Study: One-Third of Americans Have Less Than $1000 Toward Retirement

180px-United_States_one_dollar_bill,_obverseWe have previously discussed the income disparity in the country and the alarming lack of savings for a great percentage of our fellow citizens. Now a study shows that roughly one third of the population have saved less than $1,000 for retirement. Equally surprising is the estimate of what will be needed to live comfortably in the future.

One study entitled “Preparing for Retirement in America,” by Employee Benefit Research Institute (EBRI) and Greenwald and Associates says that only 65 percent of workers have any savings for retirement. The number of people with such funds fell from 75 percent in 2009 to 65 percent today.

You then have the 28 percent with less than $1,000 in retirement. For a 20 year old, some are suggesting that $7 million will be need to retire comfortably in the future. I am not sure what the basis for that figure is. In 2014, someone retiring with $1 million can withdraw $43,600 a year.” That itself is quite a jump from the $166,000 needed in 1970.

Regardless of the figures, it does appear that too few people have access to 401K plans provided through their employer. When combined with the earlier study showing a shocking percentage of 33 percent of households in cities like Chicago living paycheck to paycheck, one can see how precarious the position is for many Americans in this economy.

Here is the study.

41 thoughts on “Study: One-Third of Americans Have Less Than $1000 Toward Retirement”

  1. I also must agree that the entitlement society and entitlement mentality is partly to blame for the absolute lack of any attempt to save for anything, much less retirement.

    People are unable to defer gratification. This is why you see people who cannot afford it wearing $300 tennis shoes, sporting Iphones and Ipads. The I want it and I want it NOW mentality.

    Instead of wearing hundred dollar shoes, they could go to Wally World or a shoe outlet place and buy completely serviceable shoes. Instead of hundreds and hundreds of dollars a year for a cell phone, they could buy a not so smart phone that you pay buy the minute. I have one and it costs me under $100 a year for minutes and the phone was something like $50 to buy.

    What you WANT /= NEED.

    You don’t need to go out for fast food every night or have pizza delivered. Learn to cook. You don’t need a brand new car at $45,000 when a good used one for $12,000 can get you by and will cost less in insurance and registration. Our NEWEST car is 2002 and fully paid for. Our next newest vehicle is 1984. We have 6 vehicles, all paid for. All without computers so they can easily be maintained and repaired 🙂 They are old. Who cares? Can we afford a brand new truck with all the bells and whistles. Yes. Will we go into debt to get one. Heck NO! Today we are driving our 1962 International Travelall to a local car show 😀

    Our parents, grandparents who grew up in the Depression era learned these lessons……because NO ONE was there to give them things, give them money, give them unemployment, welfare, food stamps. You were on your own. You made do with what you had and you learned to live with what you needed and not what you wanted.

    THIS generation was also one of the biggest savers. They may not have had much ‘stuff’, but they had savings, cds and money stashed under the mattress.

    Because the Government is now Big Sugar Daddy, people don’t even bother to economize, budget or save. Why should they? when there is a (seemingly) unending stream of benefits and goodies to be handed to them.

    Seriously, when the excrement hits the oscillating mechanism, some people are going to be totally screwed. They will be unable to cope. Good. Maybe attrition will be good for society.

  2. Paul, You are absolutely correct. But, that’s a product of allowing what you do, become who you are. If you prevent that from occurring, then you can retire and not lose your self worth.

  3. Nick – there are some people that if they retire they will die, so you 80 year old broken down attorneys are just staying alive.

  4. Isaac, I totally agree. I now am able to work for whom I like, when I like, if I like. But, working a case now and then keeps the mind sharp. Here’s the problem I see w/ many. They allow what they do become who they are. Being a PI, a very cool and interesting profession, people try to make that who I am. It was Nick Spinelli, PI. I HATE that and do, as you might imagine, voice my opinion. Being a PI is a fascinating profession, but it is not who I am. I openly discuss it here. But, if you were to meet me in person I would almost certainly not tell you what I do for a living. Attorneys, as much as any profession, allow what they do become who they are. It is why you see so many broken down 80 year old barristers, wearing depends to court to they don’t pee their pants.

  5. Part of the explanation for the downward trend from 2009 to present will be that those years have been financially tougher for many than the years before. Combine that with the fact that average returns on savings/investments have been quite low due to the Fed’s effort to (among other things) keep housing prices inflated, and it seems likely (and not necessarily unreasonable, depending on the circumstance) that people are drawing down their retirement investments to pay current expenses.

    However, I agree with others here who are pointing out the moral hazard in social programs that disincentivize individuals preparing for their own retirements and regulations that encourage the mindset that people have little need to evaluate the risks of their investments. (E.g. “If this were some high risk investment or scam where I could lose all my money, the government would have made it illegal.”) Just as with anything else, when people believe that someone else is taking care of a problem, they will tend to put less effort into addressing it themselves. That will be true of retirement just as it is of other issues of health, safety, child-rearing, etc.

  6. If retirement savings and investments were important to those Americans, then they would have made it a priority and this would not be a problem. Americans have drifted toward “welfare” and “entitlements” for a few decades now be it Social Security, Medicare, Medicaid, housing subsidies, outright payments to the poor and homeless as in San Francisco, military and VA benefits, cash payments to farmers and ranchers not to grow crops, government grants to universities and tech companies, and tax exemptions and deductions to sports teams, developers, redevelopers and various industries from cities, counties and the Federal government. Look at the money and power of lobbyists at all levels of government. They’re exercising muscle for government goodies in some form or fashion. It is not surprising that Americans expect something to be there for them even if the infrastructure of the country is falling apart. That means jobs for those who will be making future payments into Social Security, paying taxes and spending to keep the economy going.

