Despite the mounting pressures on Americans of all ages to save for retirement, our saving habits haven’t changed in 10 years.
The combined employer and employee contributions to 401(k)s consistently hover around 10 percent of workers’ pay, according to “How America Saves 2018,” an annual report by Vanguard, which administers thousands of employer 401(k)s and other defined contribution plans.
Retirement account balances aren’t going up either. The typical participant’s 401(k) balance is no larger than it was in 2007, even though accounts grew 7 percent last year, to $26,000, thanks to a strong stock market. The balances, when adjusted for inflation, are slightly smaller.
The growing adoption of 401(k) plans that automatically enroll their workers is having both negative and positive influences on the account balances. Employers tend to set employees’ contributions in these plans at a low 3 percent of their pay. This has had a depressing effect on balances, but it has been offset somewhat in recent years by a modification to auto-enrollment plans: more employers are automatically increasing their workers’ contribution rates periodically.
Baby boomers with a few short years left to save are particularly under pressure to increase their savings. The typical boomer has accumulated only $71,000 in his current employer’s retirement account, according to Vanguard. Total account balances are generally larger, however – though still often inadequate – because many baby boomers have rolled over savings from past employer 401(k)s into their personal IRA accounts.
Overall, the situation for all workers hasn’t really changed and neither has Vanguard’s message to future retirees.
“Going forward, we need to reach for higher contribution rates for more individuals,” Jean Young, senior research analyst says in the company’s video above. …Learn More
Sky-high city rent, college loan payments, and the low-paying days of an early career are a bad combination for today’s Millennial.
Liz Patterson has solved all that. The carpenter built herself a 96-square-foot house on top of a flatbed truck for less than $7,000 in Manitou Springs, Colorado, a hip neighborhood near Colorado Springs.
The house “represents my monetary freedom – it’s the whole reason I did it,” the 27-year-old said.
Tiny houses, which average 500 square feet, are only about 1 percent of U.S. home sales. But builders say that sales continue to grow as Generation-X buys them as Airbnb rental properties, and baby boomers park their “granny pods” in an adult child’s backyard.
Patterson’s house before
Tiny houses actually make the most sense for 20-somethings in rebellion, given their financial constraints and a distaste for all the junk their parents accumulated over a lifetime, said Shawna Lytle, a spokeswoman for Tumbleweed Tiny Homes Company in Colorado Springs, which built its first tiny house in 1999. The national tiny house price is $23,000.
Five years earlier, the tiny house movement had started in Tokyo. Recently, a handful of U.S. communities, including Spur, Texas, and Berkeley, California, have modified their zoning rules or building codes to accommodate them. The laws are a patchwork: houses on wheels must sometimes be classified as RVs, and some cities set size minimums for houses with foundations. …Learn More
Back in December, the Vanguard Group predicted a stock market that would “remain placidly subdued” in 2018. What a difference two months has made.
A Morgan Stanley analyst, echoing many on Wall Street, has now declared, “The long-anticipated return of [stock market] volatility has arrived.” The Standard & Poor’s index of 500 stocks slid 10 percent in a few days in late January and early February, bounced back, and then dropped again last week: the S&P declined another 2 percent, and the Dow index was down even more, by 3 percent.
No one can predict the future, of course – not Vanguard or Morgan Stanley. “Time will tell,” the analyst said. But while baby boomers have been thrown around by the stock market and witnessed a recovery in their portfolios, young adults might not be so chill.
Here are some earnest words of comfort, Millennials: you are truly the lucky ones. …Learn More