For Americans Saving For Retirement, Later Is Too Late

By Cyril Tuohy

InsuranceNewsNet

A recent survey of the retirement savings habits of middle-class Americans sums up their approach: “Later, dude.”

A trite phrase, perhaps, but it's always deadly when seen in the light of compound interest. That’s because, as advisors know all too well, for millions of investors later never comes. Even when it does, it’s too late and the magic of compounding is lost.

The funny thing, though, is that middle-class investors appear to know this. Which may explain why a significantly bigger majority of the nonretired middle class, 72 percent, agree that they should have started saving for retirement earlier than they did, according to results from the fifth annual Wells Fargo Middle-Class Retirement study out this week.

That’s an increase of 6 percentage points over last year, and it's a sentiment that appears “fairly uniform” across all of the major subgroups of the 1,001 respondents, said Joe Ready, director of Institutional Retirement and Trust for Wells Fargo.

Ready, in an email to InsuranceNewsNet, said instilling in middle-class investors the importance of putting aside retirement money earlier in life “is a main message we in the industry need to continue to get out there.”

“It’s our job to educate and encourage people — it’s never too late (although the later you start, the harder it gets), you can do it, just get started — and the sooner the better,” he said.

In any event, there’s no excuse for not maximizing workplace retirement plans early, “so that they can see the benefit of time compounding the value of their money,” he said.

Of the respondents surveyed, 68 percent said saving for retirement was “harder than I anticipated.”

More than half of respondents, 55 percent, said they plan to save “later” for retirement in order to catch up, the survey found.

In many cases, of course, that day will never quite arrive. By the time some of these workers are ready to start socking away money, it will be too late, financial advisors warn. Meanwhile, workers will have squandered the one advantage they had: time.

“Saving for retirement isn’t easy,” Ready said. “It requires sacrifice and it’s not something people can put off and hope to achieve later in life. If people in their 20s, 30s or 40s aren’t saving today, they are losing the benefit of time compounding the value of their money.”

Ready also said the survey found that 28 percent of respondents hoped that $100,000 or less would be enough to help them survive in retirement, an increase from 18 percent in last year’s survey.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.