Data Source: ICI
Posted on 11/28/2015 6:15:46 AM PST by SeekAndFind
Only a small percentage of Americans are positioning themselves for a smooth transition to retirement.
Based on the composition of the financial media, one may imagine that the bulk of American households are consumed with avoiding psychological investing traps and choosing between the various forms of smart beta.
Unfortunately, however, these “challenges” are only applicable to a small segment of the population that has meaningful financial assets (or a realistic plan to acquire them). Below are eight statistics that better illustrate the status of American retirement savings, pulled from multiple recent studies.
According to a 2015 survey by the Investment Company Institute, only about one-third of U.S. households have any type of IRA. The number of households with an IRA increased by just 0.6 percent annually between 2000 and 2014.
Among households with no IRA, the average decisionmaker is 50 years old, household income is $38,000, and household financial assets total $35,000.
Among the Baby Boomer generation (those age 51 to 69 in 2015), just 38 percent have an IRA. That rate is only slightly higher than Generation X (age 35 to 50; 33 percent) and Millennials (18 to 34; 27 percent).
Data Source: ICI
Americans between the age of 50 and 70.5 are allowed to contribute an extra $1,000 each year to an IRA (for a total of $6,500). In 2014, just 14 percent of those eligible to contribute the extra $1,000 to a traditional IRA did so (16 percent of those eligible contributed the extra $1,000 to a traditional IRA).
According to the Fed’s Economic Well-Being of U.S. Households report released in 2015, 17 percent of Americans have given no thought to financial planning for retirement. About one in eight households has given “a lot” of thought to retirement.
Data Source: Federal Reserve.
Among households with more than $100,000 in annual income, 10 percent have given no thought to retirement. Among 18 to 29 year olds, 31 percent have given no thought to retirement planning.
More than half of the respondents to the Fed’s survey indicated they had no 401(k), 403(b), or similar defined contribution plan. Nearly 40 percent of those with $100,000 or more in annual household income indicated they had no 401(k).
Data Source: Federal Reserve. Reflects ownership of 401(k), 403(b), or similar defined contribution plan.
Among those without a 401(k), reasons for the absence include “unsure of best way to invest money contributed” (15 percent) and “plan to invest but have not yet signed up” (10 percent).
About 45 percent of Americans expect to continue working as a source of income in retirement. Another 25 percent expects a spouse to continue working to provide funds during retirement; 5 percent expect to rely on children or other family.
These percentages are even higher among those age 60 or higher:
Data Source: Federal Reserve.
A May 2015 report from the Government Accountability Office (GAO) examined the financial resources of investors approaching retirement. The GAO found that about half of households age 55 or older have no retirement savings (some of these households do report a defined benefit plan).
Those that do have “retirement savings” such as an IRA or 401(k) generally can’t expect much from these accounts in retirement:
Among [households] with some retirement savings, the median amount of those savings is about $104,000 for households age 55-64 and $148,000 for households age 65-74, equivalent to an inflation-protected annuity of $310 and $649 per month, respectively.
Social Security is the primary source of income for about half of households age 65 or older.
According to the GAO report, 41 percent of households age 55 to 64 have no retirement savings. Among these households, the median net worth is $21,000 and median non-retirement financial resources are $1,000. Just 22 percent of these households own a house with no debt, and 32 percent have a defined benefit plan through an employer.
Just 9 percent of households in this age bracket reported retirement savings (i.e., IRA and 401(k) assets) of $500,000 or more.
Fidelity reports that nearly half of its account holders make contributions in the 28 days leading up to the April 15 deadline.
While deadline contributions are better than no contributions, these procrastinators leave money on the table by delaying this action.
While the retirement outlook is extremely bleak for many Americans, there are a few data points that are encouraging about the financial situation of the country, according to a Fidelity report.
Michael Johnston is senior analyst for Fund Reference, and also serves as COO of parent company Poseidon Financial. His investment expertise has been featured in The Wall Street Journal, Barron’s, and USA Today, among other publications. He resides in Chicago.
Good point. You definitely want to reduce your debt as much as possible going into retirement. Its just one less thing to worry about and it will enable you to absorb other unexpected expenses more easily.
...and when the IRS comes for our annuities, IRAs and pensions to pay for Achmed then it won’t matter anyway.
Same here. In fact, our investments are still growing our income. Could not be more at peace about it...a nice feeling to have.
I predict the exact moment the government starts confiscating these accounts for SS, there will be blood in the street, and violence not seen in this country since 1865.
Except the Messiah come it will be. Its standard payout will reduce most Americans' income more toward a global average. Wealthier Americans will pay more taxes; even when they thought they had tax shelters.
