Survey Reveals Americans' Financial Future: We're Not Ready

MoneyTips.com gave us an exclusive first look at its new survey of Americans' financial wellness. Any way you slice it, the results are scary.

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Survey Reveals Americans' Financial Future: We're Not Ready
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Getting a cold dash of water in the face is rarely pleasant. When the sudden shock involves the financial planning of millions in trouble, it passes disheartening and enters the realm of scary.

According to a new survey of 326 middle-income Americans and 314 baby boomers by personal finance site MoneyTips.com, scary is the future of the country. MoneyTips gave us an exclusive early look at the results, and no matter which group you look at, large swaths of the populous are unprepared for the future -- and many are having trouble now as well. Plus, there are signs that many of those who volunteered to take the survey were relatively optimistic, and that the overall picture is probably bleaker.

Plan? What Plan?

You can't control what you don't watch, and that's where things start badly. When asked whether they have clear financial goals and milestones, 68 percent of boomers and 63 percent of middle-income respondents said that they did. That's good, but the flip side isn't.

"If you look at middle class Americans, defined as income in $40,000 to $80,000, the financial plan for one third of them is no plan," said MoneyTips CEO Marc Diana. "I would be expecting that number to be about 20 percent."

There is visible strain in the ability of many to keep things together.

As for boomers, he was "very surprised" at even 68 percent. "They're older; they're closer to that milestone of retirement," he said. "I would have expected the baby boomers would have been a higher number." Even if more than two-thirds have solid plans, having close to a third of the largest demographic in the country approaching retirement without a plan is sobering.

Already there is visible strain in the ability of many to keep things together. For middle income Americans surveyed, 57 percent were "comfortable" with their current standard of living. As for boomers, 61 percent were comfortable with their current standard. Roughly 40 percent of each group already forgoes things, though how many are saving for the future vs. not making enough to do better is impossible to say.

And How Are Those Plans Going?

Only 57 percent of the boomers with plans said they were on target to meet them. For the middle-income group, the number drops to 46 percent. Even for the people who have plans, a great many see them slipping away.

Broken out in some detail, 53 percent of boomers and 41 percent of middle-income people said they were "on track for milestones," such as marriage, a new car, home purchase or remodeling. Children's education funds were on target for only 23 percent of middle incomes and 21 percent of boomers (although almost 61 percent didn't answer, which suggests that the bulk may be through that hurdle). Fifty-one percent of middle income claimed the "right financing" for their home or properties, compared to 62 percent of boomers.

In each case, many have clearly fallen behind. When it comes to retirement, hold on. Only 49 percent of middle-income respondents and 56 percent of boomers are on track with a retirement plan. Fifty-seven percent of boomers say that their savings plan will let them live comfortably in retirement; for the middle income set, the number drops to 32 percent. There is a giant brick wall facing the country, and the impact starts in just a few years.

Two-thirds of the middle-income respondents said that they do not have an up-to-date estate plan. For boomers, 51 percent didn't. Why plan for an estate when the money could well run out anyway?

Can You Say Bernie Madoff?

The planning process for many is clearly broken, with 30 percent of middle incomes and 40 percent of boomers using a certified financial planner or counselor. Middle-income people actually outpace boomers 46 percent to 44 percent at using online resources to educate themselves.

"Among those searching for online answers to their financial questions ... I would have expected a larger number at [personal finance and business sites]," Diana said.

The level of trust that people express in their financial advisers seems naive. Of the 44 percent of boomers who said they use a financial planner or counselor, 93.6 percent "completely trust" the person or company. Ninety-two percent said that the counselor or adviser "provides a variety of financial products that meet all of my financial planning needs."

Only 30 percent of middle-income responders consult a financial planner or adviser. Of them, 93.8 percent "completely trust" the source of advice and 91.7 percent get financial products that "meet all of my financial planning needs."

In other words, the people who use professional help seem almost entirely dependent on the person. Of course, you would be beyond insane to use a financial adviser you didn't trust. However, the combination of trust and practical dependence can be deadly. The law of averages dictates that as many advisers who are above the median in performance are below. All other things being equal, people have a 50-50 chance at getting a relative loser -- assuming that advisers are, on the whole, good at what they do.

