7 Reasons Why People Are Failing to Save for Retirement
Most people know they should be saving for retirement. But what people ought to be doing and what they’re really doing is starkly different: One-third of the people in the workforce have not saved for retirement, and 23% have less than $10,000 saved up, according to an online survey from GoBankingRates that examined the spending habits of 4,500 people.
Here are seven reasons why people aren’t saving up for retirement:
Don’t consider it a priority
A GoBankingRates survey also discovered that about 40% of Americans don’t consider saving for retirement a priority.
Many workers are more focused on paying off their student loans when they do have some extra dough to spend. A lot of millennials are also focused on spending for their enjoyment. And many workers don’t seem to realize that spending more now will handcuff their retirement plans and reduce the number of vacations they’ll have access to down the line.
People are simply not making as much money as they used to relative to the current economic climate.
The 2007 real estate market that led to the national economic recession that started in 2008 is sending shockwaves to younger generations, forcing a lot of them to settle for low-salary jobs that often stem from unpaid internships.
About 54% of millennials earning less than $25,000 per year are signing up to a 401(k) hosted by the company they work for (if offered). Saving as little as $25 per year can go a long way towards reaching their retirement goals. Montana has the lowest median income for millennials at $18,000 a year, while DC has the highest at $43,000 per year.
High cost of living
One of the reasons why workers have been struggling to make ends meet, pay off student loans and save up for retirement is the fact that the cost of living in the U.S. is higher than ever now.
Three (New York, Boston, San Francisco) of the four most expensive cities in the nation to live in also happen to be three of the most populated ones, where the youth is moving to in flocks in hope for opportunity. The cost of living in New York City is 120% higher than the median average, while living in San Francisco takes more than $119,000 to live well and the average home value in Boston is around $374,000.
Not getting financial education
Many people simply haven’t been educated on how to properly manage their finances. Financial planning and budgeting are not taught in schools, and many people don’t seek this essential information on their own.
Workplace doesn’t offer retirement plan
Many workers don’t take advantage of their companies’ 401(k) plans, many of which match the amount they put in. Compounding this problem is the fact that many workers are hopping from job to job nowadays, assuming they’ll eventually stick to one company and begin saving for retirement then.
There’s also a group of workers who don’t have access to retirement plans, with 19% of respondents from a The Pew Charitable Trusts saying their company doesn’t offer a retirement plan.
Parenthood and home ownership
Many millennials are burdened with student loans, as well as providing for their families. Investing in a 401(k) becomes considerably harder when having to pay for child care and related household expenses.
They rely on Social Security
Many workers believe Social Security checks are all they need to take them through their golden years. The Bureau of Labor Statistics estimated that adults 65 and older spend an average of $45,000 a year, while the average Social Security benefit in 2016 for retired workers was $1,360 per month, which tallies up to only $16,320 a year.
Having a secondary source of income or a retirement fund becomes a necessity when you consider how Social Security checks don’t get you through much more than rent.