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The middle class challenge

By Barbara Whelehan ·
Friday, October 25, 2013
Posted: 3 pm ET

Are Americans completely out of touch with reality?

Six out of 10 middle-class Americans say their chief financial concern is "paying the monthly bills," according to the latest Wells Fargo Middle Class Retirement study. That's up from 52 percent last year.

Paying bills is important, so I'm not surprised it's a top day-to-day concern. But this finding struck me as incomprehensible: 42 percent of middle class Americans say it's impossible to save for retirement and pay the bills. Really?

Fully a third plan to work until "at least 80" because they don't expect to have enough saved.

How many 80-year-olds do you know in the workforce?

Most of those surveyed -- 877 out of 1,000 people -- were between ages 30 and 75 and earning somewhere from $50,000 to $99,999 or had investable assets of $25,000 to $99,999.

We're talking about people who have or make decent money.

The study also revealed that people suffered both fear of the stock market and apathy about investing:

  • 52 percent are afraid of investing in the stock market because of its volatility.
  • 51 percent overall say they have "little interest in learning about investing."
  • Among those with little interest in investing, 60 percent are in their 50s and 60s.

Is it possible for middle-class Americans to pay their bills and save for retirement?

"In general, the best way to assess their situation is to develop a budget and a plan for saving," says Laurie Nordquist, head of Wells Fargo Institutional Retirement and Trust. "Working with a budget and a plan for saving for retirement provides the roadmap. In our survey, we saw that across income levels, those with a plan saved three times more than those without."

On the same planet but in a different world

As I was pondering our nation's apparent lack of interest in retirement planning, I heard a piece on NPR Friday morning about what poor people in Africa do with money that is sent to them directly. Do they squander it on tobacco, alcohol and gambling, or do they invest it in something worthwhile? The story by David Kestenbaum opened with an interview of Kenya's Bernard Omondi, who had expressed delight after receiving $1,000 in cash -- "roughly what he might have made from a year of work."

A study by Innovations for Poverty Action found that recipients of money used it toward better food, health care and their children's education. Some invested it in a small business or bought cows. The study found that getting money reduced stress levels among the poor.

I wonder why Americans are so stressed out about their bills. A thousand dollars can do so much to boost the quality of life for indigent people. But here in the land of opportunity, many people find it impossible to set aside 10 percent or more of their relatively generous incomes toward retirement.

Do you find this unfathomable?


Follow me on Twitter: BWhelehan.

Barbara Whelehan is a co-author of "Future Millionaires' Guidebook," an e-book by Bankrate editors and reporters. It is available at Amazon, Barnes & Noble, iBookstore and other e-book retailers.

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Mike W
October 30, 2013 at 5:40 am

I would love to save 10% of our income! What would you like for us to stop paying on or drop completely ( Auto & Home Insurance, College Education ) ? I have a full time job, my wife works part-time, and has tried to find full time, or another part-time. Will I be better off than my parents? Absolutely not ! Will our kids be better off then us? I hope so, but not counting on it.

Salary increases are not keeping up with Expenses. I would love to retire at 65 ( or 66, according to Sos Security ), but think that is a dream.

October 30, 2013 at 5:11 am

I work two jobs, and my wife works part-time. We have three kids ranging from 8 to 14, and anything they want to do costs money (e.g. band, boy scouts, etc.) My wife and I *were* able to save for retirement until we had our third kid, but at that point the surplus in our household income vanished. Now, with literally EVERYTHING going up EXCEPT our income, we're barely able to keep up with the bills. My wife's car is eleven years old and mine is four, and fortunately I'm able to do most of the maintenance on them myself, but that only stretches our budget so far. If you had told me ten years ago that we'd have a total income just below six figures and still be in tight financial straits, I'd have called you crazy, but here we are. Retirement seems like an impossible dream; the savings we've put away over the years have been ravaged by the tech bubble, the housing bubble, and the deterioration of stock investments we'd thought were absolutely rock-solid over the long term (e.g. AT&T, Merck, etc.). We did everything we were supposed to do, and we have little to show for it. I can certainly understand the pessimism of people my age (just shy of 50) when it comes to our futures; nowadays when people ask me when I'm going to retire, I tell them, "When they throw dirt in my face."

