Americans’ Biggest Financial Worry is: Lack of Retirement Funds

More Americans are worried about not having enough money for retirement (66%) than are worried about seven other financial matters Gallup asked about. Majorities of Americans, however, are also very or moderately worried about not being able to pay medical costs for a serious illness or accident and about not being able to maintain their standard of living.

For many Americans, the golden years are quickly taking on a tin-like hue. After a vicious decade of no growth for the stock market, including two 401(k)-eating bear markets and persistently sky-high unemployment, more Americans are finding themselves in their 50s and 60s with practically no money saved for retirement.

But financial stress isn’t limited to the cost of filling the gas tank, according to Gallup. In fact, when Gallup asked around 1,000 adults this April how they felt about some of the most common financial worries, it was the least immediate concern that topped the list: retirement.

While all kinds of debt are posing problems for people, including auto and credit card debt, mortgages are the “big problem,” as 39% of households with heads aged 60 through 64 had primary mortgages in 2010, and 20% had secondary mortgages, including home-equity lines, according to research group Strategic Business Insights’ Macro Monitor.

Only a few people who say they are “very” worried about retirement hold optimistic expectations. Note that just 18% of this group expects to have enough money in retirement. The percentage jumps to 64% among those who are “somewhat” worried, and to over 80% among those who are “not too” or “not at all” worried.

Expectations about having enough money are also highly related to both age and gender. Men are more optimistic than women, and younger people are more optimistic than their elders, that they will have enough money in retirement.

Worry About Standard of Living at a New High

The 58% of Americans who are worried — and the 27% who are “very worried” — about not being able to maintain their current standard of living is the highest on record.

Americans’ concerns about their standard of living initially spiked during the recession and have remained above pre-recession levels before reaching the new high this year.

Saving early and often is the way Americans typically fund their retirement, the biggest financial obligation most will face. Pensions for many have become a thing of the past. Retirement needs vary greatly, but the numbers are universally huge. A 65-year-old retiree would need to have $1.1 million saved to draw $50,000 a year in inflation-adjusted dollars, assuming 3% inflation and a 5% annual return from investments. That’s if the investor is lucky enough to get a 5% return, which, given the flat-line returns of stocks the last decade, might give some pause.

Meanwhile, data show that many workers nearing retirement age have saved nowhere near the amount they need, and many have very little savings. More than half of all workers, 56%, say they have less than $25,000 in savings, according to a survey by the Employee Benefit Research Institute.

And the strain is already starting to show up as more American actually retire. More than half of retirees, 54%, report they have less than $25,000 saved. That’s up dramatically from 2006, when 42% said they had less than that.

The typical American household nearing retirement with a 401(k) retirement account has less than one-quarter of what it needs in that account to maintain its standard of living in retirement, a previous WSJ article revealed. Further, 80% of households with heads in their early 60s did not have enough savings in 2008 to pay off debts without tapping into their retirement accounts, WSJ reports, citing Boston College economist Anthony Webb.

Bottom Line

In general, the recession had a significant effect on Americans’ personal financial worries. More Americans are worried now about each of the eight items Gallup tracks than were so in the early 2000s. While Americans’ concerns about being able to maintain their standard of living reached a new high this year, their predominant financial worry continues to be about being able to fund their retirement.

Make a plan

Joking aside, it’s critical for people in their 50s and 60s to recognize immediately the severity of the situation, Redmond says. Coming up with a financial plan, at least, allows people to set realistic expectations for what they need to do. There are only so many things people in this situation can do, says Redmond. The only variables most people can control are working longer, saving more or getting a higher return on their investments, he says.

Survey Methods

Results for this Gallup poll are based on telephone interviews conducted April 7-11, 2011, with a random sample of 1,077 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia, selected using random-digit-dial sampling.

For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.