Americans $300K Short for Retirement


More middle-class Americans expect to work past the traditional retirement age, according to a new study conducted by Wells Fargo.

The survey found that 72% of middle-class Americans between the ages of 25 and 69 expect to work through their retirement years. The notion is driven partly by lifestyle choice, with 33% of Americans saying they will continue to work because they want to. But according to Laurie Nordquist, director of Wells Fargo Institutional Retirement and Trust, the trend also pertains to deep deficits in personal retirement savings.

According to the study, Americans, on average, believe that they need a nest egg of about $300,000 before they can stop working. They’re estimation isn’t far off:  Last year’s data from the Employee Benefit Research Institute found that a typical American couple looking to retire needs to squirrel $338,000 away to live comfortably.

Unfortunately, the majority of Americans don’t have anywhere near that amount in their retirement savings. On average, the study found respondents have only $20,000 saved for their golden years.

More pointedly, however, those nearing retirement (age 50-59) have put away $29,000 thus far. If they were to use their retirement savings as they predicted – for the next 20 years, while taking 5% out at a time – they would have to live off a mere $190 a month.

“Most middle class Americans haven’t done the math,” Nordquist said. “People are not even close to where they need to be in total savings.  Barring a miracle, a winning lottery ticket or a big inheritance, they’re going to be forced to dramatically cut back their lifestyles after retirement.”

The survey was conducted for Wells Fargo by Harris Interactive from Sept. 9-Oct. 7. In it, 1,756 middle-income Americans in their 20s, 30s, 40s, 50s and 60s, were surveyed on their attitudes and behaviors around planning, saving and investing for retirement.  It included only respondents who fell within specified income and wealth brackets. Those aged 25 to 29 had household income of $25,000 to $99,999 or investable assets of $25,000 to $99,999. Those aged 30 to 69 had household income of $40,000 to $99,999 or investable assets of $25,000 to $99,999.

The findings of that research support many other recent studies showing Americans have resolved themselves to a longer work life. Just this week, Nyhart, an actuarial and employee benefits consulting firm, released the findings of a six-month study that concluded most workers' contributions to their 401(k)s would not be enough to retire.

A survey conducted in October by Ameriprise Financial, meanwhile, also found that many Americans, men specifically, weren’t enthusiastic about leaving the workforce. The Wells Fargo survey, however, discovered that attitudes toward retirement varied more depending on age. And not surprisingly, those who weren’t on the cusp of retirement were the most negative.

According to Joe Ready, director of Wells Fargo Institutional Retirement and Trust, respondents in their 50s and 60s were most likely to feel enthusiastic about retirement, largely because many members of this demographic will receive a pension.

“In the past, saving for retirement was done automatically. Money was put aside for you [by employers], and you didn’t have to decide,” Ready said. “Now, you have to do it on your own.”

Americans in their 40s are actually under the most stress when it comes to preparing for retirement. Nearly half, or 48%, of respondents in this demographic said they didn’t believe they would be able to save enough to live the type of lifestyle they wanted to have when retired. They also felt inflation would force them to work longer and that money matters, in general, had increased tension in their households since the economic downturn. 

For their part, 30-year-olds felt slightly more confident on their abilities to adequately save. Additionally, while 20-year-olds felt that they “were on track” regarding their retirement savings, they tended to have the lowest amount of confidence in the stock market, and were therefore the most likely to put their savings in certificates of deposit than stocks. 

“They’re putting money their money in safe investments that has the least chance of long-term appreciation,” Ready said. But she also notes this reluctance to invest could compound the damage that the economic downturn has already done.

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