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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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
3 replies to teaparty2implode's comment
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
mac2jr

The Demise of Airlines ©

It is true that millions of people around the world depend on airlines to get them from one location to another, but can this be sustained into the future? The price and availability of aviation fuel has over the last few decades, along with the price of the newer, safer aircraft, pushed nearly every U.S.A. airline into bankruptcy. Airlines are finding that the average citizen is becoming tired of the TSA inspection lines, the airline overcrowding, the fee increases, baggage charges, the takeoff and landing delays, and the overall attitude of the industry. Companies are finding that telecommuting is far less expensive than the 'face to face' of yesteryear.

And taxpayers are getting fed up with paying for new terminals, new runways, air traffic controllers, TSA personnel, traffic control, parking facilities, and subsidizing airlines that are running near empty aircraft to little used airports in the nation; all so a few (one or two million out of the 318,000,000 U.S.A. population) can afford to fly.

Yes, we now have a supply of solar, wind, and geothermal energy, and a supply of natural gas, but aircraft still needs aviation fuel which is becoming more scarce by the day. And as the world's countries become more industrialized and as the one-percent'ers increase, this will drive up the prices of airline flight even more, thus putting the kibosh on travel by those who are considered to be middle to poverty class economically.

Why did we at PhiliContractorsMall bring this up, the answer is in the commentary on these pages; we need to understand that for the vast majorities of people, airline travel is becoming unacceptable and we need Alternative Transportation Systems, systems that can produce tremendous economic advantages and millions of new jobs.

A Congressperson brought this out on national television a in early July of 2013, but he suggested Busses. And this is one such alternative, and is suitable for many travelers; our experiences with busses on long-distance travel have not been good, but we have experienced very good, and comfortable long-distance travel using Amtrak and other rail systems.

Point being, we need to look 20 to 100 years into the future of transportation, or we will be walking.

June 02 2014 at 5:30 PM Report abuse rate up rate down Reply
mac2jr

The Return of the Union ©

There are many that are happy that unions are going the way of the Doo-doo bird, but is this a good thing? In today's economy of decreasing American Jobs, decreasing medical and retirement benefits, decreasing wages, and higher demands for education and experience, the average soul is having a difficult time feeding his or her self and family.

Unions came into existence due to poor working conditions, low wages, low benefits, etc., that were being offered by American Businesses back nearly a hundred years ago. And yes, some unions abused their positions and caused labor and management problems for some companies. But ...

If companies insist on not paying decent wages, not paying benefits, then our Welfare and Food Stamp programs will suffer, as will the few remaining workers that are actually making enough money to pay taxes and support those that cannot.

Thus, it may be time for the workers of all non-union companies to unionize and 'fight back' against those businesses that would reduce American Workers to the status of Slaves or foreign workers that burn in factory fires, die in building collapses, work for $2.00 per day, have no health coverage, no retirement, and no voice in the running of the companies for which they slave 8 to 12 hours per day.

Return the Unions, and Fight Back, NOW !

June 02 2014 at 5:29 PM Report abuse +4 rate up rate down Reply
2 replies to mac2jr's comment
cvanac8550

You couldn't have said it better...but the dumb a*** in the right to work states are to busy worring about their guns, abortion and gays to realize where their bread is buttered....FN a holes.....

June 02 2014 at 7:44 PM Report abuse +2 rate up rate down Reply
thefacts22

The ONLY future for unions members is to work for big daddy the feds,of course our future will be in the hands of incompetents bums

June 02 2014 at 8:01 PM Report abuse -3 rate up rate down Reply
mac2jr

Why Not - VA/Medicare Hospitals? ©

The Veterans Administration (VA) has some of the best hospitals in the U.S.A.; the Department of Defense (DOD) has great emergency and field hospitals throughout the world and especially in war zones. The point is that the military does a good job at taking care of its personnel and of those that served, and is expanding to more areas of the country with its clinics and joint operations with private and community medical facilities. Sierra Vista, AZ and Pahrump, NV are two examples.

Medicare is spending a fortune sending elderly people to private hospitals, and more of these private hospitals are either 'ripping off' Medicare, or refusing to accept Medicare patients, so let's get smart, and expand the VA/DOD systems to include Medicare.

There are many advantages, of which one is that patients will get as good, if not better, care from a Fully operated Medicare/VA/DOD hospital. Additionally, this would make it easier for the government to negotiate for lower drug prices, better medical techniques, more preventive medicine, more state to state and country to country consistency, a better medical records system, a better follow through from Field Hospital to final release or care, and to provide great teaching facilities for its military and other doctors.

How to pay for this, start with the funding from the DOD, VA, and Medicare, add low cost medical college tuition for students; there would be much lower cost for administrating, purchasing equipment, and purchasing drugs for the clients via size and competition with the private hospitals..

This could be the way to Reform our Medical Community and LOWER Medical prices to level of, or below other nations that have equal or better health care results.

June 02 2014 at 5:24 PM Report abuse +1 rate up rate down Reply
1 reply to mac2jr's comment
Sonny

Money has not solved the problem.....and will never solve the problem associated with an entrenched bureaucracy. It is just come to light that VA administrators would not let Doctors work past 3:00 P.M., just to create a problem that enables them to ask for more money. A very large disproportionate amount of funding increases to the VA, have gone to administration and salary increases......not the Veterans.

June 02 2014 at 5:35 PM Report abuse -1 rate up rate down Reply
mac2jr

Medical futures of our people are also a future problem in that we are expected in about 40 to 60 years to be living to age 115 or more, and if Corporate America continues to 'Fire' employees at younger and younger ages, now at about age 59 or less, then we will have to come up with a method of supporting those over the age of 59 for more than 56 years.

Perhaps instead of Social Security we should be putting $100,000 or more in a Government (state or local or federal) Construction Bond at Birth that can only be drawn upon at the age one can no longer work or find work after the age of 59... If inflation and private industry actually works as many say it does, then the investment will pay for itself and provide for the decades of retirement that he or she will incure.

June 02 2014 at 5:14 PM Report abuse rate up rate down Reply