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Middle Class Americans Face a Retirement Shutdown

24/10/2013 12:21 (181 Day 14:27 minutes ago)

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The FINANCIAL -- As U.S. lawmakers engage in an ongoing fight over how and when to pay the country’s debts, more than half the middle class (59%) are very clear that their top day-to-day financial concern is “paying the monthly bills,” an increase from 52% in 2012, according to Wells Fargo, one of the world's leading custom market research firms.

Saving for retirement ranks a distant second place, with 13% calling it a “priority,” as four in ten middle class Americans (42%) say saving and paying the bills is “not possible.” As a result, 48% are not confident they will be able to save enough for a comfortable retirement, and 34% of the middle class say they will work until they are “at least 80” because they will not have saved enough for retirement, up from 25% in 2011 and 30% in 2012. These results come from the latest annual Wells Fargo (NYSE: WFC) Middle Class Retirement study, a telephone survey conducted by Harris Interactive of 1,000 middle class Americans between the ages of 25 and 75 and interviewed July 24 to August 27, 2013.


About half (52%) of the middle class between the ages of 25 and 75 say they are “confident” they will have enough saved for their retirement, according to the 2013 study. However, less than a third (29%) say they have a written plan for their retirement. For those who have a written plan, 70% describe themselves as “confident” in their future retirement versus 44% who do not have a plan.
Ninety-one percent of the middle class who have a plan for their finances in retirement agree that they have the “will-power” to save for retirement versus 75% of those who do not have a plan.
Thirty-one percent of Americans in prime retirement saving years – 40 to 59 – say they have a plan, versus 69% who do not. Both groups in this age range say they will need a median nest egg of $200,000 for their retirement. However, people who attest to having a written plan say they have saved a median of $63,000, or 32% of their goal. Those without a written plan have only saved a median of $20,000, or 10% of their goal.


A plurality of middle class Americans without a written plan for retirement (45%) attribute having “so few financial assets” as the reason they don’t have a plan for retirement. According to a June 2013 U.S. Census report, the median household income is $52,100.


A quarter of middle class Americans who earn between $25,000 and $50,000 have a written plan for retirement. The proportion that has a plan rises slightly to 29% for those with household income between $50,000 and $100,000.


However, having more income does not necessarily translate to having saved more as a percentage of their overall retirement goal. The middle class has saved between 5% and 8% of their overall savings goal, regardless of their income, according to Wells Fargo.


A third of all middle class Americans say Social Security will be their “primary” source of income in retirement. Nearly half (48%) of those making less than $50,000 say Social Security is going to be their “primary source” of income in retirement, versus 25% who make more than $50,000.


Forty percent of the middle class say “a large unexpected healthcare expense” is their greatest fear in retirement; however, a similar level, 37% of the middle class, say the “loss or diminishment of Social Security” is their greatest financial fear. This fear is heightened for women, almost half of whom (46%) say their number one financial fear in retirement is a loss or diminishment of Social Security, according to Wells Fargo.


The apprehension about the market is stronger for those age 25 to 29, with 56% expressing fear of losing their nest egg. When asked if given $5,000 for retirement where they would invest, 58% of those age 25 to 29 say they would invest in a savings account/CD. Confidence in the stock market differs by gender. In contrast to past research, women seem to be less fearful than men: 46% of middle class women express fear of losing their nest egg in the stock market versus 58% of middle class men.

 

 

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