They will naturally turn to politicians for help; politicians will be only to happy to confiscate the reserves of those wise enough to have saved for old age
When the time comes, we must be ready to deal with those politicians.
Good question that I don’t know the answer to. I know what ROI is and how to compute it but I am not a very sophisticated investor. I would think (again, depending on individual circumstances) that my present real estate investment circumstances provide an ROI north of 20% and much better than a REIT (which I have owned and can be great investments). If one does decide to go the rental route, I would advise keeping the investment local, (no out-of-town condos, timeshares or pooled money purchases etc), owning small houses in stable neighborhoods needing some cosmetic work but structurally sound. Local markets usually rise and fall more on local economic conditions but other investments are impacted by national and international conditions. You would be shocked at how many people would pass over a prospective rental due to a lack of imagination, skill or ability to turn a dog into a charming rental property. Biggest issue is not ownership its making sure to find good renters and compliance with sometime onerous federal and state fair housing laws.
Same here. I was obsessed with a comfortable retirement even at age 25. Could have retired at 46, but waited till 55 (health care). A while back I provided my strategy, let me see and I’ll post it again.
There were two scenarios that motivated the wife and I to save...
Care for either/both of us in an elderly care facility without our kids having to come out of pocket for the funds. It’s tough enough on the children when parents are in those facilities. I don’t want to add to the strain by forcing them to write financially crippling checks every month.
A good chunk of change left over to give the kids upon our passing.
Don’t worry too much myself about retirement as defined as not working. I think I will work doing something I like until I am physically unable to. We have assets but don’t tap them except taking the RMD from our IRAs. we also spend all our SS and pension income. Travel and eat out a lot, have a nice life at 76. I see a lot of people like us in our friends and contacts in our travels.
Big worry is debilitating illness. Go to gym and eat carefully, to forestall whatever will get us in the end. Our assets should cover for 4-5 years. After that the kids will.
If nothing is left at the end I see that as a good plan.
Biggest issue is not ownership its making sure to find good renters
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That rings true from everything I’ve heard from friends who have real estate investments like yours.
The 20% return sounds about right, given that you need that kind of yield to justify your personal time, effort and financial commitment that is inherent in owning real properties. REITs are just passive investments but the yields can be fairly generous, and of course there is the possibility for additional capital gains if the total portfolio increases in value. Liquidity is another advantage of REITs — if the market cooperates. :)
If I told you how much I pay in taxes now (as a percentage of my income) it'd blow your mind.
The top tax rate in this country is WELL over 50% if you live in a state that has Income, Property, Sales Tax and other taxes on income like we have here in Illinois.
The ONLY thing that keeps me above water financially is because of how I choose to live and the things that I DO NOT spend money on.
The only thing that keeps me here until June of 2017 is my youngest son still being in high school. My family moved TWICE while I was in high school and it sucked for me. I won't do that to my youngest son.
That's coming. You are 100% correct on that. Smart people will figure out how to shelter their income from discovery.
The rest will pay, and pay, and pay.
One word: EXPAT. I've applied for my Irish Citizenship, which I'll get ... as my Grandmother was born in County Cork, Ireland. By extension, my wife and sons (if they choose) will also get Irish citizenship as a result.
If it comes to it, I'll leave America and move to Ireland. In retirement my taxes will be far, far less there than they will be here.
I'd rather not leave .... I will if I have to.
The more likely issue is reducing the amount that can be put in the 401K and IRA but not the MyRa, which invests in government bonds.
A likely “solution” is the feds saying that to avoid uncertain market returns, X% of IRAs and 401Ks must be invested in government bonds. The percentage starts at 1% or 2% before ratcheting up.
Don't wait; distribute it yourself. Charge them that are rich in this world, that they be not highminded, nor trust in uncertain riches, but in the living God, who giveth us richly all things to enjoy; That they do good, that they be rich in good works, ready to distribute, willing to communicate; Laying up in store for themselves a good foundation against the time to come, that they may lay hold on eternal life.
First Timothy, Catholic chapter six, Protestant verses seventeen to nineteen,as authorized, but not authored, by King James,
bold emphasis mine
REITs like Camden can be bought and sold like stock. Lower rates of return than a buy a house below market rates, fix up and rent out, but you can sell it ASAP to pay emergency bills or settle legal matters. Real estate sold in those conditions is called a bargain.
Be nice to your kids since they will be the ones to pick out your old folks home.
Since you qualified your taxes as a percentage of your income it would be wrong to include taxes based on non-income sources (assets, purchases). Your average income tax rate should be less than 50% and you should be grateful to the living God you have so much to give and are not hungry or in peril.
Crazy statistics.... No wonder our country is so messed up....
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