24/7 Wall St.

America’s role in the world as a nation of financial risk takers does not appear to be eroding. The Employee Benefit Research Association has released the results of it 20th annual Retirement Confidence Survey. The most stunning number in the report is that 27% of American workers have less that $1,000 in savings. The percentage of workers very confident about having enough money for a comfortable retirement remains steady at 16%, which is statistically equivalent to the 20-year low of 13% measured in 2009.  The poll was done among 1,153 respondents. 

The total number of people who are well prepared to retire eroded. Fewer workers report that they and/or their spouse have saved for retirement (69% down from 75% in 2009) 

The situation is not likely to get better. The 10% of Americans who are unemployed and 17% who are unemployed, underemployed or not looking for work are not savers. The balance of the American workforce faces the prospect of being out of work in the future or of working at companies where they are expected to do more work to increase productivity. This increasing work effort is matched by increased wages. The real buying power of American consumers has slipped for a decade and that means savings power has dropped as well. 

The other tremendous sea change in the savings rate is caused by the drop in home prices. Over 11 million people live in homes which are underwater, where their mortgage is greater than the value of their homes. In 2005 and 2006 millions of Americans could take equity out of the houses to save for retirement or could at least assume that the sale of their homes when they did retire would yield a net egg. 

The savings rate many be bad now, but it is likely to get worse, at least short term. 

Douglas A. McIntrye