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.
Are you taking advantage of dividends? I have recently bought a number of stocks that pay decent dividends, so even if the stocks go down, we will still be receiving some income periodically. So far, so good.
During my 401K years I determined what I was invested in, whether it be the stock or bond market or mixture. I did poorly, or at least not what I expected I should.
Upon retirement I rolled it all over into an Edward Jones mutual fund. I have a financial adviser that now makes all those decisions for me. I do not regret this at all. I have a very diversified mix, where yes, some do give dividends.
Every January I figure how much I need for the whole year, call the adviser, and a week later it’s in the checking acct. She determines which mutual fund to withdraw from.
I don’t even bother to look at the various monthly prospectus statements issued by each fund. They head straight for the fireplace. All I look at is the online account a couple times a week to see how the IRA as a whole is doing.
Just one less worry when someone I can trust is handling the retirement acct.
govt worker ???....nice pension?...health bennies?....
..this thread is for those with lots of dough to come on and brag how much smarter, wiser, better, better looking and just better than all the other slobs....
Yes, I've never understood the fascination some people have with retirement. Do they hate their jobs so much? For me, I love going to work and retirement has never crossed my mind, even though I'm in my early 50s now and have over a million dollars in 401(k) and IRAs. Giving up the power and prestige I have at work in order to sit around at home and listen to the wife nag at me all day has no appeal to me whatsoever.
Once no longer physically/mentally able to do their work, the end probably isn't very far away anyway. They don't need to save for 35 years of comfort when they don't have much more than 5 years left.
Very good point. A person who is healthy in mind and spirit is "richer" than a man who has millions but forgot how to tie his own shoes. So long as you have your health, you probably shouldn't retire. I had an uncle who had a simple job but loved doing it. He was always so happy and upbeat. His wife badgered him to retire so he could spend more time at home. He was 72 when he retired and he was dead by 75. It was sad to see his rapid decline after he left the workforce.
My marginal tax rate is well over 50% while I am very greatful to God I have also worked very hard for the income I have I greatly resent paying 6 figures per year in fed taxes alone for others to freeload and worse The government takes money from me to pay for reprehensible things like abortions, all while I am told I don’t pay my fare share. I guess they want all my income not just 1/2 of it. Makes me want to puke when I am up at 2 am taking care of someone on Medicaid who has a nicer computer than mine and who is sitting in the hospital bed I am paying for complaining about the quality of the service..... Sorry for the rant it’s a sore spot for me
Market proved me right.
One stock I purchased 4,000 shares at $2.50 on open, rode it up to $43.50 and sold it. It peaked just over $47 and crashed and burned all the way down to 38 cents a share a few short months after peaking at $47/share. Company no longer exists.
Made a good chunk of change on PeopleSoft, CheckPoint One and a few other technology companies back then too, but again, they were companies that I was very familiar with, knew what they did, knew who their market was, and given we were going into Y2K and companies were spending ridiculous amounts of money out of fear, it was pretty easy to make money off of stocks back then as long as one wasn't too greedy about it.
Great post, thanks for sharing.
I understand; keep the faith, keep working for the riches which do not tarnish, and which no man (or government) can take from you.
Perhaps the only time I've agreed with the current POTUS, is when he said something to the effect that $3 million should be a sufficient limit in a person's retirement account. I had read that $1 million per person should be sufficient and think how few people have this much retirement principal, and no vision for how to legally and realistically obtain it after a certain age and their earnings and savings histories.
Nice...
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