Retirement crisis cropped

52% of Americans have less than $10,000 in savings. What can be done?!

The U.S could very well be facing a retirement crisis and nobody is addressing it.

Bernie Sanders, a U.S. Senator recently spoke on the ever growing gap between the 1% and the rest of us.

His statement came during a union hall meeting where he said:

Here’s something not talked about, something that can make us all very, very nervous. Half of all Americans have less than $10,000 in their savings account. And you know what that means and you know why people are so stressed out? If you have less than $10,000, that means an automobile accident, a divorce, a serious illness, a crisis of one kind or another can drive you into bankruptcy and financial disaster.

Now it must be said that Mr. Sanders is toying with the idea of running for President in 2016 election as a Democratic candidate.

So, this got me thinking. Is Bernie telling the truth or is he just looking for some free press and the backing of democratic voters?

And if he is telling the truth, What are the implications and what can be done?

Is it true?

To find out the truth I decided to go digging.

The survey that spawned Mr. Sanders argument was from an article in USA Today in April of 2014. You can find that here.

The Organization that compiled the data used is the Employee Benefit Research Institute and Greenwald and Associates. In addition to the claim by Mr. Sanders, there is a chart shown here that the lack of savings and investments is in all actuality less than years prior.

total savings and investment reported by workers

In 2009 the amount of people surveyed that had less than $10,000 in savings was 39%!!!! And that is after The Great Recession that occurred in 2008 and wiped out many peoples savings.

So, if the stock market is at all time highs, and the economy is doing relatively well, then how in the world do people have less in savings now than they did in 2009? In fact according to this chart 52% had less than $10,000 in savings.

One word: PROCRASTINATION

But Cooper, you can’t judge the entire U.S. by one small survey can you?

No, you can’t, and that’s why I have more to show.

Enter the Federal Reserve Bank

The Federal Reserve Bank surveys consumer finances every three years with the latest being in 2013. The median value (median indicates the middle) of savings excluding a pension and primary residence reported by almost 95 percent of families who had savings was $21,200. This is down from $23,000 show in the 2010 Survey.

Holding and Value of Assets Chart

So, we can assume that since 5% of families reported no savings that the overall median would be closer to $20,000.

But that’s still not enough. I wanted more proof.

Enter the Insured Retirement Institute

The IRI conducts surveys to measure the retirement preparedness of Baby Boomers, the greatest class of retirees most likely of all time.

There’s a lot of good information in their study which you can find here.

But a few key stats that stand out to me are:

  1. Economic satisfaction among Baby Boomers from 65% feeling satisfied to 48%. This is an even larger drop from 2011 which was at 76%.
    • Economic life satisfaction chart
  2. Only 6 in 10 Boomers reported having money saved for retirement. (Yikes!)
    • Have Money Saved In Retirement Chart
  3. Boomers who work with advisors are more satisfied, and the gap is increasing. 7 in 10 Baby Boomers (68%) who work with an advisor are extremely or very satisfied with how things are going in their lives.
    • Economic Life Satisfaction with Advisor Chart
  4. More than 8 out of 10 Baby Boomers that work with Advisors feel they are better prepared for retirement because they work with a financial professional.
    • Better Prepared for Retirement Using a Financial Advisor Chart

Looking at these statistics is astounding. I work with many Baby Boomers and although I see mixed situations, I had no idea Boomers as a whole were in this much trouble for retirement.

One more statistic that relates

Freakonomics is one of my favorite blogs. They also have some awesome books.

However, in my research I found in 2010 they covered a survey done by TNS Global Survey in 2009 that concluded that 46% of U.S. Citizens would be unable to raise $2,000 in 30 days if they had to. Based upon the other studies this could be an even higher percentage today.

Not $10,000, not $5,000, but a mere $2,000! Not having an emergency fund of at least $2,000 is very scary and we could very well be facing a retirement crisis.

emergency funds sources - tnsglobal

What can be done?

