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Retirement becoming a dream for more and more Americans

 The traditional idea of retirement is disappearing for an increasing number of Americans. A recent survey found that 34% of middle-class Americans plan to work until “at least 80” because they don't have enough saved for retirement.

Previous versions of the survey, which was conducted by Harris Interactive for Wells Fargo, found that 30% of middle-class Americans planned to work until 80 in 2012 while 25% planned to be working as octogenarians in 2011.

The root of Americans ill preparedness for retirement is evident in other parts of the study. Only 13% of survey respondents said saving for retirement was a priority, while 42% said they found that saving for retirement and simultaneously paying their monthly bills was “not possible.”

That the middle class is unable to save for retirement is alarming, but ultimately unsurprising given the movement in median income in recent years. As the chart below shows, median household income has fallen nearly 9% since 2000 when adjusted for inflation. An average family's monthly bills haven't declined over that period, so families have to make choices about where to spend the money they are bringing in. What the Wells Fargo survey shows is that people are opting to cut back on retirement savings.

 

Unfortunately, opting to stay in the workforce longer may only exacerbate the problem. Workers who retire generally need to be replaced, typically by younger, cheaper workers. If older people opt to stay in their careers longer, this will mean even fewer job opportunities for younger workers. That oversupply of younger workers will almost certainly push down starting wages for the next generation, putting them even further in the hole as they try to save for their own retirements.

Another option for older workers could be to leave their life-long careers and take part-time jobs to supplement their retirement savings. This will also lead to lower wages, albeit for part-time workers this time.

It turns out that in either of these scenarios, the end result is more workers in the labor pool. Unfortunately, the demand for workers has been persistently low. As the chart below shows, the ratio of people working to the total population has also fallen sharply since 2000.

 

Putting more people in the labor pool won't help this issue unless the number of available jobs increases. Unless there are some big changes in our economy soon, it seems like retirement may become just a dream for more and more Americans.

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.


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Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.