77% of American Workers Have Less Than $100,000 in Savings & Investments

March 29, 2010

I spent some time this weekend reading over the Employee Benefits Research Institute’s 2010 Retirement Confidence Survey (PDF). This graphic found on page 16 of the report worries me:

Seventy-seven percent of American workers have less than $100,000 in savings and investments. Only 11% have more than $250,000 in savings and investments.

Even more troubling is that 27% of those surveyed had less than $1,000 in savings and investments.

Here are the reasons in the report for people not saving (emphasis mine):

Three in 10 Americans age 25 and over report they have not saved any money for retirement (29 percent of workers and retirees). Of these, 79 percent of workers and 60 percent of retirees say this is because they cannot or could not afford to save. Less than 10 percent mention each of these other reasons for not saving:

• Having other saving priorities (6 percent of both workers and retirees).

• Never getting around to it (5 percent of workers, 6 percent of retirees).

• Thinking they had plenty of time to save (4 percent of workers, 8 percent of retirees).

• Being ignorant and not informed about retirement planning (3 percent of workers, 6 percent of retirees).

• Retirement seeming too far away (2 percent of workers, 5 percent of retirees).

Thirty-one percent of workers who have not saved are nevertheless very or somewhat confident that they will have enough money for a comfortable retirement. However, this percentage has steadily declined from 47 percent in 2004, suggesting that workers are increasingly recognizing the need to save at least some money themselves if they would
like to achieve a financially secure retirement.

I would like to challenge those people who say they cannot save to try and find $3.30 per day ($6.60 would be even better) out of their budget to put towards their retirement. Making a habit of saving a small amount of money can really build a nest egg over a lifetime. Saving just $3.30 per day over 40 years would net a portfolio worth over $500,000 (not factoring in inflation)*. No, it’s not a lot BUT who’s to say that the amount saved couldn’t increase over time?

As a nation, we aren’t doing enough to educate and encourage people to take care of themselves. Rather, it seems we have become very good at telling people what they can’t do.

* Using the historical monthly total return average of .78% for the S&P 500 Index.

25 responses to 77% of American Workers Have Less Than $100,000 in Savings & Investments

  1. I agree. We don’t save enough; and it would be nice if we all could take care of ourselves. Alas, your challenge to “those people who say they cannot save to try and find $3.30 per day” may sound viable from our point of view, but there is a large number of people out there who cannot find such little money every day. I know some personally and there is also a bigger poverty problem in the US. (See “America’s economic pain brings hunger pangs” in the Washington Post http://www.washingtonpost.com/wp-dyn/content/article/2009/11/16/AR2009111601598.html ) I doubt that we can blame all the parents of these children who rely on food stamps that they cannot save. They don’t even have enough money to buy food, one of the basic human needs.

  2. ctreit,

    Of course not everyone can save. I understand that. BUT…I would be willing to bet that some people COULD but choose not to for whatever reason. I know poor people who smoke cigarettes. If they ditched that habit, they would have money to save for retirement.

  3. Are these figures tied to a single person? Married couple? My wife only has about 20k in an IRA, but I have 200k in retirement accounts that belong to me. So, we each have 110k. Wonder if that would change the numbers.

  4. Everything is subjective, I wonder how many of the people in the survey consider 401K saving and would a 401K be defined as “defined benefits plan”.

    And, in your 3.30 or 6.60 a day, are you taking into consideration money put into a 401k? Because someone putting 15% into their 401K then putting an additional 3.30 or 6.60 a day is saving quite a bit.

    Also, I did not read the entire article, but the graph you show does not indicate an age range. A 25 year old, will probably not have 100K in savings, as they are in the beginnings of their saving time frame.

    Good information though, puts a lot of things in perspective.

  5. I agree with amslap: without the age breakdowns, it’s had to make heads or tails of the information. A recent college graduate is likely to have $60k of student loan debt (hence negative networth) until they are in the workforce for awhile.

    Since the chart is based on a survey of ‘workers’, and we know that the huge baby-boomer population are exiting the workforce, it kinda makes sense for the lower end of the scale (>$25k) to increase just based on lower average age for workers of the survey compared to the past versions of the survey — just my guess.

  6. I think the 79% of workers who said they cannot afford to save says a lot about this country. ~Ctreit makes a valid point that there are many who truely cannot afford to save. But this is not a 3rd world country. This is one of the richest countries on the world abd 79% of us are not even close to the poverty line.

    I would say the vast majority of the 79% are simply thinking wrong. They cannot afford to save because they have 2 brand new cars in the drive way, a big house with lots of room, $10,000 in credit card debt, ect. The question in and of itself of stupid because it realies on the mentality of these kind of people. People who would rather have their brand new full size pickup truck instead of driving there 5 year old vehicle and investing. They are not willing to sacrifice.

  7. The worse problem is that when it comes time for retirement these same kind of people are going to be looking for a handout from the government. And of course it will not be their fault they were only a product of the system. (system could be the welfare entitlements or the capitilists who have honed there skills to get people to part from there money and keep of with the Jones’) So the goverment will increase taxes and those who do know in retirement who did know how to save will be taxes along with all the workers out their.

