A new survey from the Federal Reserve found that 31 percent of working adults have no retirement savings, and 38 percent have no intention to retire. Proving once again that it’s the baby boomers who are the irresponsible generation, a quarter of workers 45 and older have not planned pensions or retirement savings. [Reuters]
May 27 (Reuters) - Many Americans are not financially prepared for retirement, with almost a third of working adults without savings or a pension, according to a Federal Reserve survey published on Wednesday.
The Fed's 2014 Survey of Household Economics and Decisionmaking found that about 38 percent of the more than 5,800 respondents have either no intention to retire or plan to keep working for as long as possible.
"Thirty-one percent of non-retirees have no retirement savings or pension, including nearly a quarter of those older than 45," the Fed said.
"Even among individuals who are saving, fewer than half of adults with self-directed retirement savings are mostly or very confident in their ability to make the right investment decisions when managing their retirement savings."
The survey, which was conducted in October and November last year on behalf of the Fed board, also found that among lower-income respondents, whose household income is less than $40,000 per year, 55 percent plan to keep working as long as possible or never plan to retire.
It found a modest improvement in individuals' perceptions of financial well-being compared to 2013, though their optimism about future financial prospects increased significantly.
Sixty-five percent of respondents viewed their families to be either "doing okay" or "living comfortably" financially, a 3 percentage points increase from the 2013 survey.
Twenty-nine percent expected their income to rise this year, up from 21 percent in the 2013 survey.
Still, the finances of many families are shaky. Only 53 percent of respondents said they could cover a hypothetical emergency expense costing $400 without selling something or borrowing money.
"Thirty-one percent of respondents report going without some form of medical care in the past year because they could not afford it," the Fed said. (Reporting by Lucia Mutikani; Editing by Andrea Ricci)
Oy. We fall into the category of not saving enough, but as with a lot of things it has to wait until we are no longer paying everything we make to daycare. Only 15 months! (Not that I'm counting.)
Honestly, it is completely unrealistic to expect the entire population, or even 75% of the population, to be able to save enough money, invest it wisely (and with plenty of luck), so that they'll be able to have enough money to last them ~20 years after they retire. It's just not going to happen. It's not human nature, and it's definitely not possible in a system like the one we have, where your savings are tied to your employment, not every employer offers the same options, and people are expected to learn about and become experts in investing all by themselves, in their free time. And this isn't even getting into the poverty rate, falling wages, the rising cost of tuition (and everything else) and the fact that many people don't even have enough money leftover to save even if they wanted to.
But it's a great way to set people up for failure and then blame them for their inevitable failure while washing your hands of any responsibility for them. It's the Republican way.
Still, the finances of many families are shaky. Only 53 percent of respondents said they could cover a hypothetical emergency expense costing $400 without selling something or borrowing money.
"Thirty-one percent of respondents report going without some form of medical care in the past year because they could not afford it," the Fed said. (Reporting by Lucia Mutikani; Editing by Andrea Ricci)
I mean, look at this!!! This is appalling! And we expect people to somehow save $500,000+??
This is way more than irresponsibility (although I'm happy to join in Baby Boomer bashing!) - this is a total failure of our system.
Does anyone know how the British pension system works? I don't know anything about how it works but I am always reading mentions about it in English novels, etc. Is it like paying into the system like we do with unemployment insurance? Could we do something like that here? (like make SS really work, I guess)
To me this is the most worrying line: "Even among individuals who are saving, fewer than half of adults with self-directed retirement savings are mostly or very confident in their ability to make the right investment decisions when managing their retirement savings."
If even people who have the means to save don't feel comfortable about their ability to invest, how can we expect this system (401k) to work for an entire population??
To me this is the most worrying line: "Even among individuals who are saving, fewer than half of adults with self-directed retirement savings are mostly or very confident in their ability to make the right investment decisions when managing their retirement savings."
If even people who have the means to save don't feel comfortable about their ability to invest, how can we expect this system (401k) to work for an entire population??
yea, I'm pretty well versed in the stock market & I'm still convinced it's a big ponzi scheme.
Post by Velar Fricative on May 28, 2015 9:00:12 GMT -5
This is depressing but I just can't blame people who have trouble making ends meet right at this moment for not thinking "Well, gotta put that money away towards retirement even though we can't afford anything else right now!!!"
Does anyone know how the British pension system works? I don't know anything about how it works but I am always reading mentions about it in English novels, etc. Is it like paying into the system like we do with unemployment insurance? Could we do something like that here? (like make SS really work, I guess)
It's the same - when you work you pay a certain sum to the Gov't - National Health Insurance. It goes to the NHS as well as state pensions (which, by the way, are not very high - something like £140 per week which sucks in London). BUT, they also just mandated that all workplaces provide corporate pension funding for their workers as of a few years ago. There are a lot of other schemes for people in the UK and many people do try to take advantage of them.
As a US and UK citizen who will be retiring in the UK, I am pretty much screwed unless I give up my US citizenship due to the tax laws of the US (I can't hold a UK retirement fund as they are considered taxable by the US and my US retirement funds have pretty much been closed up/restricted due to not living in the US). This is one of many reason why I am considering giving up my US citizenship.
