In bleak new retirement survey, more than two-thirds of non-retirees say they haven’t saved enough money. Not good.
A new retirement survey is an eye-opener for sure.
Older Americans aren’t saving enough for retirement and they’re stressed out about it. A Wells Fargo annual study on retirement for the middle class shows that 71 percent of non-retirees aren’t confident that they have saved enough for retirement. In addition, one in three people in their 40s and 50s say they “get depressed” when thinking about their financial life in retirement.
And topping it off, the survey showed that 22 percent of the middle class say they would rather “die early” than not have enough money to live comfortably in retirement.
“Those are very sobering statistics,” says Joe Ready, director of Institutional Retirement and Trust at Wells Fargo. “But it’s something that can be avoided. They’re going to have to save their way to retirement. That’s the only way they can do it. It’s never too late.”
What the survey shows is 34 percent of the middle class aren’t contributing anything to a 401(k), IRA or retirement savings account. Of that, 41 percent of those surveyed between 50 and 59 aren’t saving for retirement and 48 percent of those in that age group won’t have enough money to survive on it in retirement.
That’s stunning, Ready says, is that 55 percent say they plan to save “later” for retirement to make up for what they’re not saving now.
The survey shows that 72 percent of all middle-class Americans say they should have started saving earlier, up from 65 percent in 2013. Some 56 percent say they would give up treating themselves to indulgences like spa treatments, jewelry and other purchases, 55 percent say they’d cut eating out at restaurants “as often” and 51 percent say they would give up major purchases like a car, computer or home renovation. Only 38 percent say they would give up a vacation to save for retirement, according to Wells Fargo.
The survey shows that the median savings rate for those in their 50s is $78 a month, Ready says. The median amount saved by those in their 50s is $20,000 and $25,000 for those 60 to 75, he says.
“People have said I’m just going to delay and put off saving for retirement today and worry about it tomorrow,” Ready says. “That has big implications, especially as you get those in their 50s with a lot of competing priorities, kids in college and aging parents, it doesn’t get any easier. It’s a real challenge for people but the main message is don’t delay. It’s never too late to start. If you’re in your 50s and have delayed, you got to get started. The sooner the better.”
Ready says one notable finding of the survey is that half of those in their 50s say they plan to work until they’re 80 and described how they need to work until that age to make up for their lack of retirement savings.
“There’s probably a correlation to only saving $78 a month,” Ready says. “It’s a challenge because you have lost the value of compounded earnings.”
What seems to make a difference in people saving is having a written plan, Ready says. People with a written plan for retirement are saving a median of $250 per month, greater than the $100 a month for those without a written plan, he says.
“People who have a written plan for retirement are helping themselves create a future on their own terms, with a foundation built on saving, and hopefully, investing,” Ready says. “As evidenced by the difference in monthly savings amounts for those with a written plan and those without, it is clear that a plan makes a sizeable difference.”
What the survey shows is the importance of a 401(k) plan offered by a company, Ready says. Some 70 percent of those with one available to them, 93 percent are contributing to the plan. About two-third contribute enough to maximize their company’s match. The median contribution for those ages 30 to 59 is 7 percent.
Eighty-five percent of those with access to a 401(k) or equivalent plan from their employer affirm they “wouldn’t have saved as much for retirement” if they did not have a 401(k). Moreover, 90 percent say the 401(k) or equivalent plan “makes it easy to save for retirement,” according to Wells Fargo.
“The 401(k) makes a significant difference for people in that it gives them the ability to save in a regular, systematic way. It conditions people to think that saving money is paying themselves first and is just as important as paying day-to-day bills,” Ready says.
The survey shows that 46 percent of those in their 50s think Social Security will be their primary source of income as do 56 percent of non-retirees between 60 and 75.