The "Retirement Crisis" is worse than we thought

[REWahoo]

Saving for retirement is apparently far less popular than all those dismal surveys have been telling us:

More than 66 percent of workers with access to 401(k)s and other defined-contribution retirement saving plans aren’t using them. That’s according to recent research from the Census Bureau, which analyzed tax records to estimate how workers are actually participating in these plans. On top of that, only 14 percent of companies offer these types of retirement plans, far lower than previous estimates...

Why most Americans may face an ugly retirement - CBS News

The article points out this data should be more accurate than previous surveys as it...

...is based on tax records from almost 155 million individual workers and 6.2 million companies filed in 2012. Most earlier estimates of retirement plan participation rely on survey data, which can be less accurate because people can misreport data given faulty memories or lack of knowledge.

[-]If my math is correct (see my sig line), this is saying fewer than 5% of workers (1/3 of 14%) are putting money in a 401k or other defined-contribution plan. That's scary...[/-] (See post #4 below)

 

[RetiredGypsy]

EDIT: Numbers is hard.

Holy crap, that's insane if only 5% of the workforce is thinking ahead in life.

But that can't be the whole picture, right? There are some places that still offer pensions, and then there's the military with retirement.

 

[Greencheese]

And this is why social security will never go away or be diminished, the tax rates for it will just keep climbing because too many people will have nothing else to retire on.

 

[REWahoo]

If my math is correct (see my sig line), this is saying fewer than 5% of workers (1/3 of 14%) are putting money in a 401k or other defined-contribution plan. That's scary...

Just as I suspected, my math is suspect.

From another source:

Bigger companies are the likeliest to offer 401(k) plans, and since they employ more people than small firms, skew the overall number of U.S. workers who have the option. Gideon and Mitchell estimate 79 percent of Americans work at places that sponsor a 401(k)-style plan. The good news is that’s more than 20 points higher than previous estimates. The bad news is that just 41 percent of workers at those employers are making contributions to such a plan—more than 20 points lower than previous estimates.

The combined result of those two numbers is that just 32 percent of American workers are saving anything in a workplace retirement account.

https://www.bloomberg.com/news/arti...americans-aren-t-putting-money-in-their-401-k

So it isn't 5% catastrophic, only 32% semi-catastrophic.

 

[Amethyst]

I wonder how many people don't save for retirement because what they make barely covers their living expenses.

I have been using Uber a good deal lately, and the drivers like to chat. I always end up wondering how on earth they make any money. One lady had a nice new Camry with 30,000 miles on it already. She told me she leased the car from Uber and essentially, was driving for them to earn enough to pay the lease on the car she was using for them. I got the impression she hadn't really looked at it that way until after discussing it with me, which probably means I wasn't her favorite fare that day.

 

[exnavynuke]

Just as I suspected, my math is suspect.

From another source:



https://www.bloomberg.com/news/arti...americans-aren-t-putting-money-in-their-401-k

So it isn't 5% catastrophic, only 32% semi-catastrophic.

According to this report, 63% of people report currently saving for retirement in some form or another as of last year. The overall picture it paints is still pretty dismal though.

 

[REWahoo]

...63% of people report...

One thing I thought interesting was the information in the thread article came from an analysis of tax records from 155 million workers and 6.2 million companies. Most other retirement savings information, like this 63% report, comes from surveys which are susceptible to the human trait of trying to look better than you might actually be.

 

[RetiredGypsy]

They say they looked at businesses, but I wonder how many colleges they looked at too. They have some pretty sweet retirement plans (403Bs if I remember right), at least the ones where people I've known worked.

Then there's the Thrift Savings Plan.

So maybe the numbers are slightly better.

 

[latexman]

Here's some data from Fidelity thru my midicorp chemical company's internal website:

"1 in 6 people contributing to a 401(k) aren't saving enough to get their full company match."

And in the fine print, "Fidelity analysis of 772,000 participants contributing to 401(k) plans that offer an employer matching contribution as of March 31, 2015. "


That was from a campaign to get people to save more, but if you re-arrange the message to 5 in 6 are getting the full company match, it has a more hopeful ring to it. As the old accountant said, "what do you want the numbers to say?"

 

[exnavynuke]

They say they looked at businesses, but I wonder how many colleges they looked at too. They have some pretty sweet retirement plans (403Bs if I remember right), at least the ones where people I've known worked.

Then there's the Thrift Savings Plan.

So maybe the numbers are slightly better.

There's also IRA's, defined benefit plans, etc as it seems that report only accounted for workplace 401k's.