October 30, 2013 at 4:19 am

Prepare for the worst, (the tribulation). Hope for the best, (Armaggedon)!

October 30, 2013 at 4:03 am

Unfathomable? Really? It's a one-two punch from the Dems and Repubs. Everyone is now getting a real taste of the cost of Obamacare. On the flip side, businesses are cutting hours and dropping insurance. More real costs, less income... it's not rocket science.

People have less real income, increasing costs AND inflation, and more tax burdens.

To the article writer. If you live in Africa and make $1000, and then you get $1000, you've doubled your money. If you live in America, and are lucky enough to have your hours reduced from 40 to 28, that's a 30% LOSS. Then add the increase in auto gas, the housing collapse, Too Big to Fail, tax increases (Obamacare), education increases, etc.... And the writer is surprised $1000 won't fix everything. Really? That the writer doesn't get it is what is unfathomable.

October 30, 2013 at 2:57 am

Lol Charyl, of course NJ Property taxes are high and getting higher. Historically blue states have higher property taxes than red states.
As to the article, my household earns less than in the article, and yet, I have retirement accounts and have been increasing them yearly. The main problem is that people don't know the difference between wants and needs. When I say people I include those ignorami (?) who are in political office, the Government.

October 30, 2013 at 1:44 am

our government is the only people that are going to be able to retire. no companies have retirenment or penshtions . companies will not hire you now because of healthcare law and also don't what to give any benefits. companies have left America for child and low slave wages . we bailed the car companies out and they repay us by opening factories in mexico. also we have let every nation around us invade us and help them in every way we can get ahead of real americans while they save there countries for only there citezens. wake up America or disappear we will

October 30, 2013 at 1:20 am

A low or middle income person living in New Jersey doesn't stand much of a chance of saving for retirement even if they pinch pennies. After all, this is the state with the highest property taxes in the nation. Example: in 1977 my property taxes were $900 a year - by 2012, they were over $6,000 and my house is small. How can anyone retire in a state where the property taxes eat up most or all of your savings? Many, especially senior citizens on fixed incomes have been forced out of their homes. Can you imagine losing the home you toiled so hard for years to pay off only to have it put up for Sheriffs Sale because of these outrageous property taxes? I really like Governor Christie, but he needs to focus more on keeping people in their homes by using income tax or other means rather than property taxes to fund municipalities and schools. A 10% income tax reduction is not the answer for the most of us struggling just to stay in the state we were born in. He speaks of shared services and combined municipalities, but we have more school districts in New Jersey than Pennsylvania, Maryland and Delaware combined. Forced regionalization of the districts should be HIGH on his to do list. Years ago, a supreme court justice ruled that this is an unfair method of funding the aforementioned. I do hope in his next term, and he will win, Governor Christie can give us back our homes so we can save for retirement.

October 30, 2013 at 1:13 am

And after Jan 1 2014 when the new health care insurance rates kick in there will be a less take home money. If you thought the SS tax being re-instated hurt the economy, You ain;t seen nothing yet.

October 30, 2013 at 12:21 am

Inflation, despite what the new formula says, is on the rise. Wages are not. We live simply and still have debt. Our relatives think we're hoarding money. We're not. I'm getting older and my body is wearing out. Save? Save what? Everything keeps going up.

October 28, 2013 at 3:37 pm

Most Americans are still in the mode of: 1) My home will go up in value (again). 2) I must have a certain amount of square footage for a home. 3) I must have certain things in an automobile (regardless of whether I can afford it). 4) My children must go to whatever private college they want (whether or not I can afford it). 5) My wages will (when?) increase greater than the inflation rate.

None of this is reality based. This is why "there's nothing left to save...".