According to a GoBankingRates article, Americans’ retirement accounts are in even worse shape than previously thought.
We’re broke and apathetic
Based on a survey the site ran, 64% of Americans will retire broke — that is with $10,000 or less in retirement accounts. And 45.5% of respondents have $0 in their retirement accounts. Puzzlingly, more than half of them aren’t worried about that.
That’s a lot of respondents saying that not only are they unprepared for retirement, they don’t care.
Perhaps they’re planning on never retiring. In fact, 9% said that they won’t need savings in their retirement-age years, which implies that they don’t plan to actually stop working.
Which is all well and good, except that may not be their call to make. Health issues can hit out of nowhere. (Just ask 19-year-old me.) Those issues can make you stop working for good or impair your ability to work full-time.
Some have it a little better
Another 20% of respondents will have between $10,000 to $100,000. Which is a darn sight better than the 64%’s answer — but it’s still not enough to most people to retire on.
So what’s the problem? The most common answers were that people are either struggling with their bills or that they don’t make enough to save.
I’d love to see a breakdown of the answers by income bracket because I’m willing to bet that at least some of those respondents make plenty and just aren’t using their money wisely.
That said, there are definitely people legitimately struggling. Obviously, people with low incomes aren’t going to be able to save much, if anything for retirement. But certainly some parts of the middle class simply don’t make enough to save.
It’s worth noting that this isn’t just about income tiers. It’s about age too. For example, and not surprisingly, Gen Zers and Millennials were the most likely to have $0 saved — at 63% and 53.6%, respectively. (Wow, that’s a lot!)
Of course, they’ve had the least time for saving, so it makes sense that they might have low to no savings. Millennials and Zers are also the newest to the workforce compared to other age groups. This means they’re likely to be earning less, which increases the chance that they’re struggling with bills or otherwise feeling that they don’t make enough money to save.
Also, due to the recession Millennials were stymied in their work advancement (including, in some cases, getting any work in their fields of study at all). Less advancement means lower pay, which means less money (if any) to save for retirement.
Just getting started
Really, many Millennials have only recently gotten to a good place financially. And plenty of people still feel like they haven’t fully recovered.
Hence, it makes sense that Millennials are more likely to struggle with their bills and, therefore, with saving. As for Gen Zers, they’re pretty new in the workforce, so they’re likely to be making entry-level wages. In many fields, that’s simply not enough money leftover for retirement savings after all of the bills are paid.
Right idea, wrong method
That said, some people are saving, just in the wrong place. Forty six percent of the survey respondents use savings accounts as their primary retirement vehicle. Trailing significantly behind at 30% was a 401(k). Yikes!
Of course, this could signal that fewer companies are offering 401(k)s, but I’m skeptical. And even if that were the issue, people could be using IRAs — and apparently only 14% of respondents do.
Gen Zers and Millennials were the most likely to use savings accounts over 401(k)s. Gen Zers were particularly startling, with 59.6% choosing savings accounts over 401(k)s and IRAs. Millennials were at 48.1%.
It’s worth noting that “none of the above” wasn’t an answer in this question. So “savings” might have been the default answer for people who don’t have any retirement savings at all, since they’re probably trying to build up their savings/emergency funds. In other words, it’s likely that not all of those Zers and Millennials use savings accounts for retirement vehicles.
Still, it’s terrifying to think that anyone would be using a savings account as their primary retirement tool. Even a high-interest savings account is generally going to net you under 2% these days — thanks, Fed rate cuts — so you won’t see the same kind of growth that you could with the market, at least over the long term. Heck, your “investment” might not even keep up with inflation!
Not that I’m exactly one to talk. I spent my 30s focused on building savings, rather than prioritizing my Roth IRA. And I didn’t even start my SEP-IRA until I was 40!
But at least I’m saving now. True, like 20% of the survey respondents, I have less than $100,000 stashed away. But I have another 26+ years of saving to help make up for that — hopefully all at my current job, which would allow me to really sock away money.
Can we fix this?
So what can the non-savers do to remedy the situation?
Well the good news is that Gen Zers and Millennials have the most time to make up for their lack of retirement savings. If they can get their acts together now, they’ll be just fine in their golden years.
First of all, they need to try to decrease some of their expenses to free up some money. I’ve covered ways to trim your bills. Then there are the more obvious frugal suggestions, like paring down entertainment expenses, eating out less, etc.
And of course, there’s the perennial (if vilified) suggestion of cutting coffee. Since a daily café coffee can add up to $70 a month (or more), I do support looking at the latte factor — with the caveat that the coffee must be more than a very occasional indulgence and/or isn’t their only treat amid a variety of frugal hacks.
Look at it another way
In other cases, saving more may simply be a matter of perspective. It might also be time to ask yourself whether you could spare even $25 a week. For some, the answer will be no. But many could find it in the budget. That’s $1,200 a year right there!
If people have already cut expenses to the bone, then their only remedy is to increase their income if at all possible. This could mean asking for a raise or job-hopping.
But that’s not an option for everyone. In that case, they might have to start a side hustle. In the bill-trimming post I covered how even people with a lot of restrictions can earn at least a little extra money. And any contributions are better than none.
And if they’re already side hustling just to make ends meet? (Unfortunately, it’s not uncommon.) Well, in that case their lack of retirement savings is understandable, if terrifying to contemplate.
I wish I had more advice for this sector of folks, but all I can really advise is to keep fighting the good fight. Live as lean as you can, and do your best to hustle that money. Hopefully, things will improve as you get raises or job-hop.
Are you able to save for retirement? Where are you compared to these folks?