news.cuna.org/articles/39682-chasing-dollars

Chasing Dollars

Americans are anxious about retirement savings.

November 17, 2014

Chasing Dollars

“Drivers scrambled to grab money flying around a Maryland highway after an armored truck’s door burst open,” notes a recent article at dailyfinance.com

A broken lock was to blame, and “a bag of cash fell onto Interstate 270…and the bills flew into the air.”

Police reported that motorists pulled aside to pursue a cash dash before the arrival of an emergency vehicle. Troopers on the scene were only able to salvage around $200.

Like the armored car driver dealing with the broken lock, consumers may find that carefully tended retirement savings may be scattered about in the wake of surprising economic crisis, leaving them chasing after dollars. 

Or, it may be that a lack of savings in the first place prompts the dollar chase race as near-retirees approach the finish line.

Read on to discover where and how the “locks have broken” on retirement readiness for many consumers.

‘If you’re chasing money, you’ll be running all your life.’–Tony Gaskins, motivational speaker

Americans Anxious About Their Retirement Savings,” according to a CBS News poll.  A common problem is that consumers find difficulty balancing paying bills and saving for retirement; 71% indicate it is hard to do both, about four in ten say it is “very hard.”

In examination of current retirement funds, “most Americans are not confident they are saving enough” and “Ultimately, 55% of Americans not yet retired say they will be financially ready to retire when they want to,” and 41% are not prepared.

Plus, 52% of members are either “very” or “somewhat” concerned about not having a “rainy day” savings fund, according to CUNA's 2014-2015 National Member & Nonmember Survey, as reported in Credit Union Magazine. Nearly 40% are “very” or “somewhat” concerned about an adult in their household losing his or her job.

Approximately one-third of respondents not retired “feel secure” in consideration of the amount of savings, 64% feel “mostly anxious” about it.

Indeed, “Wells Fargo Survey Finds Saving for Retirement Not Happening for a Third of Middle Class,” reports MarketWatch. 

Survey results show 41% between ages 50-59 are not currently saving.  About 31% say they don’t have adequate funds “to survive” in retirement—up to 48% of middle-class Americans in their 50s. 

Nineteen percent have nothing saved.

Sixty-eight percent say saving is “harder than I anticipated,” and 55% indicate they will plan to save later. 

The median amount in savings is $20,000, lower than 2013’s $25,000.  Most middle-class Americans believe they will need around $250,000 for retirement, yet only save $125 per month.

Those who follow a written plan fare better, and save a median of $250 monthly in comparison to those without a plan who save $100 per month.

‘When I chased after money, I never had enough.’–Wayne Dyer, author

Retirement Plan Participation Starts Ticking Up Again,” claims the Employee Benefit Research Institute.  Here, percentages of those participating in employment-based plans is up for the first time since 2010, to 40.8%, from 39.7%.

Increased participation is credited to an improving economy and better employment rate.

This survey shows those who fail to participate are likely young, work part-time, are low-income, or work at small companies. 

Retirement Planning: Half of You Answered “No” to This Critical Question,” says The Motley Fool

Here, “A recent Bureau of Labor Statistics study reported that only 48% of people who worked in the private sector participated in an employee retirement plan…Of the approximately 117 million private-sector workers in the U.S., potentially up to 61 million don’t participate in a retirement plan through their work.”

In combination, 64% of private and government employees participate in employer-based retirement plans; leaving 43 million who do not save through the employer; 26 million of them do not have access to a plan.

Three likely reasons eligible employees choose not to participate: They can’t afford it, they fear losing money, and they feel they can make better investment choices themselves.

‘When you chase money, you’re going to lose.  You’re just going to.’–Gary Vaynerchuck, author

Consumers believe homeownership is “the best way for average people to build wealth,” notes The Washington Post, but a HelloWallet study shows that half of U.S. homeowners--40 million households—“would have built more wealth by renting and investing their money in 401(k)s, IRA’s or other types of tax-advantaged instruments.”

Home owners overestimate tax breaks in housing purchases. “For many families, the tax write off that they gain…is little better than the standard federal tax deduction,” the article points out.

For lower income Americans, the minimal tax benefits are particularly evident.  Those earning $50,000 annually—approaching the national median—“would generate 50% more wealth over the next decade by investing in their retirement accounts rather than their homes.”

“Most households are seeing a deterioration of their wealth status,” according to the Center for Economic and Policy Research in its Analysis of the 2013 Survey of Consumer Finances.  “This is of greatest concern for near retirees, most of whom cannot count on a traditional defined-benefit pension.”

Here, too, the financial drag of homeownership is examined.  Home equity dollars dropped drastically during the downturn: “Housing equity rates for the highly leveraged households in the bottom three-fifths plummeted.”

This is disturbing for those approaching retirement because of their increased dependence on Social Security in absence of traditional pensions, declines in home equity, and the presence of mortgage debt.

“There is little prospect that their wealth situation will appreciably improve before…retirement.”

‘No dream is ever chased alone.’–Rahel Dravid, cricketer

But Americans remain optimistic, says a ThinkAdvisor article reporting on a BlackRock survey.  “Seventy-one percent of those who placed a high priority on saving money were confident about achieving this goal, and 68% of these believed they would get there.”

Millennials are the most confident as 32% believe the economy is on an upswing, compared with 24% of all Americans. 

Overall, “52% of Americans in the poll had a positive view of their financial future, compared with 56% of respondents globally.”

What can you do to leverage this positive view, and help members win the dollar chase race?

LORA BRAY is an information research analyst for CUNA’s economics and statistics department. Follow her on Twitter via @Bray_Lora, and visit the CUNA blog, “The Research Roundup: Economic Perspectives.”