When I read stories like the one below and the information about how much people have saved for their retirement, I’m flabbergasted by the delusional, utterly ridiculous behavior of American consumers. We know for a FACT that 60% of all workers in the country have less than $25,000 of total savings. Many have absolutely nothing saved. Even better, over 25% of all 401k participants have borrowed against their 401k plan as of the end of 2010. This data is for people with jobs. How about the 88 million people who aren’t in the labor market? I wonder how much savings they have. In order to retire at 65 and live above the poverty line, people need to have saved at least a couple hundred thousand dollars. Those who retired in the 1980s and 1990s had equity in their homes, many had defined benefit pensions, and could rely on Social Security and their savings.
Today you have 55 year old people with $25,000 of liquid assets earning .15%, underwater homes, no pension plans, and $15,000 of credit card debt. They cannot afford to retire. They will stay in the labor market until the day they die. This is not good news for the Millenials.
What I find incomprehensible is that Americans ramped up their spending in the 1st quarter of 2012 and their savings rate in back at a four year low of 3.9%. With the data about retirement savings being so pitiful consumers SHOULD BE saving 10% of their disposable income like they did in the early 1980s. Going further into debt in order to enjoy going out to dinner two times per week is about the stupidest thing anyone could do. And our leaders, media and Ivy League trained economists actually encourage this delusional foolish behavior. Can this many Americans be this stupid? What are they thinking? Are they counting on the government to come to their rescue when they are 75 years old, broke, homeless, and begging?
I find myself shaking my head and talking to myself when I see this data and watch the behavior of the majority. We’re surely doomed.
Delaying retirement: 80 is the new 65
NEW YORK (CNNMoney) — A quarter of middle-class Americans are now so pessimistic about their savings that they are planning to delay retirement until they are at least 80 years old — two years longer than the average person is even expected to live.
It sounds depressing, but for many it’s a necessity. On average, Americans have only saved a mere 7% of the retirement nest egg they were hoping to build, according to Wells Fargo’s latest retirement survey that polled 1,500 middle-class Americans.
While respondents (whose ages ranged from 20 to 80) had median savings of only $25,000, their median retirement savings goal was $350,000. And 30% of people in their 60s — right around the traditional retirement age of 65 — that were surveyed had saved less than $25,000 for retirement.
As a result, many people aren’t in a hurry to quit their day jobs.
Three-fourths of middle-class Americans expect to work throughout retirement. And this includes the 25% of Americans who say they will “need to work until at least age 80” before being able to retire comfortably.
The 2012 Retirement Confidence Survey: Job Insecurity, Debt Weigh on Retirement Confidence, Savings
March 2012 EBRI Issue Brief #369 Paperback, 36 pp. PDF, 1,585 kb Employee Benefit Research Institute, 2012
- Americans’ confidence in their ability to retire comfortably is stagnant at historically low levels. Just 14 percent are very confident they will have enough money to live comfortably in retirement (statistically equivalent to the low of 13 percent measured in 2011 and 2009).
- Employment insecurity looms large: Forty-two percent identify job uncertainty as the most pressing financial issue facing most Americans today.
- Worker confidence about having enough money to pay for medical expenses and long-term care expenses in retirement remains well below their confidence levels for paying basic expenses.
- Many workers report they have virtually no savings and investments. In total, 60 percent of workers report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000.
- Twenty-five percent of workers in the 2012 Retirement Confidence Survey say the age at which they expect to retire has changed in the past year. In 1991, 11 percent of workers said they expected to retire after age 65, and by 2012 that has grown to 37 percent.
- Regardless of those retirement age expectations, and consistent with prior RCS findings, half of current retirees surveyed say they left the work force unexpectedly due to health problems, disability, or changes at their employer, such as downsizing or closure.
- Those already in retirement tend to express higher levels of confidence than current workers about several key financial aspects of retirement.
- Retirees report they are significantly more reliant on Social Security as a major source of their retirement income than current workers expect to be.
- Although 56 percent of workers expect to receive benefits from a defined benefit plan in retirement, only 33 percent report that they and/or their spouse currently have such a benefit with a current or previous employer.
- More than half of workers (56 percent) report they and/or their spouse have not tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement.
- Only a minority of workers and retirees feel very comfortable using online technologies to perform various tasks related to financial management. Relatively few use mobile devices such as a smart phone or tablet to manage their finances, and just 10 percent say they are comfortable obtaining advice from financial professionals online.