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What is preventing Americans from saving for retirement?
Some things that occured in my life and may have impacted others, as well: unexpected unemployment for my husband, who held the health benefits with his job, unexpected car repairs, house repairs and upgrades, medical expenses, increasing property taxes (when we moved to our house, the taxes were $1,200/yr., 20 years later, when we moved they were $8,000/yr, with the star exemption), increasing utility expenses, student loans, increasing car insurance premiums (3 teenagers, 2 adults) all with stagnant wages.
Must of the above list is not truly "unexpected". The problem is, people live their lives as if they are never going to have any other expenses besides their monthly bills. They live as if they are never going to lose their jobs, will never get sick, the car will never break down, etc. That kind of thinking is the problem. Things break down. Losing a job over the course of your working career is normal, not unexpected. Cars break down and need repair and eventually must be replaced, etc.
I agree that I was naive in money matters, and exhibited poor planning for emergencies. For example, when my husband was unemployed, we spent $800 a month to maintain his previous health insurance under COBRA. That depleted our savings quickly, and then we were without insurance, as we could no longer afford it.
My attempts at savings for retirement were usually wiped out by these unexpected expenses, and we didn't have the income to keep up with the increasing cost of living in our area and still save money. We stayed there far too long due to family proximity (aging parents) and to keep the kids in the same school district. Poor choices for long term finances, but necessary choices for our family.
Everyone has their own story, and it should be respected as such. The OP asked why American's are having difficulty saving for their retirement. So, I've included my personal story. To sit back and say, "you should have known better" is kind of silly. You shouldn't judge someone until you've walked their walk.
Must of the above list is not truly "unexpected". The problem is, people live their lives as if they are never going to have any other expenses besides their monthly bills. They live as if they are never going to lose their jobs, will never get sick, the car will never break down, etc. That kind of thinking is the problem. Things break down. Losing a job over the course of your working career is normal, not unexpected. Cars break down and need repair and eventually must be replaced, etc.
So correct
If more of us would save for a unknown future our quality
of life would improve and there would be more money
to go around for everybody.
They say most of us are only a missing paycheck
away from being broke, yet many live carelessly when it
comes to saving money. Guess these people believe their
homes are all the protection they need. Oh well.
A lot of people think a smart phone with unlimited text and calls is a necessity, or their cable television subscription, or meals out. They save nothing because all they know how to do is spend.
I agree that I was naive in money matters, and exhibited poor planning for emergencies. For example, when my husband was unemployed, we spent $800 a month to maintain his previous health insurance under COBRA. That depleted our savings quickly, and then we were without insurance, as we could no longer afford it.
My attempts at savings for retirement were usually wiped out by these unexpected expenses, and we didn't have the income to keep up with the increasing cost of living in our area and still save money. We stayed there far too long due to family proximity (aging parents) and to keep the kids in the same school district. Poor choices for long term finances, but necessary choices for our family.
Everyone has their own story, and it should be respected as such. The OP asked why American's are having difficulty saving for their retirement. So, I've included my personal story. To sit back and say, "you should have known better" is kind of silly. You shouldn't judge someone until you've walked their walk.
I wasn't judging you. That was your interpretation. I was just pointing out a lot of the stuff you listed was not, as you initially implied, just random unexpected stuff that comes out of nowhere. And you have admitted as much for the most part. Kudos to you for that much, as most people wouldn't.
This is clearly just one of many reasons, but personal finance is not (really) taught in schools, and parents seem to pass down their financial ignorance more often than financial savvy; I was fortunate enough to learn the "if you don't have it, you don't spend it. If you don't need it, you don't buy it" philosophy at a very young age, and that stuck with me. I can't say the same for a lot of my friends (mid-twenties college grads) who are already racking up credit card debt on top of student loans, and this will continue for life. Not many people have the power to stop living a life of "wants" - it's too comfortable - especially if they were raised watching their parents live like this and developed a false sense of purchasing power. "I can't afford to live like this" is an unpleasant thought, but it can really snap you into reality if you let it (which I did before I even tried to live beyond my means).
This. Personal finance should be taught in high school. Everyone should understand the basic terminology, the power of compounding, diversification and that there is no magic answer to higher returns. This will never happen though because the government has a powerful incentive to keep people ignorant.
Too many people don't understand basic finance so they ignore it, besides it's more fun to spend money on *stuff* and enjoy spending their hard earned money now and hope the fairy godmother rescues them when their older.
A lot of people think a smart phone with unlimited text and calls is a necessity, or their cable television subscription, or meals out. They save nothing because all they know how to do is spend.
This. Personal finance should be taught in high school. Everyone should understand the basic terminology, the power of compounding, diversification and that there is no magic answer to higher returns. This will never happen though because the government has a powerful incentive to keep people ignorant.
Too many people don't understand basic finance so they ignore it, besides it's more fun to spend money on *stuff* and enjoy spending their hard earned money now and hope the fairy godmother rescues them when their older.
people keep themselves ignorant when it comes to their financial lives. they rather spend their time on sports trivia and scores .
folks know more about their car or refrigerator than their 401k's.
This. Personal finance should be taught in high school. Everyone should understand the basic terminology, the power of compounding, diversification and that there is no magic answer to higher returns. This will never happen though because the government has a powerful incentive to keep people ignorant.
Too many people don't understand basic finance so they ignore it, besides it's more fun to spend money on *stuff* and enjoy spending their hard earned money now and hope the fairy godmother rescues them when their older.
Or they win the lottery, get a big inheritance etc.....
I have an employee (with me 10 years) and despite raises, he still ends the year broke. I recently had the conversation that he has gotten over 300k from me despite zero to show for it. Early on he made less but lived at home, this year he made 38k and doesn't have $200 to his name.
I tried to explain the importance of time value of money, saving for a down payment for a house etc but all I got was excuses.....only thing that got his attention was the fact his landlord is paying $1600 a month on a mortgage and collecting $3600 a month in rent (triplex).....2k monthly profit playing landlord! Employee thought he would rather be living there for free and still collecting $2400 in rent/ $800 profit than being the tenant.....so maybe 2014 will be the turning point for him!
to save does not mean take all your money and bet the ranch on cash instruments. historically after inflation and taxes that has been a loss regardless more often than not..
anyone who has long term savings and needs to protect against inflation and periods of negative real returns needs more than cash instruments.
if they did that then the little bit they gave up compared to how bonds , reits,and equities did is a non event.
you can't take someones lack of planning, paying attention to their finances and lack of interest in learning even the basics and blame every thing and everyone around them because they did the wrong thing.
just about anyone who with a home who refinanced over the last couple of years or bought a car is well ahead of the game.
the fact is most americans have very little in the bank other than what comes in and goes out to pay bills. there is nothing there to even be concerned about interest on as there is nothing in the account long enough. they may be far better served by low rates as they my count on credit cards alot .
low rates and lower inflation go hand in hand. higher inflation to get higher rates would only hurt them more.
most americans can't even come up with 10k in emergency funds. their rolling balances are very very low so interest really is tiny. an up tick in inflation would well exceed even a 5% interest rate on their balances.
Isn't this a GREAT reason why burger flippers should have the option to buy tiny homes? It's hard for burger flippers to come up with $10k in emergency funds when they are paying 40% of income on rent that rises faster than income.
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