The continued progress in the economy has made Americans more confident about retirement. Recent upbeat data from the government may explain why the good mood prevails. April marked the 103rd straight month of job growth; wages are rising faster than inflation rate, which should help people not only meet their monthly needs, but also to save more for the future; and for investors, the first four months of the year were the best for the S&P 500 stock index since 1987.
All of those factors provided a positive backdrop to the Employee Benefit Research Institute 2019 Retirement Confidence Survey (RCS), which found about two-thirds of workers (67 percent) feel confident in their ability to live comfortably in retirement and more than 8 in 10 retirees (82 percent) are confident they will have enough money to live comfortably throughout retirement. That’s the good news.
However, like last year’s results, we may feel good, but we have not gone the extra step of determining whether or not that feeling is grounded in reality. Only 42 percent or workers have actually tried to calculate how much money they will need to retire comfortably and just 29 percent have tried to calculate how much they will need to cover medical expenses.
Instead of planning and saving for retirement, the majority of respondents (80 percent) may be counting on working after they officially retire. In fact, last year, 6.2 percent of those over age 65 were still in the workforce, more than double the share in 1980, according to the non-profit USA Facts. But that’s still a pretty small number compared to the survey results.
And then there’s the problem of competing attention for retirement savings. More than half of workers feel they are unable to save for retirement and for other financial goals at the same time , or that there are other financial goals currently more important than saving for retirement. 70 percent say their non-mortgage outstanding debt is the big problem, but a separate report from Bankrate.com points to another potential culprit: parents may not be able to save more for retirement because they are busy helping out their Millennial and Gen Z kids.
In a survey of more than 2,500 adults, Bankrate found 50 percent of Americans say they have sacrificed or are sacrificing their own retirement savings in order to help their adult children financially. Before you weigh in with judgment, Mark Hamrick, Bankrate’s senior economic analyst, says the trend may not have to do with enabling the next generation, rather “it’s a result of some of the ongoing financial challenges that many families face, some of which were caused by the financial crisis and the Great Recession.”
Although wage gains have improved over the past year, there is evidence that adults who graduate amid a recession see lower earnings, a condition which can last for about a decade after graduation. Pile on top of that issue the fact than many of these adults are carrying the weight of student loans and you can understand why many parents want to help.
While some parents can readily afford shelling out money to their kids, others may be putting their own retirement security at risk by doing so. It may be difficult to explain to your kids that mom and dad are unable to pitch in, but it could be easier if you say something like this: “Honey, I know this is hard, but I’m worried that if I/we don’t do a good job saving and investing for our own retirement needs, that you kids will be stuck taking care of us financially.” Pick your poison.