80 Is the New 65 for Americans When It Comes to Retirement

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For the younger generation to avoid this retirement crisis a lesson should be learned. Begin saving early and consistently with a clear and disciplined strategy.

A majority of middle class Americans (53%) say they “need to significantly cut back on spending today to save for retirement.” Americans have saved, on average, only 7% of their desired retirement nest egg a median of $25,000 in retirement savings vs. a median retirement goal of $350,000. Three in ten people (29%) in their 60s have saved less than $25,000 for retirement, possibly indicating they will rely heavily on Social Security.”For several years now, we’ve seen that Americans are undersaving for retirement and a majority do not trust the stock market as a place to invest for retirement. However, we did find a bright spot among middle class Americans more than three quarters do not want to retire with mortgage debt. This is an important goal, particularly for younger Americans,” added Nordquist.

  • After experiencing the home mortgage crisis of the past several years, people have taken to heart the idea of retiring without mortgage debt: 86% of respondents ages 25 to 75 say it is important to own their home debt free by retirement. And 63% of respondents said they wouldn’t consider being renters in retirement. Older generations seem less concerned about retiring without mortgage debt. While 87% of those age 25 to 29 say it is “very important” to pay off mortgage debt, only 40% of those ages 60 to 75 agreed.
  • Confidence in the stock market remains low, with 68% saying they aren’t confident the stock market is a good place to invest for retirement. When Americans were asked what they would do to invest $5,000 for retirement invest in a CD or the stock market 50% of respondents said “invest in mutual fund or stocks” and 45% said they would purchase a bank CD. The percentages flipped when people age 25-29 were asked the question.
  • A plurality of those surveyed (37%) say being able to pay monthly bills is their most important day-to-day financial concern, ahead of healthcare (14%), education (12%) and saving for retirement (11%).
  • Even those between the ages of 60 to 75 say paying monthly bills (39%) is a bigger concern than healthcare costs (32%).
  • In fact, middle class Americans are significantly underestimating the amount of out-of-pocket healthcare costs they will face in retirement. Respondents estimated a median of $60,000 in costs, while only 20% estimated $100,000 or more. A 2010 study from the Center for Retirement Research at Boston College estimated that the present value of lifetime uninsured health care costs for a typical married couple age 65 will be $197,000.

The 401k A Valued Savings Vehicle That Could be Improved

  • Middle class Americans are taking good advantage of their 401ks: 75% say they have access to a 401k through their employer, and the median contribution rate to the plan is 6%.
  • The vast majority said that employer matches encourage them to save more, a sentiment that was especially strong among younger people (86% for those age 25 to 29 and 91% of those 30 to 39 versus 78% for people in their 40’s).
  • 79% of respondents agree employers should provide personal advice to help employees manage their 401k plan.
  • Younger people want personal advice to manage their 401k plan at a rate of 86% for ages 25 to 29 and 81% for ages 30 to 39.
  • 78% say employees should be given the option to get a fixed monthly payment from their retirement accounts.
  • 62% said employers should automatically enroll employees in a 401k or similar plan.
  • 61% said 401k plans should automatically increase the employee contribution rate by 1% each year.
  • 13% say they have taken money out of their 401k to “pay for personal financial emergency or other need.”

Perhaps the governments of the world should take part of this advice for a secure financial future. Save more and spend less.

Please comment or call to discuss.

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