  7. oops. Forgot to close the italics.

    For a 20 year old, some are suggesting that $7 million will be need to retire comfortably in the future. I am not sure what the basis for that figure is.

    Me either. Again. THIS is what I did for a living for over 20 years. Financial planning, investing and money management.

    When discussing retirement or planning, the key thing is to find out what it is your clients actually want to accomplish and put it into perspective based on their current assets, time frame, risk tolerance and other needs.

    Do you want to retire and cruise around the world? Do envision your retirement as staying in place, your current home and gardening? Do you plan to (like Isaac and myself) continue to work a bit after retiring. (some people start second careers) Are you thinking of living in NYC or Montana?

    Of course the closer you are to retirement, the clearer your vision will be.

    THEN….we have to deal with reality. What are the current returns on investments? Currently…it really really sucks if you are a low risk investor. You will NEVER EVER meet your goals. What kinds of risks are you, and your spouse, willing to take?

    THEN….you get to monitor the plan at least twice a year or more often as things change.

    IT goes on and on. Each person is an individual case and you cannot make a blanket statement that $7 million is the figure. First of all it is impossible to make that statement and more importantly it is so discouraging that people will just say. To heck with it. I WILL buy that Camero or whatever and enjoy myself since I’m never going to accomplish THAT goal.

    Financial planning doesn’t work if the plan is so outrageously out of reach.

  8. This is not a problem of ‘income disparity’, but of values and incentives

    Absolutely 100% true. Does this mean that everyone who wants to save will have millions available at retirement? Of course not. But it does mean that if you are willing to WORK….sacrifice some immediate wants and minimize some of your needs there is room in your budget to save something that will go towards a more comfortable retirement…..or be able to buy without debt that deferred want. Like a computer or car.

    “As money management remains a challenge among consumers, the study serves as an eye opener to just how critical financial education is among today’s adults “>

    This is why we need to educate our young people in high school about budgeting and money. I can’t stress this enough!!!!!

    I used to conduct a class for our local high school in the math department once or twice a year on saving and consumer math. We talked about how much money you could have at X% if you saved X dollars. I would give some examples. Some kids were very impressed and would ask their parents to help them set up savings accounts. When I would do this in the junior college, many students who were also working, would begin adding more to their company retirement accounts.

    We would also talk about debt and give examples of how much a car (the most desired thing these kids wanted) would cost and how much INTEREST they would be paying if they financed the car as opposed to saving for at least a down payment.

    Debt is one of the worst things that poor (or anyone) people can do to themselves. It is a curse you cannot get out of.

  9. Given that 1/3 of the American people don’t make a lot of money, including a lot on unemployment, welfare, etc. I’m not surprised. Of course the way to solve this problem is to keep importing large numbers of low-skilled poor people and giving Amnesty to illegal aliens. That way America will grow its way to prosperity through cheap nannies, badly paid fruit pickers, and construction workers.

  10. Yes, the BEAUTY OF THE ALANGREENSPAN PLAN; JOB and RETIREMENT INSECURITY!! Yippee!!

  11. Don’t retire. Work four hours a day. That leaves plenty of time to do other stuff. I goofed for months on end in my youth. Then it had some value. Not so much now. Now, being productive keeps you in shape, young, and provides a structure. When you stop, you die.

  12. From that previous link regarding “f 33 percent of households in cities like Chicago living paycheck to paycheck”, it was based on the Springleaf Financial Strength Survey which found:

    “Why do Americans struggle to manage their money? One culprit could be that they never learned basic financial skills in the first place. According to the Springleaf Financial Strength Survey, one in five (20%) adults learned about money the “hard way.”

    It’s not surprising, then, that the National Foundation for Credit Counseling recently found that nearly three in four adults (73 percent) agree that they could benefit from advice and answers to everyday financial questions from a professional.1 Yet, the Springleaf survey found that nearly one in five (17 percent) respondents would rather take a trip to the dentist than spend a half hour learning money management skills.

    “We are concerned that so many Americans aren’t willing to take the time to learn the skills they need to make better financial decisions,” said Hogan. “As money management remains a challenge among consumers, the study serves as an eye opener to just how critical financial education is among today’s adults – and how far we still have to go.” “

  13. This is not a problem of ‘income disparity’, but of values and incentives.

    People have learned that individual responsibility is unnecessary (or even anathema), that you can legislate away poverty, that you can vote yourself other people’s money (because you didn’t build that),and that the government will reliably answer your plea for cash, as long as you keep Senator Egalitarian in power.

    Why save money, when it can simply be taken from someone else who did save?

  14. If you are a woman you can keep having kids as long as possible and draw Aid To Dependent Children and Food Stamps. If you have never worked in your life how can you save? We need jobs in America. No more money sent to Afghanistan. Next we will be building a think tank in Vietnam.

  15. Not sure why no reasons are discussed for this pressure felt by millions of people. These studies aren’t surprising if you read and understand our basic public and private values. Moreover the corruption of our current system is entrenched so this stays true for the next few decades. American system, forever rigged.

  16. The question of “public assistance” adds to the issue of citizens preparing for retirement. As a result of longer life expectancy, the “retirement age” required for Social Security benefits must be extended. Also, enacting tax reform may provide disposable income for citizens to set aside for retirement savings.
    Unfortunately, the safety net of Social Security retirement benefits has created a false sense of security in the minds of many.

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