When you look at a group as close to retirement as Baby Boomers it would be easy to say there’s little that can be done. However, I refuse to ever believe our fate is sealed and I’d like to give some practical advice as to what can be done to secure a better financial future.

For Baby Boomers:

First off, you’ve been through alot. Many wars, many crazy times, yet you’ve still inspired those younger than yourselves to live a great life.

My first recommendation would be to START SAVING NOW!

There’s no time like the present and we can wallow in our past as long as we want, but to change your future and your retirement you need to start right now.

Secondly, look for some help. 

seek and find

You’ve seen the stats showing Baby Boomers that used a financial professional were more satisfied than those that did not. I’m not just advising this because I happen to be a financial professional, but it rings true. Those who have help are typically better off. Even if it’s just getting the opinion from a qualified advisor or a financial plan, you’ll be better prepared for the times ahead and more knowledgeable on your situation.

 

If your employer offers a retirement plan match, take advantage of it.

I am amazed at people who receive a match into their companies employer sponsored plan and don’t use it. You’re leaving money on the table and even if it’s a small percentage it’s better than nothing.

Don’t plan on Social Security saving you

Social Security has never been and will never be (most likely) meant to provide provide a complete retirement. It’ s a supplement. And here’s some more advice on Social Security. Have a financial professional help you decide when to elect social security. This is especially important for married couples who have well over 50 options for choosing how and when to elect social security. By waiting till age 70 to file, you could gain as much as 30% more from social security versus electing at age 62.

Finally, lighten up

You can’t do anything about your lack of forward thinking in the past so stop worrying about it. In the words of the great Theodore Roosevelt:

Do what you can, with what you have, where you are. – Teddy

For the Rest of Us:

One of the greatest slices of wisdom I was ever given was that I didn’t have to make the same mistakes as those beyond my age. That I could use the mistakes they made as lessons, and create my own future avoiding the pitfalls.

So, my first tip–learn from the Baby Boomers

Don’t procrastinate. Granted, I’m sure many Baby Boomers weren’t simply just procrastinating, they were probably facing tough times and had to do what had to be done. That being said, do the hard things now, when they’re easy, so that when times are hard, you’ll be prepared.

Save, save, save

The-Road-To

A great idea as far as saving and budgeting is to set aside a certain percentage of each paycheck and like clockwork invest it into something that is well diversified. This leads to my next piece of advice…

Get help now!

Starting at a younger age with the help of a qualified financial professional can do wonders for your future. Why wait till you’re under water to ask for help. Seek it when you don’t have to have it and you will surely be better off. A good advisor can help you develop a plan to meet your goals and objectives, help disseminate financial information, and also manage your investments.

Don’t plan on Social Security even being there

Will Social Security still be there when you retire? Most likely. But don’t bank on that being a major source of income for you. Pretend it’s not there and urgently save for the future.

Have a rainy day fund

Have a rainy day fund

I  typically recommend to have an emergency fund of at least 2 years worth of expenses set aside in something that is highly liquid (easy to withdraw from; ex: money market fund, savings account, checking account, etc.) You never know when something unexpected could come your way so prepare for it.

Seek multiple sources of income

I highly recommend reading Rich Dad, Poor Dad by Robert Kiyosaki. It’s a book I’ve recommended to many friends and in it he details why having multiple sources of income is so powerful. Put simply, if one door closes, you have another one still open.

Use your employer match

If your employer offers an employer sponsored plan in which you receive a match, look very close into using it. If you’re not sure, then ask! Receiving a match on any funds contributing can be very powerful!

Finally, enjoy your working years

Don’t let your working life fly by with you waking up each morning feeling sick because you have to go to work. If you don’t like your job, find something you do like. But make the most of your situation, prepare for your future, and feel satisfied about your life.

Sources:

Politifact

USA Today

Freakonomics

MarketingProfs

Insured Retirement Institute

– Cooper Mitchell

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