Derailed! Why Your Finances Have Fallen and Can't Get Up

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In the wake of the market meltdown that began nearly five years ago, a huge bull market in stocks has helped rescue many retirement investors from the brink of ruin. Yet even with the support of the stock market, many Americans still report big losses in their retirement savings -- we're talking six-figure declines -- and they're blaming unanticipated life events that have affected their ability to achieve their financial goals for retirement.

Major unexpected events have hit 90 percent of Americans between the ages of 50 and 70 with at least $100,000 in investable and retirement assets, according to the Retirement Derailers survey from Ameriprise Financial.

The survey found that typical respondents suffered an average of four such "derailers," and the cost was substantial, causing total average losses of $117,000. For the 37 percent of respondents who said they went through five events, the total losses were even larger, averaging $144,000.

Given the stock market's huge plunge in 2008 and early 2009, you might expect that it would be the most commonly cited derailing event. But surprisingly, the most common derailer was the low interest rate environment, with 63 percent of those surveyed blaming low rates in hampering retirement-portfolio growth. Another 55 percent pointed to the stock market's decline, while 33 percent cited the plunge in home prices as wiping out a big chunk of their expected home equity.

Yet market forces weren't solely to blame for financial difficulties. Job loss hit 18 percent of those surveyed, while 23 percent point to the need to support adult children or grandchildren as hampering their finances.

Are Boomers In Denial?

As troubling as those figures are, what could be even more problematic is the extent to which Americans don't fully realize the impact that major losses will have on their retirement.

Only 35 percent believe that derailers will hurt their capacity to pay essential living expenses a lot or a fair amount. It takes several major disruptive events to get the point across, as 60 percent of those who dealt with five or more derailers expected greater difficulty in paying for essentials.

Moreover, American baby-boomers don't seem to understand the importance of actually staying on pace to achieve the goals they've set for their retirement finances.

More than 60 percent still think they're on a "smooth" road to retirement rather than a "bumpy" one. Yet, 42 percent say that their investment portfolios have left them with less than they expected 10 years ago to have by now, and more than 55 percent of those who've suffered an unexpected event describe the impact it has had on their finances as extremely serious or somewhat serious.

Lessons For the Future

The Baby Boomers surveyed here haven't given up hope and they plan to take action on their own to help get their finances in better shape.

But what future generations can take from Boomers' opinions is the lesson that paying attention to your money earlier in life can make a big difference in how your finances look by the time you approach retirement.

In particular, 57 percent said that they would have started saving earlier if they'd known how difficult it would be to handle unexpected financial challenges. Another 37 percent think that knowing more about investing at an early age would have helped them avoid their current fate, while 33 percent pointed to overspending on vacations and restaurants as contributing to their woes.

It's never too late to start working to get yourself in better financial shape. For those who have already retired, adjusting the investments you already have to make better use of income and growth opportunities can help you stretch your portfolio as far as it'll go. Boomers who are still working have an chance to boost their savings and take advantage of the final years of their career to try to get back on track.

Still, the sooner you get a grip on your finances, the easier it is to get yourself where you want to be by the time you retire. The Ameriprise survey is just one more piece of evidence showing how important it is plan for your future as early as you can.


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39 Comments

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kolblh

If the Feds keep pumping air into Wall Street the balloon will burst.

May 16 2013 at 4:53 PM Report abuse +4 rate up rate down Reply
setanta54s_back

these MORONS OF AOL still refuse to get PROPER SERVERS
as
EITHER ONE CANNOT POST
OR WE
now
HAVE TRIPLICATE/

May 16 2013 at 3:38 PM Report abuse -1 rate up rate down Reply
setanta54s_back

ANY NATION giving itself over to homosexuality and abortion ON DEMAND is doomed.
morons think gossnell is the EXCEPTION ?

he is the NORM.

plenty of THEM out THERE
happily and sadistically dismembering or literally murdering our future generations.

and no MORONS better reply about prolife being UNCONCERNED after someone delivers their baby
as ANYONE

May 16 2013 at 3:36 PM Report abuse -1 rate up rate down Reply
georgii1

Those "six figure declines" neither congress or investment folks want to talk about did lasting damage and so many of those folks left with no way to make up losses of that size in the future. For sure those folks won't be getting back up.

May 16 2013 at 2:35 PM Report abuse rate up rate down Reply
Len

Thanks to te stock market's rise since March of 09, my portfolio is doing quite well. Why? I didn't listen to those losers on Fox News.

May 16 2013 at 2:27 PM Report abuse rate up rate down Reply
1 reply to Len's comment
classof68gto

I'll second that motion.

May 16 2013 at 6:06 PM Report abuse -1 rate up rate down Reply
donn1326

The stock market is riding the bubble of cheap money. How long will other countries prop up our wasteful spending deficit by buying low interest US debt?

May 16 2013 at 2:03 PM Report abuse rate up rate down Reply
donn1326

What is hurting most Americans is the artificially low savings and CD rates. The low rate (almost 0%) caused by Fed easing is helping banks make huge profits at the expense of the American saver. Basically, American saver is paying for the bank bailout. obama a friend of the Middle Class? Think again, his administration is destroying the wealth and savings of the Middle Class, while enriching those he tells everyone he is against.

May 16 2013 at 2:00 PM Report abuse rate up rate down Reply
legacykwst

The so-called "financial experts" say that Americans don't understand the need to stay on track with retirement savings. When are they going to understand that what they call "derailers" are things over which people have very little control. That's what life is... Financial experts seem to think they live in a world of regularity and predictability. I'd like to know how many of those "experts" are in the same retirement fix as everyone else. Are they writing articles like this because they can't get a job anywhere else? Have the kids moved back home? It's not that Americans are in denial. It's that they are in a position of having to cope with real life as it hits. Is it better to starve and be homeless now or later? Later always seems the better option.

May 16 2013 at 1:14 PM Report abuse +1 rate up rate down Reply
shorthosep

I thank god every day because I got to retire in a defined pension plan and know exactly how much my retirement check will be every month. My advice to my children is this------ what's a four letter word that begins with F and ends in K and stands for intercorse------ Four O 1 K. But I'll give you youngsters some advice that might help you. Don't be afraid to pay yourself. So far this year my wife's deferred plan has made $10,000. Today I skimmed off that $10,000 and put it in her cash account. Now I let her original amount continue to be in play. This way I'm in charge, if the market goes south I have a cushion. Throughout the entire time, over 30 years investing, we have never been left behind the 8 ball. Sure we've taken some losses but at no time during those 30 years have we ever had less money in these vehicles than we originally put in. I call it the Pete Rose investing theory. Not a lot of homers but a league leading singles and doubles. We have accumulated appr. $500,000 doing it this way. Next year we'll set aside $300,000 in cash in our guaranteed fund which will genereate $12,000 a year or $1,000 a month. Between our pensions, social security, and the extra $1000 a month we should get about $95,000 a year. We'll still have $200,000 in the market and the $300,000 is safe generating interest. If all goes well the whole $500,000 gets left to our children. The way things are going in this country I have a feeling they'll need it.

May 16 2013 at 1:01 PM Report abuse rate up rate down Reply
1 reply to shorthosep's comment
classof68gto

You are doing it the right way. Investing.

May 16 2013 at 6:08 PM Report abuse -1 rate up rate down Reply
Charles

As long as the Fed continues to print money, it will only get worse. The next burst of the housing and Stock Market will not be so kind and gentle as the 2008-2009 bust!! We will continue to see near zero interest on savings and stocks and real estate will fall again.

May 16 2013 at 12:59 PM Report abuse +2 rate up rate down Reply