Americans Don’t Save for Retirement Because They Don’t Earn Enough Money

[Big_Hitter]

https://www.barrons.com/articles/why-americans-dont-save-for-retirement-51557061222

"But America’s retirement crisis wasn’t created because of character flaws or personal irresponsibility. Nor can it realistically be fixed by technocratic fixes.

The ugly, unspoken truth is that many people are just not earning enough money. They barely have enough to cover their daily expenses; they don’t have enough left over to be able to save. "

 

[Bruceski44]

My father lived on $1200 a month and still managed to save money and donate to charities. Yes, he had partially subsidized rent and some utilities gave him a break, but $14,400 a year is an astoundingly low income and he made it work, even in SoCal.

Perhaps we should examine what people's "daily expenses" are? If people are too spendy, giving them more money will not help. People "need" SUVs, cell phones, Starbucks, fast food, movies, and all the latest fads. What did my Dad need? Not much. And he was still happy, believe it or not. Likely happier than most.

 

[brett]

It is only getting worse. The increasing cost of medical and education are far in excess of the inflation rate. Those two will only serve to make the wage and retirement savings issue more acute as time moves forward.

 

[Teacher Terry]

Here rent and the cost of housing is skyrocketing far beyond wages. They tore down all the weekly motels where poor people live and it will be replaced with upscale housing. Our homeless population is growing. It’s really sad. Young families here working in casinos won’t be saving for retirement.

 

[Big_Hitter]

Here rent and the cost of housing is skyrocketing far beyond wages.

same here - huge problem.

 

[kcowan]

They barely have enough to cover their daily expenses; they don’t have enough left over to be able to save.

Yup they have to stop being influenced by others and save half of their income.

 

[Teacher Terry]

K, when a 2 bedroom apartment is 1500-2000 2 casino workers with 2 kids are going to be lucky to eat. Also many apartments make people rent a bigger apartment based on number of kids and sex of kids. So no putting the kids in the bedroom and adults sleeping in the living room.

 

[Aerides]

Doesn't matter how many of these articles come along, there are two camps of thought:

Camp 1) for many, today, basic incomes are not sufficient to raise a family, buy a small home, save for college, and retirement. For a large segment of the population there's simply not enough left over, there is no "cut back and save", it's a complex problem without simple answers.

Camp 2) they are lazy spendthrifts, and should stop buying lattes and ipads they'd be fine.

 

[Sunset]

My father lived on $1200 a month and still managed to save money and donate to charities. Yes, he had partially subsidized rent and some utilities gave him a break, but $14,400 a year is an astoundingly low income and he made it work, even in SoCal.

Perhaps we should examine what people's "daily expenses" are? If people are too spendy, giving them more money will not help. People "need" SUVs, cell phones, Starbucks, fast food, movies, and all the latest fads. What did my Dad need? Not much. And he was still happy, believe it or not. Likely happier than most.

The daily expense is a big thing.
On TV there was some news item of about 40% of milenials being supported by their parents.
They show 1 guy, sitting on the steps saying how he needs his parent support to pay all his expenses.
As he stares into his apple cell phone
He needs his $120/month unlimited texting/data/phone calls , yet somehow I survive on a $100/yr for phone calls/texting, and use a low cost internet (he could do it for free) for the times he needed internet.

 

[Teacher Terry]

You can always google what is the average income for a family of 4 in your city and decide for yourself if that’s enough money. When we were young and not making a lot of money we moved to a lower cost of living where the wages were higher than where we lived. It really helped.

 

[Sunset]

Doesn't matter how many of these articles come along, there are two camps of thought:

Camp 1) for many, today, basic incomes are not sufficient to raise a family, buy a small home, save for college, and retirement. For a large segment of the population there's simply not enough left over, there is no "cut back and save", it's a complex problem without simple answers.

Camp 2) they are lazy spendthrifts, and should stop buying lattes and ipads they'd be fine.

True, and of course for each individual there is a correct answer, as everyone's situation is different.

1) They work hard, can't get a better job and are a victim of society.

2) They are lazy, love to spend money, especially if it's somebody else's money. And they feel they deserve everything.

