Why Aren't More Americans Preparing For Retirement?
If you have more than $1,000 dollars in savings right now, you're already in a better position than about 35 percent of US adults.
Recent surveys from 2016 found that most adults in the US have very little money in their savings account. One survey by GOBankingRates found that only 15 percent had $10,000 or more in savings. About 11 percent only had between $1,000 and $4,999 in savings. The average savings for families, who had earners that were between the ages of 50 and 55 years old, was seen to be about $8,000.
Many Americans have reported that one of their biggest regrets in life, financially speaking, was that they didn't prepare sooner for their retirement. One survey by Bankrate found that about 46 percent of adults feel that they should've put more aside for things like emergency expenses and education for their children. It's also common that many feel as if they underestimated their retirement needs and weren't realistic in considering things like healthcare costs and more.
No doubt there are millions of Americans who plan on solely relying on Social Security in order to get by. However, for those who already rely solely on these funds, as opposed to supplementing their income with it, they will be eager to tell you of the hardships that such a fixed income might pose.
The personal savings rate, as a percentage of personal disposable income, is worrisome to some industry experts; the average is now seen to be about 5.1 percent. In other words, for every $100 of income, about $5.10 is being funneled toward things like emergency expenses, retirement, and so on. As you can see from the graph above, it used to be a lot higher than the average of around 5 percent.
Seniors in the US are also seen to be working at the highest rates in 55 years, according to reports from Bloomberg. It's believed that many Americans might end up working past the age of 70, in order to pay for and meet their basic needs. According to a 2017 US jobs report, depending on how seriously you want to take them, roughly 19 percent of those aged 65+ were seen with part-time employment, for the second quarter of the year.
It's estimated that by 2024, for those who are between the ages of 65-69 ,that about 36 percent will be actively participating in the labor market.
Compare that 36 percent to that which was seen back around 1994 which was only said to be roughly 22 percent who were actively participating in the labor market between those ages.
It's also expected that workers will continue working well past 65 not only in the US but in other countries as well. For the US and Japan alone, about a third of the workers are expected to be working well past 70 years of age. Some even suspect that they might never be able to retire and that so long as they are living that they will need to continue working in any way that they can in the labor market.
Researchers point to a number of reasons for the trend, such as increasing life expectancy and improvements in healthcare.
For many Americans, they still expect that in the years to come that they will be able to supplement their needs by adding on a side income and working well past 60 or 65 years of age.
One survey by the Employee Benefit Research Institute found that about 79 percent of US workers say that working a side job is their retirement plan. However, this option poses a risk for those who neglect planning now for hopes that they can secure some potential suitable employment decades down the line.
The segments of the US labor force that are expected to show the most growth between now and 2024, are those 65 years to 74+ years old.
Pics:
Getty Images via US News
FRED
Bloomberg
The Office via Giphy
This is not intended to be taken as financial advice and is posted for information purposes only.
Sources:
http://www.cnbc.com/2017/06/13/heres-how-many-americans-have-nothing-at-all-saved-for-retirement.html
https://fred.stlouisfed.org/series/PSAVERT
http://fortune.com/2016/06/22/aging-workforce-retirement/
https://money.usnews.com/money/personal-finance/mutual-funds/articles/2015-12-16/9-tips-for-investors-getting-a-late-start-on-retirement-savings
https://www.fool.com/investing/2016/10/03/heres-the-average-americans-savings-rate.aspx
https://www.fool.com/retirement/2017/07/10/75-of-americans-underestimate-their-retirement-sav.aspx
https://www.bloomberg.com/news/articles/2017-07-10/working-past-70-americans-can-t-seem-to-retire
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The thing that stops spending is consumerism alongside trying to help children / grandchildren
Yeah, I need to get saving! ;)
In my opinion it's more like a lack of financial education. In which school they learning children how to manage their finances properly?People just get used to spending everything they have since they are youngsters and so it happens that they do it as a grown ups as well.
good point!
I read a book recently which addressed this subject. The book argued that the introduction of the 401k plan led to the demise of personal retirement savings. Since companies no longer were responsible for paying their employees through retirement (traditional pension), people for various reasons failed to grasp the importance of putting money away. The book is called "Who Stole the American Dream?" and offers a fascinating history of jobs in America and the evolution of the "American Dream." You can grab a copy here or if you have a Kindle and you'd like to borrow the book from me, let me know via Twitter. Thanks for sharing!
that sounds like an interesting read, thanks for the rec
It can be a painful issue. So many of the jobs being "created" are often lower wage jobs that don't allow for savings after rent / food / etc.
I know a lot of people whose only income is Social Security. Fortunately, they live in places where the cost of living is much lower than more urban areas, but they are concerned daily about how they'll make it.
I thought only in Russia, poor pensioners!
In Russia people are getting better off
Hungary is the "best"!
I will be 25 years old this year (2017) september 17 and I have multiple disabilities (I am unable to make friends and I am unable to work in real life) and my monthly income in real life is like $230,50 USD (60 000 HUF) ($1 USD = 260.3000 HUF at the moment). I get pension-like income.
I bet the "poor pensioners" in Russia have much more monthly income than me!
Believe it is not so ((the pensioner in Russia has an average pension of about 6,000 rubles.
Think what's best)
I think this is a world wide problem in EU there is a lot of poor pensioners as well. I will have no pension because I never paid much TAX and in the pension fund but I do my own things don't need that damn pension. Thanks for the info and have a nice day :)
Sorry but I think this statement is complete nonsense, just like the unemployment numbers the Department of Labor puts out every month.
People aren't saving for retirement because they're blowing their money on frivolous things like food, housing and student loans.
The policies of the central banks have damaged the very people who actually build wealth, the ones who spend less than they earn and save.
Trying to pin it on anything else is just whistling past the graveyard.
all that cheap credit !👍
Exactly!
Reward the people who borrow and punish the people who save.
That's historically been the recipe for success right?
negative interest rates will be fun :)
With time, people evolve and learn. More people will hold on to appreciating assets than depreciating ones, so that they can use it without the fear of inflation at the time of retirement.
I guess for some people they just don't have the money to put aside for their retirement.
It's sad to see that some people may have to continue working at such high ages.
In some countries you have State Pensions but sometimes they are just not enough to live off.