Retirement, Economy

Retirement Saving And Household Well-Being

6/8/16 8:00 AM

iStock_000017323851_Small-1.jpgLast week the Board of Governors of the Federal Reserve System released the latest annual report on the economic well-being of U.S. households, and there are several findings worth mentioning which provide insights into how individuals and their families are currently faring in this country. First, 69 percent of surveyed Americans said that they are either “living comfortably” or “doing okay,” an improvement compared to the prior year’s report, and consumer respondents were 9 percentage points more likely to say that their overall financial well-being has improved during the past twelve months than to say that their financial well-being worsened. Thirty-two percent of surveyed adults reported that their income varies to some degree from month to month, and 43 percent said the same about their monthly expenses.


Forty-two percent of respondents with volatile incomes or expenses reported that such fluctuations have caused them to struggle to pay their bills but encouragingly, 68 percent of non-retired adults said that they saved at least some portion of their income in the prior year. However, an alarming 46 percent of surveyed Americans still said that they could not even cover an emergency expense of just $400 without having to sell something or borrow money. Further, 31 percent of non-retired adults reported that they have no retirement savings or pension whatsoever, although this figure was likely skewed by age and availability of workplace-provided benefits. For example, 90 percent of employed respondents age 45 or older said that they have retirement savings, and the most commonly reported method for setting money aside for retirement is to use a defined contribution (DC) plan, such as a 401(k) or 403(b).


Forty-eight percent of non-retirees reported that they possess such a plan, nearly double the 25 percent of non-retirees who said that they participate in a traditional defined benefit pension plan. There were a handful of reasons cited for not participating in a 401(k) or similar savings vehicle, including not having access to a DC plan and uncertainty about how best to invest the money contributed. Elsewhere in the report, more than a quarter (27 percent) of surveyed Americans said that they have an individual retirement account (IRA), and 41 percent indicated that they have savings outside of a formal retirement account. Another 15 percent of respondents said that they have real estate or land investments that they plan to sell or rent to generate an additional income during retirement. Six percent reported having retirement savings through the ownership of a business.



Sources: Board of Governors of the Federal Reserve System

Post author: Charles Couch