1 in 10 American workers not saving for retirement


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One in 10 American workers isn’t saving for retirement, according to a survey that accompanied Bankrate’s Financial Security Index for August. And their numbers are increasing, even though the economy has improved.

The national telephone survey, which includes a number of personal finance questions, asked how much people were contributing this year compared with last year. Among those who took the survey, 10% said they “did not contribute this year or last year.” That’s the highest percentage since Bankrate started asking the question in 2011.

With millions of Americans behind in their retirement savings, it is important not only to save but to save more each year.”
– Greg McBride, CFA, Bankrate

There were a few positive developments among those who are saving, however. Among American workers:

  • 19% are saving more in their retirement savings accounts when compared with last year.
  • 14% are saving less than they were a year ago. That’s an improvement from 2011, when 29% reported saving less.
  • More than half are saving the same amount.

“With millions of Americans behind in their retirement savings, it is important not only to save but to save more each year,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “Even for those saving the maximum, 401(k) contribution limits increased for 2015, affording the opportunity to put more away for retirement.”

Retirement outlook

A persistent concern among many Americans is whether they’ll be able to retire. The Great Recession and a lack of adequate planning have forced many seniors to keep working well into their 60s. And retirement researchers have pointed out that the decline of pension programs, the anticipated increase in medical expenses and a rising cost of living could make retirement more of a privilege than an expectation in the future.

The National Institute on Retirement Security reported in July that Americans in almost every state won’t meet their financial needs in retirement. In a separate report, the group estimated that the median retirement account balance for all households near retirement was $14,500. For all households, it was a meager $2,500.

Part of the problem is that fewer companies are offering retirement accounts to their employees, according to an April study from The New School’s Schwartz Center for Economic Policy Analysis. Only 53% of American workers were offered a retirement account at work in 2011, down from 61% in 1999.

Millennials are least likely to save

Bankrate’s FSI survey revealed how different demographic groups went about saving for retirement. For instance:

  • The youngest age group in the survey, adults age 18 to 29, was the most likely not to be contributing to a retirement fund.
  • Democrats were nearly twice as likely as Republicans to say they saved more than last year.
  • Those earning less than $30,000 a year were the most likely to not save at all.
  • College grads were more likely to save more, while those who never attended college were the most likely to not sock away any savings.

Expert advice

Financial planners agree that saving sooner is the key because the money will compound over a longer time period, resulting in a bigger nest egg.

For example, an investor who puts away $5,000 a year from age 25 to 65 at a compounded rate of 8% will amass almost $1.3 million over those 40 years, says Gilbert Armour, a financial planner with SagePoint Financial. “Their friend, who procrastinates and starts 10 years later and has only 30 years, will reach $566,416 at age 65 — less than half of their forward-thinking friend,” he says.

Marguerita Cheng, CEO of Blue Ocean Global Wealth, encourages clients to contribute enough to receive a company match, if there is one. Then, slowly increase by 1% a year. If that’s too much, then try $50 or $100 per paycheck.

“Challenge yourself to pay yourself first,” she says. “We tell clients that we want you to have fun today and fun in the future.”

Financial comfort fading

Overall, Americans are feeling confident about their financial circumstances, though they’re less optimistic than they were earlier this year. Bankrate’s Financial Security Index slipped for the 3rd straight month to the lowest reading since October 2014. The security readings for savings, debt, net worth and overall financial situation all declined.

Women’s feelings of financial security turned negative for the 1st time this year, while men’s feelings tied the lowest level of the year.

Still, the overall reading of 101.2 indicates improved financial security compared with 1 year ago, and job security rebounded from last month’s decline.

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