 

[MichaelB]

Doesn't matter how many of these articles come along, there are two camps of thought:

Camp 1) for many, today, basic incomes are not sufficient to raise a family, buy a small home, save for college, and retirement. For a large segment of the population there's simply not enough left over, there is no "cut back and save", it's a complex problem without simple answers.

Camp 2) they are lazy spendthrifts, and should stop buying lattes and ipads they'd be fine.

Are you trying to cut to the chase and head off a new round of this oft-discussed topic?

Don’t forget the “Sh!t happens to good people” group. Job loss, major health issue, good choices with bad outcomes do happen.

 

[Dtail]

Doesn't matter how many of these articles come along, there are two camps of thought:

Camp 1) for many, today, basic incomes are not sufficient to raise a family, buy a small home, save for college, and retirement. For a large segment of the population there's simply not enough left over, there is no "cut back and save", it's a complex problem without simple answers.

Camp 2) they are lazy spendthrifts, and should stop buying lattes and ipads they'd be fine.

I feel a bit of both camps.
In my development which would be considered an in between middle/upper middle class living, the average house costs 350k. The average teachers salary in FLA just as one example is 35k, so if the household income is 70k, they can't afford a 350k house.

 

[Andre1969]

Doesn't matter how many of these articles come along, there are two camps of thought:

Camp 1) for many, today, basic incomes are not sufficient to raise a family, buy a small home, save for college, and retirement. For a large segment of the population there's simply not enough left over, there is no "cut back and save", it's a complex problem without simple answers.

Camp 2) they are lazy spendthrifts, and should stop buying lattes and ipads they'd be fine.

I think it's both, and everywhere in between. I know a lot of people who are in a bad situation because they're lazy, thinks the world owes them, and they spend too much, but I also know a lot of people who are working their butts off, and still having problems getting ahead.

And, if this site is to be believed, incomes DO appear to be falling behind, with respect to inflation... https://dqydj.com/income-percentile-by-age-calculator/


It has a chart, part way down, that lists mean and median incomes by age. I remember breaking the $40K/yr barrier when I was 31. According to the chart on this page, the median income of a 31 year old is $39,060. BUT, I hit $40K back in 2001, and when I threw that number into an inflation calculator, it comes out to around $58K per year today.


And, FWIW, I didn't think $40k per year felt like an extravagant amount of money, back in 2001. I also had a housemate, who helped with expenses. And, 2001 was the last year I worked a second job, delivering pizzas. I guess the big question is, though...what was the median income of a 31 year old back in 2001, and how does that compare to today?

 

[Midpack]

Doesn't matter how many of these articles come along, there are two camps of thought:

Camp 1) for many, today, basic incomes are not sufficient to raise a family, buy a small home, save for college, and retirement. For a large segment of the population there's simply not enough left over, there is no "cut back and save", it's a complex problem without simple answers.

Camp 2) they are lazy spendthrifts, and should stop buying lattes and ipads they'd be fine.

And both are true.

You have to spend less than you make, and beyond a certain $ income - you can do that at almost any level of income. But you can't do it if you buy the most house a lender will loan you for, the most expensive cars a dealer will finance, and you feel entitled to X lavish vacations per year. I have known plenty of people in camp 2 - some made $50-60K year all the way up to folks with serious 6 figure incomes.

That said, even folks who were didn't over commit themselves financially, have been squeezed by many expenses rises faster than income (health care and education as mentioned above), or extended career changes/job losses, health issues, etc.

The linked article was pretty useless...to generate clicks as so many are today, not about imparting useful information.

 

[Mdlerth]

Maybe incomes haven't changed as much as expectations did

...for many, today, basic incomes are not sufficient to raise a family, buy a small home, save for college, and retirement. For a large segment of the population there's simply not enough left over, there is no "cut back and save", it's a complex problem without simple answers.

Here I have to wonder whether basic incomes EVER were sufficient to do all those things. Retirement itself is an extremely recent proposition, at least for the vast majority of the population. For millennia it was restricted to a tiny, aristocratic minority; everybody else worked until they died, probably in their mid 40s. My grandmothers were the first of their generation to retire; both of my grandfathers died in harness and never retired.

