Fed: Less than 40% of Americans on the Right Retirement Track

Less than 40% of Americans say their retirement plans are on track, and non-retirees report widespread confusion about some common financial tools and concepts, according to a new report from the Federal Reserve.

Three-fifths of working people with 401(k)s, IRAs, and traditional savings accounts reported “little or no comfort” with managing them, the Fed found in its annual Report on the Economic Well-Being of U.S. Households for 2017, released Tuesday morning.

“Many adults feel behind in their savings for retirement,” the Board of Governors of the Federal Reserve System wrote in the report. “Even among those who have some savings, people commonly lack financial knowledge and are uncomfortable making investment decisions.”


A quarter of working-age Americans have no retirement savings at all, the survey found, with the average respondent unable to answer three or more out of five “basic financial literacy questions correctly.” Among respondents over the age of 60, an eighth had no retirement savings at all, and only 49% said their plan was on track.

“While preparedness for retirement increases with age, concerns about inadequate savings are still common for those near retirement age,” the board of governors pointed out.

The Fed also found racial disparities in retirement preparedness, with white Americans 14% more likely to have any kind of retirement savings than their black counterparts — and 18% more likely to feel comfortable in their retirement futures.

Respondents aged 18 to 29 said they’d feel comfortable with their savings if they had at least $10,000 set aside for retirement; that number rises to $100,000 by the time people reach age 40 and above, and the Fed pointed out that nine out of 10 people with more than $500,000 socked away for old age felt comfortable.

While men with bachelor’s degrees reported the highest degree of confidence in managing their retirement investments as compared to women of all education levels, that doesn’t necessarily mean they have the know-how to approach retirement properly.

“Expressed comfort in financial decision-making may or may not correlate with actual knowledge about how to do so,” the report notes. “To assess actual financial literacy, respondents are asked five basic questions about finances. The average number of correct answers is 2.8, with one-fifth of adults getting all five correct.”

Those questions included: “Housing prices in the United States can never go down, true or false?” And “Buying a single company’s stock usually provides a safer return than a stock mutual fund, true or false?”

The report was based on the fifth consecutive Survey of Household Economics and Decision-making (SHED), most recently conducted in November and December of last year. Private research firm GfK conducted the survey on behalf of the Fed, with a total of 12,246 completed responses.

Written by Alex Spanko

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  • I frankly doubt the statistics if taken on all those senior homeowners over 60 years of age would equal 49% of their retirement plans being on track?! It would be interesting to see how many actually responded to the survey.

    Our seniors, including those over 60 years of age are worse off and less prepared than ever when it comes to being ready financially, to retire!

    The HECM or one of the new proprietary programs can be the answer to many senior homeowners to improve the quality of their retirement!

    I am very enthused to see announcements like this coming out!

    John A. Smaldone

  • Gee. The ONE GROUP OF PROFESSIONALS who are in the BEST position to advise Seniors are driven away from helping by the irreverent and irrelevant 1009 question “J”. Giving Seniors 6 digits of cash, and they’ve never managed anything greater than a checkbook…and somehow, this will end well? NONSENSE. Another point? The Lending industry is woefully lacking at EXPLAINING how the HECM works. Whether HUD/FHA admits it or not? This is a FEDERALLY INSURED program, and is a profoundly useful financial planning tool. Financial planning skills should dictate who can originate this. Further to this point; LIFE INSURANCE companies should be the one’s who structure and sell this. They rely on actuaries; HUD does not. HUD guesses; Actuaries can PRICE the product.

    • Mr. Turner,

      As currently structured, a HECM is only contingently guaranteed by the federal government. The significance of the MMI Fund is that HECM losses must be first covered by the reserves in the other MMIF programs. To the extent that the overall MMIF is in a loss position then and only then will the federal government cover HECM losses. This means that generally younger borrowers are covering the losses in the MMIF.

      The HECM may or may not be a financial planning tool (I see it as a product, not a tool) but HUD should not be subservient to a player who has no skin in this game, so called financial planners. Most financial planners are not CFPs. Many are simply those with marginal or significant experience in insurance or some aspect of the securities markets. Many are nothing more than asset managers.

      Life insurance companies have no idea how to sell debt. This is not an asset. Again a HECM is not an asset. If anything it is a NEGATIVE asset. An annuity is an asset but where is the debt?

      What do you mean HUD does not rely on actuaries? Have you ever read the annual actuarial report? Many of those who oversaw and oversee the structure of the product are people who come with an insurance background; that is why we use such ridiculous terms with a mortgage like maximum claim amount and lending limit (when in fact it is a cap on the appraised value that can be used in determining the amount that a lender can provide borrowers through the principal limit).

      Pricing the product is not as big a deal as you make it out to be. It is the required design of the mortgage that HUD created that causes the problems. Why is life insurance relevant? Repayment is not based on the capacity and willingness of the borrower but rather collateral. While MIP could come into play, a better way is to base PLFs on metropolitan statistical areas, zip codes, or other grouping of the population with similar appreciation rate characteristics within a region that does not result in redlining. Yet HUD rightfully demands control over how the loan is designed. I agree there is a better approach, I believe property appreciation characteristics are far more relevant than the life expectancy of borrowers alone.

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