 

[Amethyst]

I always thought that the mandatory OASDI deduction constituted a mandatory "retirement savings." Is that not the case?

And this is why social security will never go away or be diminished, the tax rates for it will just keep climbing because too many people will have nothing else to retire on.

 

[Car-Guy]

And this is why social security will never go away or be diminished,

I wouldn't bet on that.

the tax rates for it will just keep climbing because

I would bet on that.

 

[RetiredGypsy]

I would feel confident definitively stating that somewhere between 0 and 100% of people are saving for retirement.

I bet I could be a professional analyst with that kind of precision.

 

[Car-Guy]

I would feel confident definitively stating that somewhere between 0 and 100% of people are saving for retirement.

I bet I could be a professional analyst with that kind of precision.

I suspect you are well within the margin of error. Most of us are born with nothing, so if we retire with something, I guess technically we have saved. I guess what matters is, how much.

 

[LuckyDog]

I think that Amethyst has hit the nail on the head. Many people, especially those in rural areas and inner cities, just make enough to get by. There could be a little 'extra' but it is many times spent on unnecessary things as they see no way out...

 

[LOL!]

Why should many people even bother with saving in a 401(k) plan at all?

Where does that kind of thinking come from anyways?

There are many other ways to save for retirement for most people that don't lock up their money. There is quite a lot of confusion about what constitutes "saving for retirement" anyways.

Many people don't pay income taxes at all, so unless the 401(k) has a company match, then those folks should just save in a Roth IRA if they can. And since they don't pay income taxes, they don't have high incomes. A single person can contribute up to $5,500 and a married couple can do twice that. What families can afford to put $11,000 a year into retirement savings to begin with? With US median family income of about $52K, that suggests that Roth IRAs could be used to invest 20% of family income annually.

Unfortunately, financial sales reps get their vulture claws into these people and cost them a lot of money whether they use 401(k), IRAs, variable annuities, or whole life insurance.

Perhaps more distressing are the questions that are sometimes asked, such as, "I don't have a retirement plan at work, so how can I save for retirement?" Do you think an insurance agent is going to tell them about a low-expense-ratio, passively-managed Roth IRA when they can sell them whole life insurance?

And the first linked article does people no great favors. It does NOT EVEN MENTION IRAs and things like the Savers Credit.

 

[audreyh1]

I wonder how many people don't save for retirement because what they make barely covers their living expenses.

Of course.

 

[Car-Guy]

Why should many people even bother with saving in a 401(k) plan at all?

so unless the 401(k) has a company match,

The company 6% matching is what did it for me. In ~25 years my 401k was worth well over 1m.

 

[exnavynuke]

Seems there are a lot of companies that offer matching for 401k plans.

Most Vanguard 401(k) plans (94 percent) provide employer contributions, according to a Vanguard analysis of 1,900 401(k) plans with 3.6 million participants.


That's just Vanguard, but in 2011 only 42% of 401k plans did not offer a company match. The last I had read (not looking it up right now) was that the trend was moving towards more companies offering matching in recent years.

 

[target2019]

I wonder how many people don't save for retirement because what they make barely covers their living expenses.

The rising tide has not lifted all boats...

 

[target2019]

Since the data in OP is based on personal and business tax filings, it sounds more comprehensive than other reports I have been hearing about.

 

[mystang52]

I think part of the problem for low wage earners is that the "sales pitch" for 401K always discusses contribution amount higher than they might be able to afford. Maybe if the were encouraged to start with any amount, regardless how small, it might have a better success rate.
FWIW, here's my anecdote. As a manager at several of my j*bs, I pitched the contribute-whatever-you-can approach. This worked with a few of the low wage earners......and more than a few of those thanked me later when they hit some great savings threshold, be it $500 or in one case $100. ALL of the increased their deductions when they realized they didn't miss that deducted amount.

 

[CRLLS]

I wonder how many people don't save for retirement because what they make barely covers their living expenses.

An alternative way to look at it is that their living expenses have grown to match what they make. This is nothing new. Some people do not have a grasp on the "saving" concept.

Regarding the savings studies, when 2 studies can be so widely different, how can anyone blindly believe any writer's summary of the data. I need to look at the raw data and make my own conclusion. Maybe that is just me.

 

[exnavynuke]

Since the data in OP is based on personal and business tax filings, it sounds more comprehensive than other reports I have been hearing about.

I believe it only covers one type of retirement savings vehicle (401ks), so that seems like it's not very comprehensive regarding anything but 401k plans.

 

[RetireAge50]

As far as I know 100% participate. Survey of only one but the one person that impacts me.