement plan or account.
The irony is that not only do 72 percent say they should have started saving earlier for retirement (that’s up from 65 percent in 2013), 61 percent admit that they’re not sacrificing “a lot” to save for retirement (Thirty-eight percent say they are). And when asked if they would cut expenses “tomorrow” to save for
retirement, only half said they would.
Where would they find the money to save? Fifty-five percent said it would come out of spending for spa treatments, jewelry and impulse purchases; 55 percent said they’d stop eating at restaurants “as often”; and 51 percent said it would have to come out of funds planned for a car, a home renovation or a computer. Only 38 percent said they’d forego a vacation to save for retirement.
When they do save, they’re not saving all that much. The survey indicates that the median amount saved is $20,000 — down from $25,000 in 2013. Middle-class Americans expect to need a median of $250,000 in retirement, but are only saving a median of $125 monthly. If you discount younger middle-class individuals with lower-paying jobs and consider those between the ages of 30-49, savings are a bit higher at a median of $200 a month. But when you look at people in their 50s, that amount drops to only $78.
Not surprisingly, those with financial plans (only 28 percent) save more; a median of $250 per month. Also, people with 401(k)s save more, and 85 percent of those with a plan say they “wouldn’t have saved as much for retirement” without it.
Among those who don’t think they’ll have enough money, it’s a truly grim picture. Nearly half (48 percent) say they aren’t confident they will have put away enough “to live the lifestyle they want” in retirement, and that number increases to 71 percent for those in their 50s. Scarier still, a quarter of all middle-class Americans say they “get depressed” thinking about how their finances will be in retirement.
Bump that up to the folks in their 40s and 50s and you get one out of every three down in the dumps about it. And they’re serious: 22 percent said they’d rather “die early” than not have enough money for comfortable retirement living. A third say they will have to work until they’re “at least 80” because they won’t have enough money otherwise. Half of folks in their 50s say they’ll be working until at least 80.
OCT 24, 2014 | BY MARLENE Y. SATTER
Tom Hegna inspires me. If you are unfamiliar, Hegna is an author and speaker, and coach of financial planners. I commonly refer my clients to his book Paychecks and Playchecks, or one of his DVDs. His ideas are not particularly controversial or even uncommon, but his ability to articulate the fundamentals of financial planning is what separates him from the pack. Here’s a recent taste of Hegna doing what he does best—setting Financial Advisors straight about how to best serve their clients (he is speaking to financial professionals, but no “insider” knowledge is required to get the gist):
Beware of TINA: The Singing Siren
I want to direct your attention to our current economic status. When the market is having a bad day, I always like to post a quick snapshot to Facebook of the market's downturn. Despite major economic events in 2016 (Brexit, Fed Rates, underwhelming job reports, etc.), the Dow is at an all-time high. During 2016, according to the American Association of Individual Investors, the average portfolio of an active market participant engaged 64% of their portfolio into the stock market, which was an increase from the long-term average allocation of 60%. Back in 2008 when the market took a downturn, a lot of people got the heck out of the stock market and fast. After we saw some balancing and a bounce-back from 2009-2014 and even now in 2016 where the DOW is at all-time highs, a lot of those people are reentering the market.....STOP RIGHT THERE.
Economics 101: Buy Low, Sell High
Consumers Logic/Perception: 2008:The market is big, bad, and scary, get out! 2016: The market is making other people money, let's get the getting while the getting is good!
How does that make any sense? Why is the stock market at all-time highs in 2016? Inflation must be at an all-time high (Hint: It's not). Why are people trying to re-enter the market when it's at all-time highs?
One person comes to mind immediately: TINA, and I'm not talking about Tina Turner. There Is No Alternative (TINA). It is a scary thought that during a time when earnings are down, the economy is slowing, and oil prices have plummeted that people are piling more money into the market. What goes up, must come down. If the stock market is at all-time highs, it means there really isn't another option for stock brokers who want to keep their clients. They are forced to chase after gains for their clients and prove they are doing something for their fees. Many people are chasing after the gains we witnessed in the 1980s and 1990s because TINA. Bond rates are so low that they don't seem like a viable alternative. And if interest rates do rise, bonds will get crushed. CD's and money market funds are paying close to zero. What is an investor to do? Just like the sirens who's singing lured sailors to crash against the rocks, TINA may be doing the same to investors...When I think of all the Americans educated with this fallacy of TINA, I want to tell them, THERE IS ANOTHER ALTERNATIVE FOR EVERYONE!
For people in their accumulation phase, they should put at least a portion of their savings into a whole life or permanent life policy. For people in the distribution phase, I recommend converting a significant portion of their savings into guaranteed lifetime income. While people are riding the emotional roller coaster that is the stock market, you and your clients will be more optimally situated to enjoy life! If the markets continue to grow from TINA, with apprehensive and skeptical growth, stocks are likely to enter a bubble. With life insurance and annuities, there is no bubble! While your neighbors are stressed waiting for the market to open, you will be starting your second round of 18 holes and then heading to happy hour!
Look, the aging demographic in the US is not a joke. The US is getting older and older, which will have a dramatic effect on Americans lifestyles, social interactions, and market opportunities. Also, it will have an unprecedented impact on cross-generational interaction, future medical technologies, and economic influences. Rather than trying to predict the future of the market, stick with guarantees.