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The middle class challenge

By Barbara Whelehan · Bankrate.com
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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36 Comments
Bob Wisconsin
October 30, 2013 at 9:58 am

The problem not new. I remember in the 1960s, there was a term "keeping up with the Joneses" That is what is going on in 2013. Everyone has to have the latest gadgets, the hottest Nikes, etc. etc. I was $50,000 in credit debt 5 years ago. I worked hard to pay it off. I'm debt free and now taking the money I put to credit card into savings and retirements. I have only one card with a small limit. I buy everything in cash. Cut up these credit cards!

Hogorina1
October 30, 2013 at 9:52 am

Never own a car nor home. This is the beginning and ending of a materialist slavery. Last of all never prepay a funeral in advance.
To be really happy distance your self from national government control. Stay away from all ballot boxes and the stooges they represent.To be out of debt. and monetary slavery never spend more than you earn daily.

Kris
October 30, 2013 at 9:45 am

When dealing with my money (I'm definitely not a financial guru and my family is in the middle of the spectrum represented in this article) I find it helpful to focus on what I have control over. I can't control the market or what the government does or what a CEO earns. What I can control are my expenses and investments. Retirement funding is taken off the top of my paycheck so I won't miss it. So are the other fixed expenses, including savings/investments. Our home is small, we drive our vehicles till it would cost more to repair them than to purchase another, we (gasp!) have stupidphones, not smartphones, we (double-gasp) don't have cable, we eat out once or twice a month, not once or twice a week, we don't have a lot of electronic gadgetry, our elementary schoolkids are allowed one extracurricular activity rather than 3 or 4, I grocery shop at Aldi's or for sale items only, I purchase clothing in off-season when the prices are cheaper, etc. etc. etc. We have everything we need and some of what we want. I call that being wealthy.

Barry
October 30, 2013 at 9:42 am

Very hard to save 5 to 10% on todays income, considering health care, taxes,fuel and general living expenses.kinda ironic that corporate America has deleted pensions, unions and has double the premium of healthcare but refuses to increase hourly wages/salaries.Be prepare to work for the rest of your life. Good luck

JQP1122
October 30, 2013 at 9:39 am

@ RANDY:

I absolutely agree. Kids are great, I have one (BY CHOICE). Unless your last name is Gates, Trump or Buffet IF you choose to have 3,4,5+ kids then you better be prepared to have difficulty making ends meet. I don't care what our parents and/or grand-parents did or were able to do (ie: large families) that is not the way of the world in 2013. So again I say, choose to have a large family and suck it up and don't complain - you made your bed now lie in it...otherwise you should have taken precautions either temporary or permanent ones.

By the way, I know few very, very few adults who have only 1 or 2 children and worry about their day to day finances. Because job losses, health premiums, etc. it is only 1 or 2 additional mouths to feed or bodies to clothe and that is not too terribly difficult. (there are some exceptions but I think I am fairly right on with this satetment)

lisa
October 30, 2013 at 9:36 am

College age adults need to work and pay for vehicle expenses and most of their tuition. "They don't offer grants and scholarships for retirement but they do for college" and student loan rates are resonable. You have to take care of your future now. Your kids have more time left than you do to pay for college.

Babb
October 30, 2013 at 9:34 am

Saving for retirement is possible first make sure you own your home being completely paid for is a must. Anyone who has always rented have nothing when it comes to retirement. The old saying the best investment is your home. The survey is by far off, but the silver lining is this isn't any. For retirement each of us are pretty much on our own, for sure counting on the Government forget it. Take into account this health plan dig into really who gains? Take a good hard look at Health deal this will really make you feel retirement is impossible. Does Obama have heavy interest in Health Insurance companies? Guess why Congress hasn't moved very quickly on Health Insurance, reason the more they delay the more time they have investing in Health Insurance Companies. Fear not that enjoy a tropical beach is possible just move out of this country.

lisa
October 30, 2013 at 9:31 am

I find it very interesting and concerning that lynn complains that she can't save for retirement because she has 4 cars to fuel and insure and college tuition for her children. Hello! The college age adults need to pay for the expenses cars that they use. And in my opinion most of their college tuition to. Student loans are of a very low interest rate and scholarships are fantasic. Grants can work too.

JQP1122
October 30, 2013 at 9:30 am

Difficult to save, hmmmm. I saw another article that said Walmart expects its best Black Friday ever. With Halloween tomorrow I've read articles about the amount of money American people will spend on this holiday from costumes, to parties, to candy, etc. I rarely if ever see empty seats at the stadiums or pubs during Sunday football. Nearly every person in America over 10 has their own smart phones.

So let me say again, difficult to save, hmmmm!!

Randy
October 30, 2013 at 9:24 am

I find it interesting that people choose (and yes it's a choice) to have 5 kids these days and then complain about not having enough money.