Remember that the vast majority of mutual funds don't beat the market. Assuming that professional advice is always smart and accurate would be a mistaken generalization. In addition, many advisers make their money from selling financial products that they represent, whether those products are the best for your interests or not. Chances are that some hopefully small portion of the advisers are scalawags more interested in separating you from your money than in growing same.

More Involved Than Most

"Overall, the common theme that I've found is that larger numbers of people don't have a financial plan, aren't comfortable with where they are," Diana said. "They're missing their financial milestones and aren't comfortable about where they'll be in retirement. Those are all larger numbers than I would have expected across the board. I understand these are difficult economic times, but five years doesn't make a lifetime of living for everyone out there. I was expecting more people to be buckling down during these tough years and having been more prepared for the future than what I'm seeing here."

But perhaps the scariest revelation from this survey is what it doesn't show, due to its methodology. All of those who participated were either recruited online via an email file MoneyTips has, or found out about the survey through the MoneyTips' Twitter (TWTR) and Facebook (FB) feeds. That sample population, then, is hardly a fair mirror of the country as a whole. Instead, it would be fair to assume that the group is weighed more heavily toward people who take an active interest in their personal finances. In other words, the real situation is probably a whole lot worse.

"I think it's going to be a very, very challenging time five to 10 years from now," Diana said. "Even if the economy picks up, it will take more time to boost up the savings in the retirement programs that all of these folks are in. I think there's a very large problem looming out there."


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29 Comments

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cmcdrra

The sad reality is the majority just do not a prayer in this area. Would guess 60%, probably higher, do not have anything left to save. It does not mean they are spending their money wisely, it just means it is gone. For example a family of 4 with annual household income of $50,000 just does not have much of anything left after taking care of needs, wants aside.

The old saw about saving even $5 or $10 a week just will not get you there in current times. Perhaps in the past when you could expect 5%+ on just a monemark or CD. Those times have been gone for 6 years with another few to come.

The 61 to 80 percentile could save, but most won't especially the lower they are in the range. The 81 to 100 percentile is not worried about it.

Participate when/where you can especially in 401's 403b's etc and even better if employer match. Unfortunately the lowest percentile just does not have much to put in the pot.

Even the folks who retired 10 years ago with a $150,000 cash nest egg are hurting. They expected at least $6,250 annually, $520 a month to supplement their SS and whatever other pension they might have. Returns have been a kick in the groin for the 5-6 years. Have an Ira a/c with a 6 figure cash balance. My most recent monthly interest credit was $1.21, or $14.52 annually.

Retirement is not as attractive as it used to be and for too many not even an option.

June 04 2014 at 1:54 PM Report abuse rate up rate down Reply
ctjhowie

OK, what's the right answer? How much is enough for retirement?

June 03 2014 at 5:20 AM Report abuse rate up rate down Reply
RICH

You forgot the mistake of trusting your kids to manage their college funds that mom, dad, and grandma saved for them.

June 02 2014 at 9:17 PM Report abuse +1 rate up rate down Reply
thefacts22

There is no future for USA,much less "financial future" under clown Presidente.oba we will be socialist,therefore the independent middle class has to be eliminated.USA voters MOST clean all the "cronies" and cooperators in our elections

June 02 2014 at 7:55 PM Report abuse -2 rate up rate down Reply
1 reply to thefacts22's comment
teaparty2implode

To be a true socialist nation 90% of our country needs to be in a Union.

June 02 2014 at 11:29 PM Report abuse rate up rate down Reply
1 reply to teaparty2implode's comment
teaparty2implode

The TPGOP is blocking hope and change. They have blocked a raise in the minimum wage, equal pay for women, and jobs. Oh yeah, they even blocked funding for the VA last February which would have provided more hospitals and clinics for our returning vets.

June 03 2014 at 9:07 AM Report abuse +1 rate up rate down
cvanac8550

here's a good one..the media's not talking about...Us bad Americans mistreating the poor disadvantaged folks in the inner cities...I guess his daughter didn't pay attention to his rhetoric....
http://www.nbcnews.com/news/crime-courts/daughter-jeremiah-wright-convicted-fraud-scheme-n47841
Presidential pardon in the future...I'm an independent progressive leaning a little left so don't catorgorize me as a bagger...Whats right is right ........

