Most of us know that we as Americans just aren’t saving enough. But do you really know the truth about savings in the U.S.? Here are five facts about the state of savings that may surprise you.
Many people have virtually nothing saved.
Thirty-six percent of people have less than $1,000 saved, according to a 2014 survey by the Employee Benefit Research Institute. The reasons for these low savings are many, including stagnant wage growth, inflation, and previous crises that have led people to deplete their savings. Of course, some people just have trouble setting aside money for tomorrow, even if they are financially able to do so. But whatever the reasons, the consequences of not having a financial cushion tend to be the same for most people, including more debt and greater financial insecurity.
Even high-earning Americans often have little in savings.
Perhaps it’s not totally surprising that the lowest-income Americans have little in savings. In fact, the bottom 20% of income earners have enough cash on hand to survive just nine days, according to 2015 research by The Pew Charitable trusts. Yet what’s more surprising is that even households with significant income are teetering on the edge of financial instability. The same Pew study found that even those households in the top 20% of income only have enough liquid savings to replace lost income for 52 days.
Americans are saving far less than they did in the past.
Americans, on average, save less than 5% of their income today. The personal savings rate in the U.S. was just 4.9% as of December 2014, according to data from the Federal Reserve Bank of St. Louis. Forty years ago, in December 1974, it was just under 14%. Not only are savings rates low across the board, but some people actually have negative savings, with 20% of Americans regularly spending more than they earn, according to data from the 2012 Financial Capability Study.
Americans want to live comfortably in retirement, but they aren’t willing to sacrifice and save for it.
Sixty-one percent of Americans admit they are not sacrificing a lot when it comes to saving for retirement. At the same time, 22% of the middle-class Americans admit they’d rather die early than run out of the money they need to live comfortably in retirement. In fact, people are more likely to be saving for a vacation than retirement.
It’s not just a lack of willpower that’s keeping us from saving.
Some people just live beyond their means, focusing on today’s wants rather than their future. But low savings rates aren’t just a product of greed or laziness. The recent recession, and the plunge in home values and job losses that came with it, led many people to draw from their savings to survive. Even those who didn’t have to turn to their nest egg to get by are often dealing with lower incomes and higher fixed costs for housing and healthcare. The fact is, real wages for Americans workers haven’t budged for decades, according to the Pew Research Center, and that may be making it difficult for many to save.
Copyright © Integrated Concepts 2015. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.