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Savings, Investment, and Retirement Issues

A study by Putnam Investments surveyed 2000 people who had retired within the past two to six years. The average household income was $49,000. Of the retirees income, 24 percent came from traditional pensions, 11 percent from self-directed accounts and other investments, and 41 percent from Social Security. Half of the respondents stated that they are living better than in their working years; the other half stated that their quality of life had dropped. Approximately 20 percent reported that they were struggling. Over 78 percent regretted not saving more during their work years. Fifty-nine percent felt they should have started saving for retirement earlier in their careers. More than a third wish their employer or plan manager had encouraged them to save more aggressively. Only 16 percent of those surveyed reported that they had a formal, written financial plan. ["Many Retirees Insecure About Finances," Financial Advisor magazine, 2004 December, pg. 22.]

Sixty-two percent of Americans report that they are saving and/or investing. However, more than 40 percent of all Americans save less than 5 percent of their annual household income. Sixteen percent save between 5 and 10 percent. Only nine percent save more than 20 percent of their annual income (Jean Chatzky, You Don't Have to Be Rich, 2003).

The average personal savings rate is now less than 2% of income, and the average household has a net worth of just $264,000 at retirement, not including home equity (Money, December 2004, pg. 94).

The American Savings Education Council's 2004 report, Saving and Retirement in America, states that among all workers, 45 percent have less than $25,000 in savings and investments (aside from equity in primary residences). In the age group 25-34, 64 percent have less than $25k in savings; in the age group 35-44, 48 percent have less than $25k; in the age group 45-54, 30 percent have less than $25k. According to a 2002 survey by the Consumer Federation of America, 25 percent of U.S. households have net assets of less than $10,000.

Nearly half of all retirement plan participants who change jobs fail to roll over their accounts, according to Hewitt Associates. They take the dough instead, incurring unnecessary taxes and penalties for doing so. And another 25% have outstanding loans or have taken withdrawals on the job (Money, December 2004, pg. 98).

America is the richest country in the world, yet, ironically, we have the highest percentage of people living paycheck to paycheck. A recent study from ACNielsen revealed that about one in every four Americans say they don't have any spare cash. ["Escape the Credit Card Trap," Kiplinger, 2005-10-06.]

In his book The Total Money Makeover, Dave Ramsey cites the Wall Street Journal as reporting that 70 percent of Americans live paycheck-to-paycheck. He also cites a poll from Parenting magazine which found that 49 percent of Americans could cover less than one month's expenses if they lost their income. The 2003 MetLife Study of Employee Benefits Trends bears this out, reporting that 52 percent of employees live paycheck-to-paycheck. The surprise? Among high-earners ($75,000 or more), an alarming 34 percent claim this distinction. The survey found that 87 percent of low earners ($30,000 or less) do so.

A recent study by the Levy Economics Institute found that in 1999, nearly 42 percent of all American households were in "asset poverty." The institute's definition of "asset poverty" was that the family did not have enough in liquid financial assets to support itself for at least three months. Additionally, the report estimated that 46 percent of American households had less than $5,000 in liquid assets. ("Liquid assets," in this case, includes IRAs, whose actual "liquidity" is debatable.)

More than 7 million Americans already have second jobs, according to the Bureau of Labor Statistics. Nearly three out of every 10 people who hold more than one job say they do so to meet household expenses or pay off debt. [Chatzky, J. (2004, September). Weapons of mass debt destruction. Money, p. 57.]

For a two-bedroom rental alone, the typical worker must earn at least $15.37 an hour — nearly three times the federal minimum wage. [National Low Income Housing Coalition; annual "Out of Reach" report, 2004. Found at: http://www.usatoday.com/money/economy/housing/2004-12-20-rent_x.htm?csp=34]

The August 2007 issue of Kiplinger's Personal Finance magazine reports that American families owe $9,900, on average, in credit-card debt. They pay $1,500 in interest annually. [Page 16]

Approximately 60 percent of Americans revolve balances. The average revolving balance, among individuals with at least one credit card, is now $3,815. Households in the $75,000-to-$100,000 income bracket carry the heaviest debt loads, shouldering nearly $8,000 per person. [CardTrak, 2004 April]

Approximately 35 million Americans pay only the required minimum — as low as 2 percent — of their balance each month. [Frontline. Aired on PBS 2004-11-23. Found at: http://www.pbs.org/wgbh/pages/frontline/shows/credit/eight/]

A U.S. Public Interest Research Group study found that 25% of consumer credit reports contained errors serious enough to lead to a denial of credit. [Freedman, J. (2004, September). Credit Check. Money, p. 30.]