June 02 2014 at 7:42 PM Report abuse +1 rate up rate down Reply
SPQR

Sample size is too small, you need about 10 samples, 500 each, across all salary levels from 40 to 80 K in various cities to get a clearer picture of the state of preretirement groups. At least for this group they seem ill prepared. On the bright side, most of the retirees will be dead in the next decade or so. The new immigrants will be easier to support because millions will have fallen off SS, Medicaid, Medicare etc and be underground.

June 02 2014 at 5:55 PM Report abuse +1 rate up rate down Reply
Valerie

The fact that a lot of people in America are in financial trouble is hardly a "big news story".

June 02 2014 at 4:08 PM Report abuse +2 rate up rate down Reply
SPQR

Americans were conned to spend all their money and still are because the economy is based on consumerism. Most Americans are fooked

June 02 2014 at 4:06 PM Report abuse +1 rate up rate down Reply
1 reply to SPQR's comment
jpfmtka

"Fool me once, shame on you". "Fool me twice, shame on me". "Fool me over decades?" Lifetime, lifestyle, habitual idiocy that transcends shame or blame and binds the clueless into a lifetime of bondage to absurd debt.

June 02 2014 at 4:31 PM Report abuse rate up rate down Reply
gmsexton

first, it's absolutely impossible to have "clear financial goals and milestones" it's impossible as they are moving targets. these "goals" would have to be so broad in definition as to be meaningless. no one can predict with any accuracy what the markets will do, what inflation will be, and future income levels will be.

all you can do at best, is invest in company retirement options or 401k's and invest based on years till retirement. trying to balance risk and reward is a complete guess. it's also a complete guess as to how much you will need, and how much your account will be worth at the time of retirement.

if the article illustrates anything, it's that most people don't take an active roll in their retirement because it has simply become too complicated for them to understand and manage. you either hire someone to do it for you or you place your funds in the company smorgasbord of options and weight according to years till retirement. the odds hiring someone who will beat the "average" is at best a 50-50 chance.

the real issue will be managing your funds and assests once you actually do retire, that's where it will get interesting. try guessing how long you are going live, your relative health, and the costs associated with that. then guess how much that averages out to a year. all while guessing what you need to hedge against inflations effect, not to mention income taxes. good luck all....

June 02 2014 at 2:33 PM Report abuse rate up rate down Reply
1 reply to gmsexton's comment
theycallmeroy3

Certainly can't be left out of any equation. Extremely insightful.

June 02 2014 at 3:31 PM Report abuse -1 rate up rate down Reply
Hello, WildBill

This nation needs to rethink "tiny houses", and start building tiny house communities with lots of amenities for the boomers. We love being together and can take care of each other. Community classes, pools, exercise rooms, dining halls, food gardens, all can be affordable if we pool our resources. Our golden years can get rewarding and enjoyable. We just need to be able to get at whatever value is still left in our homes, and be able to invest it in affordable living. The houses do not have to be 400 sq. ft., but less than a thousand. An idea whose time has come!

June 02 2014 at 1:58 PM Report abuse +2 rate up rate down Reply
2 replies to Hello, WildBill's comment
theycallmeroy3

That's a wonderful idea. And could go further in tax credits and assistance for those who help the elderly most in need. Except the regulations would strangle the private sector beyond creativity. And insurance companies who sell LTC policies, combined with those in the market who offer assisted living facilities, often on the backs of Medicare ( for rehabilitation) and Medicaid for long term care, would some how want a piece of the action.
Often groups of anything, are usually followed by regulation. There was a story recently about a woman who sold everything and bought a tiny house. She parked it in one of her friends backyard. Probably without an HOA, who'd have a cow.
It will be the millennial s who'll redefine the housing market. Already data is coming in about how millennial's shun vast open space. Their space is held in the palm of their hand. Doesn't bold well for the housing market.

June 02 2014 at 3:26 PM Report abuse rate up rate down Reply
MISANTRHOPE

Sounds good in writing, but in truth I think you would see blight moving in more & more like weeds growing among the bermuda grass making crime, unpleasant neighbors & ultimitely creating distressed HUD funded housing look like a mansion.

June 02 2014 at 3:59 PM Report abuse rate up rate down Reply