    Sickening. Sorry for the rant

  8. Ben — good points. But it is 80% of the 30% (who haven’t saved). So we are really talking about 24% of all the workers that are claiming they “can’t save”. I do not know what portion of the population is considered ‘in poverty’, but it is probably in the ballpark of that 24%…

  9. JLP, what are the demographics of the respondents to the survey? It looks like 45% of all workers have less than $10K saved, but I wonder if most of those respondents were decades away from retirement. Maybe the institute got higher response rates from new hires, for instance, who were just finding out about the 401ks etc. that are available to them. Maybe not and we really are all screwed.

  10. There are very few excuses for not saving at all. But without demographics, these tables are pretty unfair. We are part of that 77% but we have been in the workforce for a little less than 7 years. With our retirement savings and a positive net worth I’m sure we are at least on par with, if not ahead of, our peers.

  11. So about 33% of the population will be paying for 100% of the population come retirement. Lovely… I’ve been in the workforce for 10 years now and have managed to reach 100k even with the tech and real estate/financial bubbles. If I can do it, more than 33% of the population should too.

  12. And comments like JC’s perpetuate the unfairness that this table portrays. JC, based on 10 years in the workforce you are what, about 31 or so? What portion of those 77% do you think are younger than you? In 2005, 16% of the workforce was over 55 – I’m betting they make up a good portion of that 23% that have over $100K saved. Even if they’re saving at the same rate as you are, or more, they’re just a few years behind time-wise. And at some point, *everyone* in the workforce is going to have less than $1000 saved for retirement.

    If everyone had to retire today, then your statement would be correct. While I think that there is a good number of people that aren’t saving enough, I also think that a good portion of those 77% are on track for a healthy (if not luxurious) retirement because they still have plenty of working years to save.

  13. “So about 33% of the population will be paying for 100% of the population come retirement.”

    This figure seems pretty high when you consider that 1% of the population has 90% of the wealth.

  14. I live on a poverty-level income and spend half my income to rent a room in a house with seven people. I don’t think I could save $3.30 per day until either income improves or expenses decline..

  15. Courtney –

    You say there are very few excuses for not saving at all. Would you consider a poverty-level income a valid excuse?

  16. Terry, you’re still making a poverty-level income?

  17. bg thanks for pointing that out. I skipped the 3 in 10 clause.

    But about 12% of the population is at or below the poverty line. Wich I think is less than 20k year if I remember right. So I think about 24% of the population is a good indicator of those who cannot afford to save.


  18. How many people are at the poverty line for their entire lives? I’m sure some of them probably are but I doubt if everyone who is at the poverty line at *some point* will remain there for their entire working lives. My parents were at the poverty line in the 80s with three kids on one salary. When my dad died, they had a combined six-figure income.

    If you are truly at the poverty line your entire life, then yes I would agree that it would be a valid excuse for not saving.

  19. JLP –

    Yes, I am an older unskilled worker. Don’t see much hope for my income.

    Courtney –

    I dunno how many live at poverty level their whole lives, but I imagine it’s fairly common among unskilled workers.

  20. http://www.bankrate.com/finance/money-guides/tax-credit-for-savings-made-for-retirement-1.aspx?ic_id=nwsltr_taxtip_20100329

    Here’s a tip from Bankrate.com for receiving the saver’s credit on your tax return. No EZ forms are allowed, you have to use the FORM 1040.

  21. This is tricky! I bet the study doesn’t take into account pensions! Many of the older generation didn’t have the 401(k) option but had nice juicy pensions to get them buy later in life.

    If you add the value of pensions into the mix, the numbers change drastically!

  22. Comments seemed to argue that demographics are at work as younger workers haven’t had time to save as much… But it’s the entire workforce. This seems to be an effort to assure each other that the dream is still alive and with time we’ll all be millionaires despite having lost the equity in our homes in two and a half years. By recent historical standards I should be entering my peak earning years but I doubt I’ll top the numbers of my 40s. And the mountain of money I saved in my 40s is now distinctly molehill-like. My experience is probably reflective of a large number of people in my slice of the demographic pie.

  23. The Obama adminstration will make sure that anyone who has saved for retirement will have it erode quickly by denying Social Security benefits to these savers

  24. Most people have the power to save for their future, they just don’t. Those that say that they can’t save seriously need to consider giving up things that most think are necessity. Cable TV, high speed internet, cell phones, new cars, Christmas shopping, etc..

    Sadly in todays world we’re told not to live beyond our means and that we would be in the clear. When actually we need to live WAY below are means. I make very good money but live WAY below my means. I live on 25K a year and that includes a mortgage (for a small house – 950sq/ft). I save and invest the rest, which is more than I live on and that’s all after tax money.

    The only people that really can’t save are those that don’t have a full time job or have financial obligations (school, loans, medical, etc.). Everyone else should be able to find a way to save and invest.

    What’s more amazing is that kids go to school and college but don’t learn one of the most important things in life – how to save and invest for their future. Hell, finances is the #1 reason for divorce nowadays – go figure!

  25. Did I just read you say that $500,000 is not a lot of money?

    Well, I’m not sure what to say to that, besides that it’s more than I need to retire, when you factor in interest. Even moderate interest at say, 2% with 500 thousand dollars would last me over 45 years, if inflation stays at 3%.

    I’m 22 years old now, and I have $5,500 saved. I save 55% of my income. I have no talents that allow me to pursue a higher paying job, so this is where I am at. I save the most I can with a very low paying job. Because of this, I’ve adapted to needing far less in my life to be happy. For that reason, I don’t need that much to retire, relatively speaking.

    On average, I save $16.6 per day, or $500 a month.