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.
My motto: Live below your means.
I’m now retired and living the dream.
...and when one looks at what is actually taxed, the printed money itself, the taxes run out to infinity. We that have sufficient for our needs, are extremely grateful, despite the confiscatory taxes we are forced to live with.
My ‘plan’ for ‘retirement’ was to find and marry a wealthy old farmer.
Mission Accomplished. *SMIRK*
Nah, he’s more frugal than even *I* am. He wouldn’t have looked at me twice if I had any debt beyond my farm mortgage or was irresponsible with my money and had no financial plan for my future - with our without him.
Life Is Good! :)
I’ve followed Dave Ramsey for many years; it’s never too late to get your financial act together, People!
Ditto
Not in my book but it might have more meaning if those of us who don’t know, actually knew if you were a landlord.
Bump
I could be. You never know.
A starter retirement savings account developed by the United States Department of the Treasury for people without access to a retirement savings plan at work.
In short, a 401K with the feds invested only in federal debt.
“You never know.”
Exactly!
...and do I have a kneed to know?
...and if I did you would probably have to kill me anyway!
Found my post from back in August. Here it is....
Not knowing yours or anyone elses exact situation, I really don't like to give specifics on choices. I haven't batted 1.000 in these 30 years, and would hate for someone to lose money on what i may think is a good play. What may be a good choice for a 58 year old retiree may not be the same for someone else.
On another thread I did give this general advise that has served me well through the years and during '87, '00, and '08....
1. Priority 1 should be eliminating or reducing debt. I view debt payments by default as negative income.
2. Competitively bid all aspects of your expenses. Get the utmost value down to the penny for everything you buy, or services you secure. Over years and years, you would be surprised how much this adds to your net worth balance sheet.
3. Keep your investment portfolio that is intended toward goals... i.e retirement as an example, in strong conservative investments. When you have those bases covered, then you can look at speculative plays.
4. I invested zero in the dot coms in the '90's. My father gave me the best advise of all in that era.. "Why would you ever invest in anything that doesn't make money?" To me that rules still applies today.
5. I have found that the simple rule of putting 100 minus your age in equities worked pretty well for me. Maybe not for everyone, but........
6. Research and "like". When investing, I tend to get into stocks which I think have good products that I like. Before getting in I research it to death too. A Low P/E is often a good indicator. Furthermore, is there a long term demand for the product too.
7. The best time often to invest is when everyone is rushing out the door. The is the toughest part, but finding a price bottom, is golden toward finding long term return.
8. Monitor investments and net worth monthly. Research, evaluate, and adjust as needed.
9. Don't fall in love with a stock/fund/etc. so much that you resist selling when the fruit is ripe. Don't forget that your favorite stock is not a family member.
10. Never forget that a SHTF scenario is always a possibility. Remote, but still there. Have a base amount of investments that will address. Metals, Land, etc.
11. Formulate and adhere to three different budget scenarios... (1) Regular (2) Austerity (3) Emergency.
Know what you mean. At last glance I think we have paid our friends at the IRS $1.7M through last year cumulatively. Talk about not getting your moneys worth.
And when they get their hearts broken do you console them?
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.
My prediction is also SS benefits will be reduced based on other taxable income. My best guess it will be prorated down to 0% benefit for those earning >$200K
Late double post
Huh? Am I at Free Republic? Let me check the web address.
BTW...what makes you think I am not grateful for what I have. But do let me say, that what I did took saving, and hard work. I also am not grateful of how I see my tax dollars being pissed away by a bunch of drunken sailors occupying the capitol in DC.
You might want to re-reviw your comment on its conservative merits.
bkmk
How many accounts are you using ?
Nah, that's hard to do. What they will do is tax 100% of social security benefits on folks with high income.
You have to like to do it though. If you don’t, it’s not worth it.
***************
Yes, that seems to be the bottom line. I prefer REITs. They are not immune from price fluctuations but like all investments, you have to buy them at the right time and right valuations. Make sure you have a margin of safety.
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