Retirement for many may be at risk because of faulty assumptions. Setting aside some time to do the math could help. But just trying to make a living and pay the bills makes planning to retire a challenge for the middle class.
When asked what percentage of their financial resources they expect to withdraw annually in retirement, the median withdrawal predicted by middle-class Americans is 10 percent. But most experts recommend annual withdrawals of 3 to 4 percent.
In addition, middle-class Americans say they’ll need a median of $300,000 to support themselves in retirement — but to date have saved only $25,000.
The annual Wells Fargo Retirement Survey also found that 34 percent of middle-class Americans estimate that their retirement income will be half their current annual income, or less. The median household income for Americans was roughly $50,000 last year, so that means many are planning on living on $25,000. Three-fourths of middle-class Americans say their estimate of what they’ll need to live on in retirement is based on “some sort of guess,” the survey finds. And those guesses are based on optimistic assumptions. For instance, middle-class Americans say they believe the median cost of their out-of-pocket health care costs in retirement will be $47,000. But the Center for Retirement Research estimates a typical couple at age 65 can expect to spend $260,000 or more over the rest of their lives.
“Clearly, the guessing doesn’t work,” said Laurie Nordquist, a director of institutional retirement and trust services at Wells Fargo. The survey findings suggest that many consumers are too focused on paying down debt and paying bills to spend more time on retirement planning.
Household incomes have taken a big hit the past three years, affecting families’ plans for retirement, spending and debt reduction.
American incomes declined more in the three-year expansion that started in June 2009 than during the longest recession since the Great Depression, according an analysis of U.S. Census Bureau data by Sentier Research LLC.
Median household income
Continue reading Household Income Has Big Drop the Past Three Years – Implications for Retirement, Spending and Debt Reduction
Debt in the U.S. is improving. The country continues to deleverage – lowering spending, foreclosing, and saving more of their income.
Total debt, public and private, has been steadily reducing for 12 quarters in a row.
While public debt has risen at a faster pace during the past several years,
total U.S. debt has risen at the slowest
Continue reading Debt Continues to Reduce in U.S.
Families making the least and most money are seeing their job prospects improve. Middle-income earners are getting hit the hardest in the job market.
Employees making above-average wages, like doctors and energy-industry workers, and those at the other extreme, including home-health aides and restaurant staff, have seen the greatest improvement in hiring since the jobs recovery
Continue reading Middle-Income Earners Hit Hard in Job Market – Not Seeing Income Gains
Almost two-thirds of U.S. student-loan borrowers misunderstood or were surprised by aspects of their loans or the student-loan process, a study shows.
About 20 percent of the respondents in an online survey said the amount of their monthly payments was unexpected, according to the study released today by Young Invincibles, a nonprofit group in Washington that
Continue reading Students Borrow Money for College and Don’t Understand their School Loan
Most Americans can’t afford a $1,000 emergency.
A majority, or 64%, of Americans don’t have enough cash on hand to handle a $1,000 emergency expense, according to a survey by the National Foundation for Credit Counseling, or NFCC.
Only 36% said they would tap their rainy day funds for an emergency. The rest of the 2,700 people
Continue reading No Money for an Emergency – Study Finds Most Families Have No Cash for a Rainy Day
Unemployment and global debt worries continue to hurt the economy, adding financial pressure on families that increasingly rely on food stamps.
Nearly 15% of the U.S. population relied on food stamps in May, according to the United States Department of Agriculture.
The number of Americans using the government’s Supplemental Nutrition Assistance Program (SNAP) – more
Continue reading Unemployment, Economy Contribute to Record Use of Food Stamps
Payrolls at U.S. companies increased by a slow 114,000 in July, suggesting modest job growth in the wake of debt reduction and fears of slower growth, in an employment report released by ADP.
It was the 18th straight month of job growth in the ADP report.
The ADP report covers only private-sector employment, and not government jobs.
Continue reading Debt and Slow Growth Keeps Hiring at Slow Pace
Along with signs the economy is slowing and consumer sentiment is declining we see that Americans cut back on their spending in June for the first time in nearly two years and their incomes grew by the smallest amount in nine months. This is another troubling sign for an economy that is barely growing.
Continue reading Consumers Lower Spending, Save More as Economic Growth Slows
The debt overhang and unemployment continue to hurt the economy.
The Thomson Reuters/University of Michigan final index of consumer sentiment fell to 63.7, the weakest since March 2009, from 71.5 in June.
Consumer spending from April through June showed the smallest gain