Anika Jindal, Wealth of Geeks
A study from the Empower Annuity Insurance Company of America found that around 68% of working Americans feel they will be financially ready for retirement when the time comes.
The American economy is improving. Gas prices are down from their all-time high in 2022, and inflation is 2.89% lower than this time last year, according to Ycharts. Even with all the changes over the past few years, it seems that Americans are still prioritizing their financial health and preparing for retirement.
Edmund F. Murphy III, President and CEO at Empower, points out, “There is still progress to be made, but I am optimistic our retirement system is providing the tools and solutions that are helping individuals achieve good financial outcomes.”
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Still saving
A lot of people are spenders, not savers. However, the Empower report makes it clear that most working Americans still contribute to their retirement plans.
Average retirement balances increased by 11% over the past year. Balances declined 27% in 2022, so this uptick represents improving circumstances among workers. Even so, inflation and other circumstances have 11% of Americans concerned they’re not saving enough for retirement.
Workers who have managed savings accounts fare better than those using target date accounts. In fact, they save an average of 27% more and are more engaged with their plans.
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The other side of the coin
Not all Americans are as confident about their savings — for retirement or any other purpose. Credit card debt is on the rise. The Federal Reserve Bank of New York reported Americans owe $1.13 trillion in credit card debt.
According to The Fed, credit card debt increased by $50 billion in the fourth quarter of 2023.
Credit card debt and higher interest rates are taking their toll on Americans’ budgets. About 27% of the Empower respondents said they were very likely to take out a loan or hardship withdrawal from their retirement accounts in 2024.
Confidence in Social Security as a safety net is also low. About 24% of all Americans believe Social Security will not exist by the time they retire. Nearly one-third (32%) of Gen Zers don’t think they’ll be able to depend on Social Security for part of their retirement income.
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Engagement is everything
Americans who stay engaged in managing their finances save more. Luis Fleites, Marketing Communications Director for Empower, says, “…employees who are engaged savers, utilizing the tools and advisory services that many employers provide, do save more than those who are unengaged.”
It pays to take advantage of any advisory services employers offer, but there are other options. Some people prefer to find their own financial advisors, but that can be expensive. Some websites offer AI-generated financial advice, which may be a good place to start for those who want guidance but can’t afford the services of a human advisor.
Those with substantial assets will probably want to find a planner experienced in dealing with more complex financial issues. These people may need specialized tax preparation, investing, and estate planning advice. The bottom line, however, is that those who are engaged and aware of their financial status save 53% more than those who are not.
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Who is saving?
According to the Motley Fool, most people start to rack up retirement cash after age 35, and it grows exponentially until workers reach age 75.
However, the Empower study showed some groups aren’t saving nearly as much. About 37% of Gen Zers are more concerned about getting out of debt than saving for retirement. Considering many in this demographic are paying student loans, that’s understandable. Still, this group is way behind the baby boomer crowd when it comes to retirement savings, plus 37% of them aren’t maximizing their employer-matching contribution to their 401(k) accounts.
Gen Xers are saving for retirement, Investopedia reports, but they’re not necessarily optimistic about the outcome. About 55% of Generation X think they will be able to retire, but about 25% aren’t so sure. They’re pretty confident that they know how to manage their finances, but they’re still apprehensive about the future of their retirement savings. Yahoo Finance reports the average Gen X household has about $40,000 saved up for retirement, and they’re concerned that won’t be enough.
Men also have more retirement savings than women. The Empower study indicates men’s average account balances are about 50% higher than women’s. This is because of the gender pay gap and also because women are not usually in the workforce as long as men.
According to CNBC, women should wait until age 70 to claim the entire Social Security benefit. They should also make the most of their contributions while in their 20s and 30s — before they have children.
—————
A marathon, not a sprint
Even in uncertain economic times, saving for retirement is a long-term journey. Most people won’t win the lottery, so they’ll have to save and plan for their retirement over the long haul. Experts urge workers to stay current on their savings plans and get the help they need to navigate financial issues and tough economic times, if necessary.