Three generations ago, college was by no means the expectation for most of society, even in First World countries. My parents' generation was the first in their families where all their siblings attended college.

Owning your own home used to be called The American Dream. It was a special achievement. Now we don't consider it special anymore, because somehow we think it's a constitutional right?

I guess the big question is, though...what was the median income of a 31 year old back in 2001, and how does that compare to today?

And would it have bought the basket of goods and services "we" (the highly generic "we", which may or may not include "you") expect to be affordable on the median income?

 

[audreyh1]

Doesn't matter how many of these articles come along, there are two camps of thought:

Camp 1) for many, today, basic incomes are not sufficient to raise a family, buy a small home, save for college, and retirement. For a large segment of the population there's simply not enough left over, there is no "cut back and save", it's a complex problem without simple answers.

Camp 2) they are lazy spendthrifts, and should stop buying lattes and ipads they'd be fine.

I'm sure there are plenty of folks in situation 2. However, that does not mean there aren't plenty of folks in situation 1.

 

[pb4uski]

I'm more in the camp of people living above their means and spending unwisely though I'm sure there are some that are doing all they can do and still falling behind.

Moreover, not enough people have access to retirement plans. As the Center for Retirement Research at Boston College has noted, accumulating retirement savings rests on a chain of questions: Are you working? Does your firm offer a plan? Are you eligible for your firm’s plan? Finally, do you actually participate in that plan? If the answer to any of these questions is “no,” you’re out of luck.

How are they "out of luck"? Anyone can set up an IRA (or better yet, a Roth IRA if they are in a low tax bracket) and have their own retirement plan... in fact arguably better since they will have better investment choices and it will follow them from job to job... only downside is no matching but a lot of employers don't match anyway and the $6,000 limit ($7,000 if over 50) but the people they are talking about don't save that much anyway. Don't these reporters have any understanding of these things that they write about?

 

[Teacher Terry]

I'm more in the camp of people living above their means and spending unwisely though I'm sure there are some that are doing all they can do and still falling behind.


Have you actually looked at what the median income is for a family of four in your state?

 

[LRDave]

They show 1 guy, sitting on the steps saying how he needs his parent support to pay all his expenses.
As he stares into his apple cell phone

A smart phone is an absolute requirement to have a chance at independent employment in this world IMO. It can also be a distraction, but I wouldn't begrudge ensuring that a fledgling you are trying to kick out of the nest has smart phone.

 

[pb4uski]

I'm more in the camp of people living above their means and spending unwisely though I'm sure there are some that are doing all they can do and still falling behind.


Have you actually looked at what the median income is for a family of four in your state?

Yes, it was $57.5k in 2017, probably close to $60k today. Do you have a point that you intended to make?

 

[JDARNELL]

A friend of mine sent me this article this morning. He has been out motorcycle riding the past few days with 4 buddies. He asked them about if they were saving. Despite having disposable income he said all 4 said nope. He FIREd at age 43

 

[Jeffman52]

Here I have to wonder whether basic incomes EVER were sufficient to do all those things. Retirement itself is an extremely recent proposition, at least for the vast majority of the population. For millennia it was restricted to a tiny, aristocratic minority; everybody else worked until they died, probably in their mid 40s. My grandmothers were the first of their generation to retire; both of my grandfathers died in harness and never retired.

Three generations ago, college was by no means the expectation for most of society, even in First World countries. My parents' generation was the first in their families where all their siblings attended college.

Owning your own home used to be called The American Dream. It was a special achievement. Now we don't consider it special anymore, because somehow we think it's a constitutional right?

+1

All too often people want to start economically where it took their parents 30 to 40 years to get to.

 

[pb4uski]

+1

All too often people want to start economically where it took their parents 30 to 40 years to get to.

Yup... that is part of the problem.

 

[Letj]

I think while many people don’t earn enough to save for retirement, there is an equal or more number of people who don’t save because it’s not the way they think. Most Americans are raised in relative comfort where they just didn’t have to scrimp and save to make ends meet and to put food on the table. Moreover, most of us are conditioned to spend money and spending money equates to life satisfaction in our minds. It’s not surprising that immigrants raised in deep poverty and deprivation find it easier to save due to cultural values and lack of having a consumer mindset.