Survey: Most Americans are on Shaky Ground for Retirement

Will You Be Able to Make Ends Meet in the Future?

Written by Hersh Stern Updated Thursday, June 6, 2024

broken piggy bank

Since the economic downturn of 2008-2009, many Americans have been recouping lost savings through the steady, albeit slow, increases in the economy and the stock market. Yet, even with these improvements, a recent FINRA (Financial Industry Regulatory Agency) survey of 27,500 people found that a majority of American adults are unprepared for a comfortable retirement.

While one reason for this is demographic, since more people are living longer today than ever before - which requires savings to be stretched even further - the FINRA survey also highlighted a number of additional reasons why many people are unprepared to make ends meet in retirement.

Are you investing enough for retirement?

Key Finding #1

The FINRA survey found that outside of employer-sponsored retirement accounts such as 401(k)'s, only 1 in 3 Americans had a personal investment account - and this number has been decreasing over the years, even though the stock market has been rallying.

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The way that most of us are preparing for retirement is vastly different than how our parents and grandparents prepared. In the past, most employees could rely on an income steam from an employer-sponsored defined benefit pension plan, along with benefits from Social Security.

Today, however, few companies offer such plans anymore and if a retiree thinks he can rely solely on Social Security, he’s up for a big surprise.

Social Security benefits were never meant to be your only income source in retirement - and according to the Social Security Administration itself, "Social Security replaces about 40 percent of an average wage earner's income after retiring."

For most people, this won't be nearly enough. So, unless one has other savings and investments, it could be difficult to meet even the most basic of retirement living expenses in the future.

If you are one of the 30% who has a personal investment account that is invested in stocks or mutual funds, you’ve probably been taking advantage of the growth opportunities there. This is because other assets just cannot match the long-term 7% return of the stock market.

And even for recent or new investors, it’s good to keep in mind that the stock market has always ultimately erased every previous correction within months or years. That knowledge can give you the confidence to stay the course.

What do you know and what don’t you know about investing?

Key Finding #2

One of the most telling statistics from the FINRA survey was that only 37% of the respondents were able to pass a 5-question quiz on basic financial literacy.

When it comes to your future finances, what you don't know can hurt you.

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This low pass rate has been dropping successively over the past seven years. Respondents tended to have the most difficulty with the inflation and risk questions. However, because all of the questions asked could be encountered in everyday life, such as calculations involving interest rates and inflation, being familiar with all of the concepts is important both now and in the future.

Do you know how much money you need to save for retirement?

Key Finding #3

According to the FINRA survey, only 39% of Americans have ever tried to figure out how much they need to save in order to reach their retirement goals. And, 56% of the survey-takers said they were worried about running out of money during retirement.

One of the scarier statistics the survey found was that the majority of respondents said they have never tried to figure out how much they'd need to save in order to retire yet they clearly were concerned about it.

What this suggests is that in general, Americans aren't saving enough; they’re not be staying accountable to their budgets; and they aren't investing in the right assets or financial instruments to create enough retirement income for the rest of their lifetimes.

It's a known fact that people who make the time to plan for retirement and stick to their plans tend to accumulate more wealth into retirement.

Your chances for a financially secure retirement are greatly improved if you take the time to actually plan for one. By setting specific and measurable goals, you will be much better able to work towards a definitive end point - and know along the way whether you're making progress.

Are you following a monthly spending budget?

Key Finding #4

One of the bright spots in the survey showed that more than half of all households do try to stick to a monthly expense budget.

This is a real positive, especially given the low personal savings rate in the U.S. as compared to many other developed countries.

Those who abide by a budget are not only more likely to spend less than what they bring in each month, but are also more likely to save money for an emergency. So, if you're still in the camp that isn't sure where your money is going, a budget can definitely help.

There was also some good news in terms of those who had been setting aside money in an emergency fund.

The Bottom Line

It is important to ensure that you are on track for the future. The best way to do that is to create an overall financial plan.

Your plan should include a budget, an emergency fund, as well as investments in the proper assets. Because everyone's situation is different, there isn't a one-size-fits-all solution. So, putting together a plan that works for you is the key.

Annuities have helped many people plan for retirement income. If you’d like to learn more about the findings of this survey or how annuities can be part of your retirement security plan, call us at 800-872-6684.

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