People should pay down debt and make space for personal goals like travel or hobbies. Saving money involves more than just making sure the bills are paid on time.
The American economy is improving. Gas prices are down from their all-time high in 2022, and inflation is 2.89% lower than this time last year, according to Ycharts. Even with all the changes over the past few years, it seems that Americans are still prioritizing their financial health and preparing for retirement.
Edmund F. Murphy III, President and CEO at Empower, points out, “There is still progress to be made, but I am optimistic our retirement system is providing the tools and solutions that are helping individuals achieve good financial outcomes.”
—————
Still saving
A lot of people are spenders, not savers. However, the Empower report makes it clear that most working Americans still contribute to their retirement plans.
Average retirement balances increased by 11% over the past year. Balances declined 27% in 2022, so this uptick represents improving circumstances among workers. Even so, inflation and other circumstances have 11% of Americans concerned they’re not saving enough for retirement.
Workers who have managed savings accounts fare better than those using target date accounts. In fact, they save an average of 27% more and are more engaged with their plans.
—————
The other side of the coin
Not all Americans are as confident about their savings — for retirement or any other purpose. Credit card debt is on the rise. The Federal Reserve Bank of New York reported Americans owe $1.13 trillion in credit card debt.
According to The Fed, credit card debt increased by $50 billion in the fourth quarter of 2023.
Credit card debt and higher interest rates are taking their toll on Americans’ budgets. About 27% of the Empower respondents said they were very likely to take out a loan or hardship withdrawal from their retirement accounts in 2024.
Confidence in Social Security as a safety net is also low. About 24% of all Americans believe Social Security will not exist by the time they retire. Nearly one-third (32%) of Gen Zers don’t think they’ll be able to depend on Social Security for part of their retirement income.
—————
Engagement is everything
Americans who stay engaged in managing their finances save more. Luis Fleites, Marketing Communications Director for Empower, says, “…employees who are engaged savers, utilizing the tools and advisory services that many employers provide, do save more than those who are unengaged.”
It pays to take advantage of any advisory services employers offer, but there are other options. Some people prefer to find their own financial advisors, but that can be expensive. Some websites offer AI-generated financial advice, which may be a good place to start for those who want guidance but can’t afford the services of a human advisor.
Those with substantial assets will probably want to find a planner experienced in dealing with more complex financial issues. These people may need specialized tax preparation, investing, and estate planning advice. The bottom line, however, is that those who are engaged and aware of their financial status save 53% more than those who are not.
—————
Who is saving?
According to the Motley Fool, most people start to rack up retirement cash after age 35, and it grows exponentially until workers reach age 75.
However, the Empower study showed some groups aren’t saving nearly as much. About 37% of Gen Zers are more concerned about getting out of debt than saving for retirement. Considering many in this demographic are paying student loans, that’s understandable. Still, this group is way behind the baby boomer crowd when it comes to retirement savings, plus 37% of them aren’t maximizing their employer-matching contribution to their 401(k) accounts.
Gen Xers are saving for retirement, Investopedia reports, but they’re not necessarily optimistic about the outcome. About 55% of Generation X think they will be able to retire, but about 25% aren’t so sure. They’re pretty confident that they know how to manage their finances, but they’re still apprehensive about the future of their retirement savings. Yahoo Finance reports the average Gen X household has about $40,000 saved up for retirement, and they’re concerned that won’t be enough.
Men also have more retirement savings than women. The Empower study indicates men’s average account balances are about 50% higher than women’s. This is because of the gender pay gap and also because women are not usually in the workforce as long as men.
According to CNBC, women should wait until age 70 to claim the entire Social Security benefit. They should also make the most of their contributions while in their 20s and 30s — before they have children.
—————
A marathon, not a sprint
Even in uncertain economic times, saving for retirement is a long-term journey. Most people won’t win the lottery, so they’ll have to save and plan for their retirement over the long haul. Experts urge workers to stay current on their savings plans and get the help they need to navigate financial issues and tough economic times, if necessary.
People should pay down debt and make space for personal goals like travel or hobbies. Saving money involves more than just making sure the bills are paid on time.
