Lack of savings paints a disconcerting picture about financial preparedness in America with nearly one-third (30 percent) of U.S. adults aged 18+ within three paychecks of needing to either borrow money or skip paying one or more bills, according to findings from a new study by Northwestern Mutual.
The study found that more than one-fifth (22 percent) of Americans said that they have less than $5,000 saved for retirement, and nearly half of working adults (46 percent) said that they expect to work past the traditional retirement age of 65.
“People are skating on some very thin ice financially,” said Emily Holbrook, senior director of planning at Northwestern Mutual. “While there are some signs of improvement since last year we still have a long way to go, and for most Americans there's no way to get there without a plan.”
The annual study found:
- More than one in five (22 percent) said that they have less than $5,000 saved for retirement, and 15 percent said that they have no retirement savings at all. That was an improvement from 2018, when 31 percent had less than $5,000 saved and 21 percent had no retirement savings at all.
- While 10,000 Baby Boomers turn 65 every day, nearly one in five (17 percent) said that they have less than $5,000 saved for retirement and 20 percent said that they have less than $5,000 in personal savings. For Gen X, the numbers are greater – 21 percent said that they have less than $5,000 saved for retirement and 22 percent said that they have less than $5,000 in personal savings.
- More than half (56 percent) said that they do not know how much they will need to retire comfortably.
- More than a fifth (22 percent) of non-retired U.S. adult respondents said that they believe it was not at all likely that Social Security would be available when they retire.
- On average, people said that they believe that there is a 45 percent chance they will outlive their savings, and 41 percent have taken no steps to address it.
The Nationwide Mutual study found that 46 percent of Americans expect to work past the traditional retirement age of 65. Nearly one out of five Baby Boomers (18 percent) and an equal percentage of Generation X (18 percent) expect to work even longer – past the age of 74.
Moreover, more than half (53 percent) of those who said that they expect to work past age 65 said it would be by choice, compared to 47 percent who say it will be out of necessity.
Among those who said they expect to work past age 65 out of necessity, the top three reasons included:
- “I won't have enough saved to retire comfortably” (78 percent)
- “I do not feel like Social Security will take care of my needs” (56 percent)
- “I am concerned about rising costs like healthcare” (49 percent)
For those expecting to work past 65 by choice, the top three reasons included:
- “I enjoy my job/career and would like to continue” (58 percent)
- “I want additional disposable income” (46 percent)
- “It is a social outlet that will help me stay active/prevent boredom” (39 percent)
“We're seeing a combination of factors in these numbers,” said Ms. Holbrook. “Given what we know about savings levels, the number of people who can afford to retire at 65 is low. At the same time, people across the country are changing what the face of retirement looks like and getting satisfaction well beyond their bank accounts by continuing to work. The combination of those factors – affordability and lifestyle – form the bedrock of a good financial plan.”
Data from the study released in May suggested that U.S. adults aged 35+ felt their financial habits and financial security had improved over the last 10 years, while risk aversion continued to run high and optimism remained flat.
“Clearly it's not an apples-to-apples comparison between these first two sets of findings, but side-by-side they tell us two things,” Ms. Holbrook said. “First, while middle-aged and older adults report improvement, they're still on a long road, just moving in a slightly better direction. Next, while there are some troubling signs about long-term financial security in America, there is also some evidence that as people age financial discipline becomes more of a priority.”
Learn more: Northwestern Mutual.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].