Is the Middle Class Ready to Retire?

by John Brummitt

Middle class workers (42-50% of the population) are the backbone of the U.S. economy. So, it is interesting to see how they “stack up” when it comes to retirement preparation, based on a recent study from Wells Fargo.

Consider the number one priority of the middle class as a whole: 59% percent indicate that paying monthly bills is their top financial concern. Nearly 60% of middle class workers struggle with debt, and trends suggest this debt will increase in coming years.

Saving for retirement comes in a distant second, the top financial concern for only 13% of the middle class. Four in ten workers say they can’t save and pay the bills. Almost half of middle class workers do not think they will have enough saved to retire and plan to work into their 80s. This number increases every year.

It is somewhat depressing to see increasing debt and decreasing savings for the middle class, but all is not lost. Twenty-nine percent of middle class workers are confident they will have enough to retire. What makes this 29% different from the rest? They have a written plan to help them stay on track in paying off debt and saving for retirement. Those with a written plan save three times more than those with no written plan. Sounds like it is important to have a written plan!

You might be thinking, “Yeah, but that 29% is the older population in the middle class getting ready for retirement.” You would be wrong. According to the survey, workers in their 30s are the ones who have really grasped this concept and are using it to their advantage. These 30-somethings have the most realistic outlook about retirement. They estimate that median retirement savings should be $500,000 to retire successfully, almost $300,000 more than what people in their 40s and older estimate they will need.

If you are in your 30s, don’t start patting yourself on the back just yet. While the largest number of written-plan savers is from the Generation-X demographic, around 14% have also withdrawn these funds early for nonretirement purposes, according to a study by the Insured Retirement Institute. It is not enough to have a written plan. You must follow it and understand the importance of letting retirement funds grow over time. This is crucial for a successful retirement.

Sure, paying the bills should be your first priority, but retirement savings should be a close second, since this is how you will pay your bills in the future. Even with advances in medicine, working into your 80s may not be a viable option, so follow these simple steps to savings:

• Develop a plan for saving early in your working career.
  

• Set funds aside in a retirement account from every paycheck.
  

• Leave the money there until you retire.
  

This simple formula for successful saving is one of the hardest things to follow, especially when “life happens” and you need money for an immediate crisis. Start today, and make sure that you are ready to retire when the time comes.

About the Writer: John Brummitt graduated in 2011 with an MBA from Tennessee Tech University. A 2004 graduate of Welch College, he has been with the Board of Retirement since the spring of 2006.