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 Institute
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.