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Mike Larson, Money and Markets columnist and editor of the Safe Money Report, is out this afternoon. George Lambert, an editor on the Money and Markets team, is filling in. Mike’s regular afternoon column will return on Monday.
The IRS recently announced cost-of-living adjustments affecting pension plans and other retirement-related items for tax year 2015. For example:
The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
But will those increases mean anything to many Americans? We think not. Here’s why …
A Wells Fargo survey of middle-class Americans has uncovered that the majority have only saved about $20,000 for retirement, which is down from $25,000 in 2013. The estimated need is more like $250,000.
Thirty-four percent of working middle-class adults in the U.S. are not even contributing a dime to a 401(k) plan, an IRA, or any other type of retirement savings plan, according to this recent survey which followed more than 1,000 adults between the ages of 25 and 75 with a median household income of $63,000.
Those who are putting money away for retirement say that they are currently reserving $125 every month. Fortunately most of those surveyed — about 61 percent — say that the savings is not much of a sacrifice. Thirty-eight percent say that this long-term investment is a big sacrifice.
About 55 percent, however, say that they plan to save later since they got a late start on retirement savings.
|More than half of non-retirees without access to a 401(k) plan say “it is not possible” to pay bills and “still” save for retirement.|
Wells Fargo’s director of institutional retirement, Joe Ready, says, “The main message here is people are putting off saving, and they are losing the benefit of long-term compounded earnings. Kicking the empty can down the road is going to be detrimental to their retirement security. It’s really a problem.”
The worst of it, of course, is that it is not very easy to make the kinds of changes necessary to begin putting money away for savings. However, even just a few dollars a month — in a fair-yielding retirement account — will eventually pay off the kinds of dividends necessary in retirement.
The survey also shed light on several other things: More than 30 percent of the middle class believe they will not have enough money to survive retirement. About 70 percent actually have some kind of savings plan through an employer.
On average, people with access to a 401(k) plan will save ten times more than someone who does not have one.
How have you prepared for retirement?
Are you contributing to a 401(k) or IRA? Or are you among those who are counting on Social Security for the majority of your retirement income?
And if you are retired, tell us how you put aside money during your working years. What sacrifices did you make so you could retire comfortably? Please share your experiences — positive and negative — with your fellow readers in the Money and Markets comment section.
|Our Readers Respond|
Regular columnist Mike Larson is out this week. He will be reviewing your comments upon his return and respond to as many as possible at that time.
|Other Developments of the Day|
Strange things continued to happen in regard to North Korea and the Internet. The country, which has been accused of the hacking of Sony Pictures, suffered a complete Internet outage for several hours before its links were restored Tuesday. U.S. officials said the U.S. wasn’t involved in whatever happened. Dyn, a U.S.-based company that monitors the Internet, said the reason for the outage wasn’t known — possibly a technical glitch or a hacking attack from some other source. Most observers speculate that the problems did, in fact, stem from technical matters. Few people in North Korea have access to the Internet and nearly all of the country’s web traffic must go through China’s infrastructure.
Some might say that strange things keep happening with the U.S. economy as well. The Commerce Department reported that gross domestic product grew at a 5 percent annual rate in the third quarter, the largest advance since 2003 and up from a previous estimate of 3.9 percent. Analysts had been expecting a figure closer to 4.3 percent growth. The unexpected jump followed a gain of 4.6 percent in the second quarter. The showing helped spur U.S. equities to strong early gains and sent the Dow over the 18,000 level.
Meanwhile, consumer spending also rose more than forecast in November, boosted by lower gasoline prices and indicating the most important element of the U.S. economy — the consumer — is gaining confidence. “Lower gasoline prices are providing a boost, and we haven’t even seen the full benefit yet. The job market has been a big positive,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, was quoted by Bloomberg as saying.
And as many people head into the holiday break, weather warnings are in effect and could disrupt travel plans of many Americans. The National Weather Service said that a “high-impact event” could cause major flight delays at New York airports on Christmas Eve, with heavy rain and wind gusts. Here’s the NWS summary: “A strong storm system will bring potential for severe weather, heavy rainfall and flooding, and heavy snow from the Gulf Coast to the Great Lakes through Wednesday. Severe storms are possible Tuesday across the Gulf Coast states with damaging winds as the primary threat; however, a tornado cannot be ruled out. Flash flooding is also possible across parts of the Southeast through Wednesday.”
If you’re planning to travel, the Money and Markets team hopes you have a safe and successful trip.
Remember, you can join your fellow readers by commenting on your thoughts about retirement preparation or on any other issue by clicking here.