Recession continues to impact retirement savings rates

As regular readers know, we’ve been highlighting results from our annual Wells Fargo Retirement Study for a couple weeks now. This is the third in a series of four posts—here are part one and part two.

As I’ve mentioned, we conducted our 2010 Retirement Study in an effort to better understand the impact that the current economic environment has had on middle class Americans ranging in age from their mid-20s to their late 60s.

Americans participating in our annual Wells Fargo Retirement Fitness Study were asked about the impact of the recession on their financial management and retirement expectations. Here’s what they told us:

  • 71% are actively working to reduce debt.
  • 65% are not very confident or not at all confident that the stock market is the right place for investment gains for their savings.
  • 55% have other financial priorities and don’t have extra money to save.
  • One-third are worried about a job loss in their household in the coming year (40-somethings [43%] and 50-somethings [42%] are most concerned about job loss).
  • People making $75,000 to $100,000 a year have saved more than those making $100,000 and up, with a median of $99,000 in total investable assets, vs. $59,000 saved by those making $100,000 and up.

It’s clear that many of the people who responded are still feeling significant impacts from the recession and feel it is affecting their ability to save for retirement. Nearly three-quarters (71%) are trying to reduce debt, which may mean more money is going to debt-reduction than savings.

What do you think of these findings?

While debt reduction is critical to sound financial management, saving for retirement is also important. With 72% of respondents anticipating they’ll need to work at least a portion of their retirement years, setting aside money now, no matter how small the amount, can potentially result in a better retirement outcome later. The earlier you are able to save, the better the chance of meeting your retirement goals.

If you find yourself struggling to pay down debt and save for retirement at the same time, the practical steps provided in our article Owe Less and Save More may prove valuable to you. Please take a look!

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2 Responses to Recession continues to impact retirement savings rates

  1. Mark pare says:

    Karen,

    Nice column. Why do you think the higher earners have saved less?

    Thanks and I hope you are well.

    Mark

    • @Mark – Great question, thank you! Unfortunately, we don’t have a definitive answer why higher earners have saved less because since that specific question wasn’t posed to respondents as part of the study. However, if I had to speculate, I think lifestyle and confidence in future earnings power may play a role. As income increases, people often see a corresponding increase in lifestyle expenditures, like a second home. Another possible reason is that people feel more confident in their long-term earnings capabilities once they are earning upwards of $100,000 and may plan to make up any gaps in savings in the future. Also keep in mind some respondents may be redirecting savings toward college education plans, long-term care insurance, or other expenses the survey didn’t specifically ask about. I’ll recommend that we incorporate your question as a follow-up question to respondents in our 2011 study in the fall. Thanks again for your interest!

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