race to the finish

Behavior

Americans With Small 401ks Worry

This blog has spilled plenty of ink over the problem of so many workers having inadequate retirement savings.

One theory is that they don’t understand the urgency. But a new survey makes clear that they not only are fully aware of the problem but are very worried about it.

The vast majority of the 1,000-plus baby boomers and Generation-Xers who conceded to being behind on their saving wish they could save more – Allianz, which conducted the survey, calls them “chasers.”

These chasers recognize that if they don’t make adjustments, it’ll be too late to repair their finances. Two out of three fear the worst: they’ll run out of money at some point in old age and will be forced to eke out a living on their Social Security checks alone.

Their fears are warranted. The typical boomer household approaching retirement who has a 401(k) has saved just $135,000 in its 401(k) and any IRAs combined. At retirement, this amount equates to only about $600 in monthly income

Half of the workers put the blame on a single culprit: “too many other expenses right now.”

This sentiment dovetails with mounting evidence that many workers are overwhelmed by the increasing costs of health insurance, college, and housing, which are far outpacing their pay raises. Low-paid workers are especially hard hit, according to 2017 research. If they save at all, they set aside only 3 percent of their paychecks – half of what top-paid people are able to save.

The survey also indicated that the workers coming up short aren’t making up for it by investing their 401(k)s in sufficiently risky investments, which could generate the potentially higher returns that would give them more money by the time they reach retirement age. Investments “need to be more aggressive,” Allianz said.

Recognizing a problem is the first step to solving it, and most of the people who admit to falling behind believe they’ll have to work a few more years to repair their retirement finances. They’re right about that.

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3 Responses to Americans With Small 401ks Worry

  1. Ken Pidcock says:

    “Investments “need to be more aggressive,” Allianz said.” No doubt true, but regrettable. You’d think adjectives describing an effective retirement saver would include frugal and disciplined, not aggressive. But that’s what you get with no interest.

  2. Phil says:

    The first step to successful retirement planning is not just recognizing the problem, but not planning on Social Security. Then do the budgeting and live by those numbers. Then you have the possibility of saving and investing. Then learn how to invest by managing brokers, “The Educated Guessers.”

  3. John Ketter says:

    What happens when these folks run into a medical issue? Some percentage of them are going to be faced with providing home or assisted living care for a loved one. Just ask me, I know!!

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