They Should, But They Can’t

According to a recent study by Edward Jones, 51% of Americans aren’t actively contributing to an employer-sponsored 401(k) account nor are they contributing to an IRA (only 37% do) or HSA (only 18% are).  Are we just an instant gratification society, as some of my peers would argue, or are there other tangible reasons for this inaction?

First, many Americans work for small employers that don’t offer defined contribution plans, and we know that saving for retirement outside an employer-sponsored plan has been challenging. Second, real family income growth has been negative for most Americans (bottom 95%) since 2007 and less than 0.9% annually since the late 1970s for the bottom 80%, according to the Economic Policy Institute.

When addressing wage growth, it shouldn’t shock anyone to read that low wage earners have actually lost ground when adjusting for inflation, while the shrinking Middle Class has seen only a 6% increase since 1979. Without wage growth, how is the “average” American to keep pace with significant increases in costs for housing, education, healthcare, food, etc in an environment where Corporate America is contributing far less in benefits to it employees?

source: Economic Policy InstituteMost Americans are Getting Poorer

Given the weak growth in family incomes, it is not surprising that we have seen an unprecedented rise in debt/household.  Americans today have amassed more than $1.5 trillion in student loan debt and more than $1 trillion in Auto debt.  Revolving credit card debt is fast approaching $800 billion, too.  When factoring in mortgage debt, Americans have amassed more than $13 trillion in total debt.

The burden of debt is becoming so heavy that more than 73% of Americans are now dying in debt, with an average balance of $60,000, and it will likely get worse.  So no, I don’t believe that we are a society of careless individuals placing instant gratification ahead of appropriately planning for their futures. The U.S. is fast becoming an economically stressed population without the financial wherewithal to keep their collective heads above water.

4 thoughts on “They Should, But They Can’t

  1. I would respectfully disagree. It’s not that the statistics you have shared are incorrect but if people can find away to pay minimum balances on their debts every month then imagine what would happen if they didn’t have those debt payments, and instead turned around and saved and invested that money. The key is budgeting, which most Americans don’t do and statistics back that up. If one is not budgeting then how can they honestly say what they can or cannot afford to do, including saving for retirement?

    Step 1: Get on a budget. Step 2: Pay off debt. Step 3: Save and invest. It’s actually that simple and playing the victim has gotten our fellow Americans nowhere. I’d also like to point out that one’s employer not offering a 401K is a total bologna excuse for not planning for retirement. Any bank or certified financial planner can help you set up a solid IRA independent of your employer. It’s just my educated opinion based on years of researching the world of personal finance.

    • Good morning, and thank you for sharing your thoughts. Unfortunately, it isn’t as simple as you make it out to be. If it were, we wouldn’t be witnessing the magnitude of the problem. It is easy to set up a budget, but that doesn’t matter if your compensation doesn’t cover life’s basic needs. You haven’t shared your thoughts on the lack of income/wage growth, the percentage of workers that are underemployed, the 95 million age-eligible workers that are not in the labor force, the 62.7% LPR that is 4% below 2007’s level, the greater use of “as needed” workers by Corporate America, etc. All of these are contributing to a society that is financially stressed. Thank you, again, for taking the time to share your thoughts with me. I hope that you have a great day.

      • I hear you, and you are right I did not address all of those things. I was an Army wife for 5 years in which yes, I was constantly underemployed if not unemployed. That didn’t mean I made excuses and looked to everyone else to fix my problem though. I found work. It wasn’t work that I was excited about. It was work that was below my education level. But it was still work and my family’s bills got paid, we saved, we paid off $54K of debt in 10 months and are now in a very stable financial position. It came from living below our means which I am afraid to say really is an issue in our country. When the average car payment is over $500 per month in America and yet we have people stating that they cannot save or invest or pay off debt, then yes, I do see it as an issue of not managing your income well, not budgeting, and yes, even allowing oneself to play the part of the victim. It is okay for us to agree to disagree. It’s my opinion, as I said, nothing more, nothing less. You also did not address the fact that the majority of Americans do not live on a budget. You said “it’s easy to…but…” If you believed that, then why do so many people not budget? It goes back to not managing what you have. Even an amazingly competitive salary is useless if you do not budget.

  2. I think its safe to say that very few couples can pay off 54K in three or four years let alone 10 months. That equates to over a thousand a week just for debt net income after taxes.

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