Survey Says Retirement May Be a Far-Fetched Idea for Many Americans
America, we have a problem. Americans aren’t saving for retirement. Sadly, going forward, all of this could get much worse. Put simply, retirement could become an inconceivable idea for many.
To give you some idea of how bad the situation really is, consider the retirement survey done by GOBankingRates, a personal finance web site. This survey, done once a year, asks Americans how much money they have saved for retirement.
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Here are few eye-opening findings from the most recent survey:
- 42% of Americans have less than $10,000 saved for retirement, essentially meaning they will likely retire broke.
- Only 16% of Americans have retirement savings that exceed $300,000.
- Over 32% of adults aged 55 and over (those closest to retirement) have less than $10,000 in savings.
(Source: “Survey Finds 42% of Americans Will Retire Broke — Here’s Why,” GOBankingRates, March 6, 2018.)
GOBankingRates did another survey with a group that had no retirement savings and asked them why they aren’t saving. These were the most popular answers:
- One percent said, “I don’t make enough money to save.”
- Close to 25% said, “I’m struggling to pay bills.”
(Source: Ibid.)
Mind you, this isn’t the only survey suggesting that Americans are having a hard time saving for retirement. There are several other similar studies and surveys that suggest that Americans are behind on their savings.
Pension Funds May Not Save You Either
Here’s the worst part: many Americans think that they are contributing to their pension and that it could help them. But be careful; even the American pension system is in deep trouble. Pension funds across the cities and states across the U.S. are severely underfunded.
To give you some perspective, according to the Michigan Department of Treasury, more than 110 Michigan cities have underfunded pensions. This means that pension funds in 110 Michigan cities don’t have enough money to meet their obligations. (Source: “Study Reveals 110 Michigan Cities Have Underfunded Pensions,” CBS Detroit, March 12, 2018.)
If you look at what’s happening to pensions on corporate levels, it’s mind-boggling as well. They make a solid case that retirement for many Americans could be on the line.
Consider General Electric Company (NYSE:GE) as one example. The pension funds across the company are underfunded by $28.7 billion. Note that GE is currently going through financial woes; its profitability has tumbled and its cash flow situation is worsening. Many are now wondering how GE will be able to meet its obligations. (Source: “GE Cuts $2.4 Billion From Biggest Pension Deficit on S&P 500,” Bloomberg, February 23, 2018.)
While GE is currently in the news cycle these days, in the past we have heard about other major American companies freezing their pension benefits.
What’s Ahead?
Dear reader, remember this: if Americans’ retirement savings continue to dwindle, this could ultimately result in a massive burden on the social security system down the road. In fact, it could send U.S. national debt soaring much higher.
In the meantime, it could have a severe impact on consumption in the U.S. economy. Think of it this way: What do you think a person who is 10 years away from retirement age will do in order to have some money when that time comes? They might cut back on spending, which could be a drag on overall consumption as a result. Not to mention, it could hurt the U.S. growth rate.
