Twenty percent of people fifty-five years of age and older have nothing saved for retirement. Thirty-one percent of adults of all ages have no retirement savings.
According to the Washington Post:
The sobering statistic was one of many released by the Federal Reserve on Thursday as part of its report on the economic well-being of U.S. households, which surveyed more than 4,100 people online last year between mid-September and early October.
The study offered a stark reminder that as more Americans are made responsible for their own retirement, most are not saving nearly enough. Overall, 31 percent of people said they have zero money saved for retirement and do not have a pension. That included 19 percent of people between the ages of 55 and 64, or those closest to retirement age.
There is a reason for this. It isn’t only due to shifts in personal ethics. Government policy is also a driver.
Below is a chart from the American Bureau of Economic Research.
What you will notice is that, for a while, in the post-war economy, people kept saving money. Then, in the 80s there is a noticeable decline. In 2010 it looked like we might get a bounce, but that seems not to have materialized in the long term.
So what happened?
The Washington Post tried to answer the question:
What’s going on here? A lot of people said they rarely thought about retirement, at least not until it was too late. About 41 percent of people ages 18 to 29 said they never thought about retirement planning, a number that understandably declined to 20 percent for people above the age of 60.
But researchers said the dismal saving rates weren’t fully explained by lack of caring. They also cited a combination of low resources and poor awareness
But what would have changed in our culture that would make people less aware of the need to save for retirement.
One suggestion would be artificially lowered interest rates.
Here is a chart of the average rate of interest one could get in a bank savings account.
Here is another one for Certificates of Deposit.
Perhaps, the problem is not that people don’t care, but people stopped caring when they gave up believing that saving money in a non-risky manner would pay off. There was a time when a person could get a ten percent return on his money in a savings account! That is no longer the case.
Worse, inflation is constantly robbing the saved dollars of their values. There was a time (the late eighteen-hundreds) when even saving at no interest still had value because the buying power of the saved money kept rising.
Finally, these same low interest rates allow businesses to extend “easy credit” to consumers. So they are discouraged from savings and encouraged to go into debt.
These perverse incentives have an effect on how people think about the future, or if they allow themselves to think about the future.
When preparing for the future becomes too difficult to accomplish, people tend to push it out of their minds. They are not failing to save for the future because they don’t think about it. They are failing to think about the future because their government has made it too difficult to save for the future.