…and I thought the term “middle class” referred to a certain level of overall financial health.
It turns out that “middle class” just means your lifestyle, as a USA Today story yesterday showed that a third of the middle-class people in the United States have $20,000 in retirement savings.
That means that a third of middle-class people are spending their money on today rather than saving for the future.
This poll raises three questions in my mind:
1) If “now” is going poorly enough that you can’t save, what are you going to do later when you can’t work?
2) While I’m all for personal accountability, isn’t this another reason employers should make retirement savings opt in vs. opt out, like it is for some current retirement plans?
3) What’s the right day to start saving, if it isn’t today?
The greatest question of these three, for me, is the opt in vs. opt out. I think that left to our own devices, humans are fairly lazy (I have 46 years of experience being human and I can tell you, there’s nothing better than doing nothing….). Changing retirement plans so that we actually have to endure cumbersome forms to NOT save into a retirement plan would be a great way for me to do the right thing. If we aren’t going to guarantee a pension anymore, don’t you think this is the one action companies can take that costs them zero and helps their employees a ton?
…and before you think I’m saying that I think it’s the company’s job to secure your retirement, that’s not my point at all. I’m saying that there’s an overwhelming amount of evidence showing the current way isn’t working. Left to our own devices, humans will do very little, so let’s make retirement plan rules favor doing little.
On my third question, when do you begin….there clearly isn’t going to be a great day to begin saving. It’s never easy and there’s never going to be “extra” money left over at the end of the month. At some point I realized this with my weight. There wasn’t ever going to be a great day to start getting healthy. I was going to have to take action or the years would keep slipping away. I said I needed to lose some weight at 35, at 36, at 40, at 42…..finally at 46 I took action.
Do I regret not taking action sooner? Not as much as I’m pleased with myself for actually finally looking in the mirror. I can’t take back what’s already happened, but I can start living the life of my choice today.
I think when it comes to saving, now’s that time. $20,000 in retirement won’t last a year. Let’s start moving now!
How is your retirement saving is going? Are there reasons you’re telling yourself now is/isn’t the time to save?
Photo: U.S. Army
Great write-up Joe! I feel the same way. I work in the finance department at a mid-size Midwest manufacturer and while we have a good participation rate, I’m a little disappointed that it isn’t 100%. I have started to take part in our 401k plan meetings with our advisors and will be trying to push an opt-out methodology for our next plan year. We’ve been stepping up our efforts to try and help education our associates but there are always some that don’t put importance into retirement savings which is disappointing.
Thanks for the thoughtful comment, Thias. I wonder why a company would decide AGAINST opt out. Would they be on the hook for a larger matching gift obligation and don’t want to contribute more?
I’m not being snarky with that comment….I don’t have access to those meetings and honestly wonder what the downside would be? More money out the door is the only thing I can imagine.
I actually haven’t had the opportunity to be in a meeting yet where it has been discussed but I can assume that the reason it isn’t done is the “well we have always done it this way” mentality. But I also agree with your idea on the contributions. For every company out there actually worried about helping their employees with retirement, there are probably 10 that only care about profits…
Huh. I do wonder a little about the average age of the middle-class folks who took that survey. That could factor pretty heavily into what the average savings would be.
I’m middle-class and that is pretty close to how much I’ve got saved for retirement. I’m also only 30. If we’re looking at folks much closer to retirement, that’s a frightening number to be at.
I agree though, the middle class as a whole are pretty crummy savers. I think it’ll be interesting, in a sort of horrible way, to see how the middle class fractures as they hit retirement. I bet a vast majority will plummet into lower class.
That’s the fear, isn’t it? Lots of people might need support because they couldn’t be bothered to save during their earning years.
On the age of the survey respondents….it’s a Harris/Wells Fargo survey they cite in the USA Today piece, so I think a big polling organization like that is focused on a broad range of people….
I really start to wonder what “middle class” really means? How do we define it….income?
No time like the present right! Once you get started it’s a lot easier, sometimes you forget you are even doing it, this can be a 401K contribution or a walk from the train everyday, you just do it.
I was thinking about this just yesterday….how the key to life is automation……
Long ago, I presume it was the same with citizens and paying taxes. If left to our own devices and asked to remit our taxes ourselves, the government would be beyond broke hence why taxes are taken off the top from a paycheque. I wouldn’t be against instituting a minimum/mandatory percentage for retirement savings to be taken in the same manner. I’m sure that wouldn’t go over very well though.
Thanks for the comment, Kassandra.
I agree: while the real solution is one like they have in Singapore where people are FORCED to save, that goes against everything embraced in a “freedom” culture. Funny….people in Singapore don’t feel put upon and they’re some of the richest people in the world if you base it on median savings…..but I can’t endorse it in the USA. That’s why the opt out method is a nice middle ground.