The reasons for such a huge shortfall between the two numbers is easy to see when looking at the numbers. Just over one-third (34%) of middle class adults who work aren’t contributing a single cent to their 401(k), IRA or some other type of retirement savings account. Those who are managing to save money for retirement are only saving a median amount of $125 a month. Almost one-in-five (19%) have no retirement savings at all.
The majority of the people questioned don’t feel a need to sacrifice for their retirement savings. Just under two-thirds (61%) responded they aren’t sacrificing much to save for retirement while just over one-third (38%) responded that they are making sacrifices to save money for retirement. Just over half (55%) responded they plan to save more money later to make up for not saving as much as they should be saving now.
The lack of savings is putting many in a position where they aren’t sure whether they will be able to retire. Almost one-third (31%) of middle class adults don’t believe they’ll have enough money in retirement to survive. For middle class adults in their 50’s, half say they will continue to work until they’re 80 years old because they don’t have enough money saved to retire.
One of the main findings of the survey is that investment returns alone aren’t going to produce enough income to create a secure retirement account. It’s essential for people to save money in addition to investing it, and that’s something many in the middle class in the US aren’t currently doing. As Wells Fargo’s director of institutional retirement, Joe Ready, points out, “The main message here is people are putting off saving, and they are losing the benefit of long-term compounded earnings. Kicking the empty can down the road is going to be detrimental to their retirement security. It’s really a problem.”
There are five things people should do to improve their retirement savings:
- Start saving today
- Take advantage of your company’s 401(k) match, if offered
- Figure out how to save more than you currently are saving
- Determine the type of investor you are
- Leave your hands off your savings
The survey questioned 1,001 adults between the ages of 25 to 75 who had a median household income of $63,000.
(Photo courtesy of Garry Knight)