Post by Velar Fricative on May 28, 2015 9:44:55 GMT -5
And while the numbers here are for Boomers, I will not be surprised at all if things get worse for Millennials and beyond. While many of us know that we can't rely on SS and pensions have gone the way of the dinosaurs in most fields, we're facing rising debt and lack of ability to build wealth via real estate or other traditional vehicles for wealth-building.
Post by penguingrrl on May 28, 2015 9:45:27 GMT -5
I'll admit that I've always considered retirement a luxury only available to the well off. I mean, H and I are saving the recommended 15%, but we assume that the market will tank and that money will all be sunk. I really don't trust the stock market with my money at all. So far we've never seen as much as 1% growth on our various accounts. And we don't know nearly enough about that sector to change it.
I'll admit that I've always considered retirement a luxury only available to the well off. I mean, H and I are saving the recommended 15%, but we assume that the market will tank and that money will all be sunk. I really don't trust the stock market with my money at all. So far we've never seen as much as 1% growth on our various accounts. And we don't know nearly enough about that sector to change it.
What? What are you invested in? If you're with Fidelity or one of the big places, you can call them and have them walk you through how to find even an index fund so that you're matching pace with the market overall. No need to get fancy. I also like the targeted retirement products, so for example, you choose a 2030 fund if you want to retire around 2030, and it's balanced for you.
Here's a quick table I found with the past 15 years' returns from the S&P 500:
We save for retirement but I'm convinced it's not enough. DH thinks we're fine. At least we have something-at 32, I have more in my retirement accounts (excluding DH's) than my mom does at 50. Combined, DH and I barely hit 1x our salaries this year.
This makes me sad:
Still, the finances of many families are shaky. Only 53 percent of respondents said they could cover a hypothetical emergency expense costing $400 without selling something or borrowing money.
And while the numbers here are for Boomers, I will not be surprised at all if things get worse for Millennials and beyond. While many of us know that we can't rely on SS and pensions have gone the way of the dinosaurs in most fields, we're facing rising debt and lack of ability to build wealth via real estate or other traditional vehicles for wealth-building.
Soooooooo...we're all fucked.
Plus the astronomical cost of college for our generation's children. I know the standard advice is to look out for your own retirement first and the OP's article spells out why but I also understand the desire to set your kids up for a good start in life. Sigh. It's all a big mess.
Does anyone know how the British pension system works? I don't know anything about how it works but I am always reading mentions about it in English novels, etc. Is it like paying into the system like we do with unemployment insurance? Could we do something like that here? (like make SS really work, I guess)
It's the same - when you work you pay a certain sum to the Gov't - National Health Insurance. It goes to the NHS as well as state pensions (which, by the way, are not very high - something like £140 per week which sucks in London). BUT, they also just mandated that all workplaces provide corporate pension funding for their workers as of a few years ago. There are a lot of other schemes for people in the UK and many people do try to take advantage of them.
I wonder why there isn't more political momentum to set up something like this. This kind of system seems much more effective than what we have now.
I'll admit that I've always considered retirement a luxury only available to the well off. I mean, H and I are saving the recommended 15%, but we assume that the market will tank and that money will all be sunk. I really don't trust the stock market with my money at all. So far we've never seen as much as 1% growth on our various accounts. And we don't know nearly enough about that sector to change it.
If this is true, please call a representative from where your accounts are held. It sounds like your investment allocations need to be changed, pronto. The market is up a lot over the past several years, you should be well, well above 1% growth.
I'll admit that I've always considered retirement a luxury only available to the well off. I mean, H and I are saving the recommended 15%, but we assume that the market will tank and that money will all be sunk. I really don't trust the stock market with my money at all. So far we've never seen as much as 1% growth on our various accounts. And we don't know nearly enough about that sector to change it.
What? What are you invested in? If you're with Fidelity or one of the big places, you can call them and have them walk you through how to find even an index fund so that you're matching pace with the market overall. No need to get fancy. I also like the targeted retirement products, so for example, you choose a 2030 fund if you want to retire around 2030, and it's balanced for you.
Here's a quick table I found with the past 15 years' returns from the S&P 500:
2014 13.80
2013 32.43
2012 15.88
2011 2.07
2010 14.87
2009 27.11
2008 -37.22
2007 5.46
2006 15.74
2005 4.79
2004 10.82
2003 28.72
2002 -22.27
2001 -11.98
2000 -9.11
We have one with vanguard (from when I was still working at the museum) and Hs is with one of the big companies (I don't remember which). I think the problem is that we're terrified of having money in the market, so we always choose the lowest risk options possible, which is probably the slowest growth. I honestly feel like anything I put in a 401K is no safer than putting it in a slot machine. Maybe I'll see it again and maybe I won't (I hate gambling too). Right now H has a pension. Here and his last job both had mandatory pension contributions. Too bad both were temp positions that couldn't/wouldn't lead to permanent employment.
penguingrrl - Look at this calculator: www.moneychimp.com/features/market_cagr.htm You can put in the year you started investing and the year you ended investing (theoretically), and how much a dollar would have grown to. Over time, there is very, very little chance that all your money goes away, even taking into account those really difficult years.
yes, we might have a zombie apocalypse or some other global meltdown, but generally the money in there is growing over the long term.
