Middle Class Behind When It Comes to Retirement Savings

Nearly 70% of middle -class Americans say saving for retirement is more difficult than they anticipated, according to the fifth annual Wells Fargo Middle-Class Retirement study.

“Saving for retirement is a formidable challenge for middle-class Americans, with 34% not currently contributing anything to a 401(k), an IRA or other retirement savings vehicle,” Wells Fargo says.

Harris Poll conducted 1,001 telephone interviews of middle-class Americans in their 20s (ages 25-29 only), 30s, 40s, 50s, 60s and 70-75 on behalf of Wells Fargo. The survey was conducted from July 20 to August 25 this year. 

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Forty-one percent of middle-class Americans between the ages of 50 and 59 are not currently saving for retirement. Nearly a third (31%) of all respondents say they will not have enough money to “survive” on in retirement, and this increases to nearly half (48%) of middle-class Americans in their 50s.

Nineteen percent of all respondents have no retirement savings. And, 61% of all middle-class Americans, across all income levels included in the survey, admit they are not sacrificing “a lot” to save for retirement, whereas 38% say that they are sacrificing to save money for retirement.

“Saving for retirement isn’t easy,” says Joe Ready, director of Institutional Retirement and Trust, in a written statement. “It requires sacrifice, and it’s not something people can push off and hope to achieve later in life. If people in their 20s, 30s or 40s aren’t saving today, they are losing the benefit of time compounding the value of their money. That growth can’t be made up later, so people have to commit early in life to make savings a regular discipline year after year – it is the only way most people will achieve their financial goals to carry them through retirement.”

While a majority of middle-class Americans say that they are not sacrificing a lot to save for retirement, 72% of all middle-class Americans say they should have started saving earlier for retirement, up from 65% in 2013. 

“People who have a written plan for retirement are helping themselves create a future on their own terms, with a foundation built on saving, and hopefully, investing,” Ready says. 

Those who are saving say they value the 401(k) as a way to create a retirement nest egg, with 70% of respondents saying they have a 401() or equivalent plan. And, 93% are contributing to those plans.

Working longer or into traditional retirement years appears to be a predicted reality for a third of middle-class Americans who say they will need to work until they are “at least 80 years old” because they will not have enough retirement savings, holding steady from a year ago, the study finds.

Access the full results of the study here.

Written by Cassandra Dowell

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  • Some decent advice, for sure. Here is the plan I’m following to make sure I don’t end up without any money in retirement:

    1) Pay off your debts as fast as you possibly can. If this means living in a crappy studio apartment and eating ramen everyday for a couple of years, do it. If you want to buy a car, get a reliable beater. Get insurance for $25/month from 4AutoInsuranceQuote. Forget about buying a house until your debts are paid off.

    2) Once you are out of debt, stay out of debt. The only exception to this rule is a vehicle and a house. If you want to get a nicer car, buy used and be able to pay it off in a year or 2.

    3) If you are going to stay in the same spot for at least 10 years, buy a house, preferably with at least a little bit of usable land. An acre is good, 5 acres is better. Take the amount you are pre-approved for and cut it in half – that’s how much you should spend on a house. Come to the table with at least 20% down and make a couple of extra mortgage payments every year. If you’re going to be transferred or relocate every 5 years, forget about buying a house and rent instead.

    4) Develop multiple revenue streams. Do contract work. Start a business on the side. Invest in a business as a silent partner. Raise chickens, breed dogs or grow apples. Build websites. Buy and sell antiques. Acquire rental property. Sell something that generates residual income. Learn to play the currency markets or trade stocks. Do whatever you can to generate income from multiple sources.

    5) Grow these multiple revenue streams to the point that they generate enough consistent and reliable cash flow to replace your current income.

    6) Make as much as you can. Save as much as you can. Give away as much as you can.

    7) Retire!- the sooner, the better. Be sure you understand that “retirement” doesn’t necessarily mean you stop working, it just means having the freedom to do what you want to do, when you want to do it.

    Don’t be foolish and fall into the trap of trying to measure your wealth by the value of your assets. Markets change. Valuations fluctuate. Instead, measure your wealth by the amount of cash flow your assets consistently generate.

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