Four in ten Americans can’t cover emergency expenses, according to a new report from the Federal Reserve Board. Lack of financial preparation is wreaking havoc on American households, especially those approaching, or in, retirement.
The financial situation of American households has improved during the past five years, according to the Economic Well-Being of U.S. Households report. The report shows that in 2017, 74 percent of adults reported feeling at least “okay” financially, an increase of 10 percentage points from the first survey four years earlier. However, the majority of Americans say they are “unprepared” for any kind of financial emergency, whether it’s medical, car-related or another expense over $400.
The study was drawn from the Board’s fifth annual Survey of Household Economics and Decisionmaking, which looks at the economic health of Americans. The survey of 12,000 people across the U.S. examined the following economic factors:
One-third of the people surved marked they felt they are “living comfortably,” and another 40 percent felt they are “doing okay” when it comes to their finances. However, a large portion of people are struggling, with notable differences across race, ethnicity, education levels and geography. The majority of hardship comes from the following situations:
Repaying debts and paying for addictions make saving difficult, making emergency expenses and retirement savings nearly impossible for many Americans. Greg McBride, Chief Financial Analyst at Bankrate.com, comments:
“The finding that four-in-ten adults couldn’t cover an unexpected $400 expense without selling something or borrowing money is troubling. Nothing is more fundamental to achieving financial stability than having savings that can be drawn upon when the unexpected occurs.”
The report was eye-opening as it showed that fewer than 40 percent of adults think their retirement savings are on track and 25 percent of Americans have no retirement savings — which is scary with today’s “silver tsunami” of retiring baby boomers.
McBride mentions one of the main reasons Americans are so unprepared is because they don’t have a retirement plan strategy or overall education about retirement planning. Days of pensions and company-sponsored retirement plans are past and people need to be proactive. Also, many people have part-time jobs that don’t offer benefits. McBride comments:
“The burden is on us as individuals to save for our retirement. Take control of your financial destiny by contributing to an employer-sponsored retirement plan such as a 401(k) via payroll deduction, or arrange automatic monthly transfers from your bank account into an IRA.”
Setting up automatic direct deposits from a paycheck to a savings or investment account that can build not only a financial cushion, but also compound interest. Connecting with an expert financial advisor can help guide you in the financial marketplace as to what investments make sense for your unique situation. Consider expert financial help today to get your retirement planning on track.
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