ETA: you're probably in a money market account, which is like the default option for 401(k)s, prior to you going in and choosing your investments. THey're meant to be stable ... but 1% growth isn't growth at all, when you think about the impact of inflation. You're literally losing money.
Sorry if it seems like I'm criticizing you, but if you're actually saving, then it's a crime to just let that money fester. Make it work for you!!
penguingrrl - Look at this calculator: www.moneychimp.com/features/market_cagr.htm You can put in the year you started investing and the year you ended investing (theoretically), and how much a dollar would have grown to. Over time, there is very, very little chance that all your money goes away, even taking into account those really difficult years.
yes, we might have a zombie apocalypse or some other global meltdown, but generally the money in there is growing over the long term.
ETA: you're probably in a money market account, which is like the default option for 401(k)s, prior to you going in and choosing your investments. THey're meant to be stable ... but 1% growth isn't growth at all, when you think about the impact of inflation. You're literally losing money.
Sorry if it seems like I'm criticizing you, but if you're actually saving, then it's a crime to just let that money fester. Make it work for you!!
Thank you. It's honestly a travesty that we're counting on a system so confusing to even fairly educated people (I was in grad school for a while and H has a PhD from an Ivy League university) to ensure that elderly in our society are taken care of. I need to educate myself on this because at 34 and 33 we have almost nothing towards retirement despite following the recommendations for saving for all of our working years (minus Hs 5 years of grad school; we saw negative growth in those years and his 401K was worth less when he graduated than when he started).
And while the numbers here are for Boomers, I will not be surprised at all if things get worse for Millennials and beyond. While many of us know that we can't rely on SS and pensions have gone the way of the dinosaurs in most fields, we're facing rising debt and lack of ability to build wealth via real estate or other traditional vehicles for wealth-building.
Soooooooo...we're all fucked.
Yeah, at least the boomers pretty much could guarantee that their houses were worth something between buying very low - like $40k for a house that is now worth $300k. So even in the "crash" of the housing market, their house was still making money if they bought it early.
If you make $35k and get 1/2 percent raise every year (of course many people get no raises at all), starting to save 3% of your salary at age 30 and your employer contributes nothing (which many employers don't, especially at lower paid jobs), and you have no hardships like divorce or illness or anything like that that require you to stop contributing or pull money out of savings, you'll have about $127k after 35 years of saving. How long is that going to last you???
Eta That doesn't adjust for inflation. In 35 years, that $128k is only going to be worth the equivalent of today's $46k. So you saved all those years and now you have slightly more than one years salary.
Is it any wonder why so many people don't even bother?
Numbers like this are the reason I have trouble believing that only 12% of the country has a negative net worth.
For real.
<-----Negative net worth but has retirement savings (Yay student loans! Yay anecdotes!)
The prevalence and size of SL debt is the other thing that makes me question it. I just don't understand how over 30% of people 45 and above can have nothing saved for retirement while the majority of people our age are paying off massive student loans and probably a mortgage that comprises 90-80% of the value of their home and yet magically 88% of these people somehow have a positive net worth.
I wonder why there isn't more political momentum to set up something like this. This kind of system seems much more effective than what we have now.
Because socialism.
There might be a tiny degree of socialism but mostly you're getting back what you put in right? With the idea that the govt invests it for you so there is a little extra. It's concerning to me that very few people apparently feel confident investing in their own.
What? What are you invested in? If you're with Fidelity or one of the big places, you can call them and have them walk you through how to find even an index fund so that you're matching pace with the market overall. No need to get fancy. I also like the targeted retirement products, so for example, you choose a 2030 fund if you want to retire around 2030, and it's balanced for you.
Here's a quick table I found with the past 15 years' returns from the S&P 500:
2014 13.80
2013 32.43
2012 15.88
2011 2.07
2010 14.87
2009 27.11
2008 -37.22
2007 5.46
2006 15.74
2005 4.79
2004 10.82
2003 28.72
2002 -22.27
2001 -11.98
2000 -9.11
We have one with vanguard (from when I was still working at the museum) and Hs is with one of the big companies (I don't remember which). I think the problem is that we're terrified of having money in the market, so we always choose the lowest risk options possible, which is probably the slowest growth. I honestly feel like anything I put in a 401K is no safer than putting it in a slot machine. Maybe I'll see it again and maybe I won't (I hate gambling too). Right now H has a pension. Here and his last job both had mandatory pension contributions. Too bad both were temp positions that couldn't/wouldn't lead to permanent employment.
There is a degree of risk involved but it's quite minimized by the length of time you plan to be in the market. If you guys are in your thirties, you're looking at 30 years easy. Take a look at graphs of the stock market over time. There are dips of course but the overall trend is up. And should continue to be unless you think the U.S. economy is going to stop growing