Donald Trump has grabbed his share of headlines lately. In addition to the allegations of sexual misconduct, the president has also been in the spotlight for suddenly taking an interest in the health of Americans’ retirement accounts. Trump appears to be setting the stage for his re-election by trying to demonstrate he cares about the financial well-being of Americans.
Lately Trump has been asking people at fundraisers and campaign rallies “how’s your 401(k)?” The growth of the stock market has the president assuming most Americans are celebrating huge gains in their retirement accounts. There’s just one problem with that question.
Here’s why this one statement proves Donald Trump doesn’t know anything about Americans’ retirement reality. We’ll shed some light on what’s really going on for most Americans when it comes to retirement savings.
The 401(k) is not OK for most American workers. The problem with Trump’s question is that most workers don’t have a 401(k). And if they do have one, they’re not contributing much. Just 14% of companies made 401(k) plans available to their employees in 2012, according to 2017 U.S. Census Bureau research. Among that group, only about a third of workers contributed to their plans.
Next: Quite a few Americans have nothing saved for retirement.
Little to no savings
Those who do have a retirement account aren’t saving very much. Many Americans are living paycheck to paycheck. According to a CareerBuilder survey, three-quarters of workers are struggling to make ends meet. Financial stress and unexpected expenses have many workers putting retirement on the back burner or not saving for retirement at all. Roughly 1 in 3 Americans has nothing saved for retirement, according to a survey by GOBankingRates.
Next: People are scared, for good reason.
Fears about going broke
Few Americans are confident in their ability to save enough money to live comfortably in retirement, according to the Employment Benefits Research Institute. Just 18% of Americans surveyed by the institute say they feel very confident about being able to retire comfortably. This is down from 21% the year before. Not surprisingly, those who are struggling with debt are less confident. Roughly 36% of workers with major debt are not confident about having a secure retirement, compared with 8% of workers who don’t struggle with debt.
Next: This is how student loan debt complicates things.
Student loan debt
Although most financial experts warn against putting a child’s college education ahead of retirement savings, some people just aren’t listening. Some parents and grandparents choose to take out loans to help their children and grandchildren pay for college. The number of people age 60 and older who have student loan debt has quadrupled over the past 10 years. Furthermore, the Consumer Financial Protection Bureau found this age group is the fastest-growing segment of the student loan market.
Older Americans who have been wrestling with student loans over the past five years have saved $182,000 less for retirement. This will result in a $1.3 trillion retirement savings gap by 2021, according to AARP’s 2017 Financial Innovation Frontiers study.
Next: Many Americans are also supporting adult children.
A not-so-empty nest
In 2014, adults between the ages of 18 and 34 were more likely to be living with their parents than with a spouse or partner or on their own, according to Pew Research. This arrangement could add financial stress. In addition, roughly 39% of parents surveyed in another Pew poll said they helped their adult children with errands, housework, and home repairs. And 58% said they provided financial help to their adult children.
Next: Don’t forget this type of debt, which can put a strain on retirement plans.
Some Americans still have mortgage debt lingering over their heads during retirement. Older Americans who are close to retirement and still have a mortgage are struggling to save for their golden years. The Consumer Financial Protection Bureau reported the percentage of those age 65 and older carrying mortgage debt has risen from 22% in 2001 to 30% in 2011.
Next: Some expect to retire late, or not at all.
Delayed retirement — or none at all
Many baby boomers experienced a drain on their savings accounts and retirement portfolio during The Great Recession. Consequently, some had to delay retirement. Just 11% said they expected to retire after age 65 back in 1991. However, in 2014, 33% said they expected to retire after age 65 and 10% don’t plan to retire at all, according to the Employee Benefit Research Institute’s 2014 Retirement Confidence Survey.
Next: This type of care can interfere with retirement savings.
American workers are also being sandwiched between assisting their children as well as aging parents. This no doubt puts a lot of strain on one’s ability to save for retirement. There are roughly 40.4 million unpaid caregivers of adults ages 65 and older in the U.S. Among that group, 9 out of 10 are taking care of an aging relative, according to Pew Research Center.
Some workers, usually women, leave the workforce early so they can manage an elderly parent’s care. However, this tends to hamper one’s ability to save for retirement due to lost wages. A female employee who makes this decision could lose approximately $350,000 in wages and Social Security benefits, according to Met Life and Fidelity Investments research.
Check out The Cheat Sheet on Facebook!