Retiring? Saving for retirement? Here's some good news.
Are 90% of articles written about retirement pessimistic? Sometimes it seems that way. Repeatedly, we are reminded that most baby boomers haven't saved enough for the future.
There's no denying
this, but the media is giving short shrift to other, more positive
developments that may be improving the economic and retirement outlook
for many Americans. Here are a few worth noting.
401(k) savings have rebounded tremendously from Great Recession lows.
For older savers, the recovery is especially pronounced. Fidelity just
released its latest Quarterly Retirement Snapshot. Looking over account
data from its retirement plans, it says that the average Q3 401(k)
balance for employees who had contributed to their accounts for at least
ten straight years was $241,800, compared to just $130,700 in Q1 2009
when the recession was ending. That's an 85% increase.1,2
Data from
Principal Financial Group points out similar gains. Earlier this year,
it noted that the average balance in its 401(k) plans had risen nearly
70% since the market trough of 2008. Also, new research from the
Investment Company Institute shows that if an employee made consistent
per-paycheck contributions to a 401(k) during 2007-12, the balance on
such accounts increased an average of 6.8% annually (and this is not
even considering the great year the market had in 2013).3,4
Incomes finally seem to be rising.
This recovery has been marked by a lack of wage growth - a factor that
has made it shallower than many analysts expected. That may be changing
at last, as the Census Bureau's employment cost index increased 0.7% for
Q2. That is solid, in fact it is the biggest quarterly boost seen in
six years.4
Hiring has picked up in some crucial industries. ADP's
latest employment change report shows October payrolls swelling by
28,000 workers in the construction industry and 15,000 in the factory
sector. There were 5,000 new hires at businesses with more than 500
workers, 102,000 new hires at small firms and 122,000 fresh hires at
medium-sized companies.5
Americans aren't living on margin as much as they once were. In 2008, total U.S. credit card debt reached $866 billion. In 2013, that fell to $660 billion.4
Fewer Americans are
letting consumer debt linger. The Federal Reserve Bank of New York says
the latest debt delinquency rates are the lowest in more than six years -
the 90-day-plus delinquency rate was at 4.8% in Q2. During 2010, it
reached 8.7%. Additionally, overall household debt declined $18 billion
in the second quarter, and mortgage debt decreased $69 billion.4,6
Medicare spending didn't rise in the last federal budget year. It
was flat for FY 2012-13 and while that may not hold true in successive
years, it is certainly interesting. According to Medicare actuaries,
fewer Medicare recipients than forecast went to hospitals for care
during that budget year, and many of those who did used cheaper
services. (Per-beneficiary Part A spending fell for a second consecutive
year in FY 2012-13; enrollment in Part C plans expanded.)7
This lack of an
annual spending increase led Medicare's trustees to adjust their
forecast of when Medicare's main trust fund might run dry. It is now
projected to do so in 2030, four years later than previously estimated.7
Baby boomers may be in for a more enjoyable retirement than the media assumes. This
summer, T. Rowe Price surveyed recent U.S. retirees and found that 89%
were somewhat or very satisfied with their quality of life. This level
of retirement satisfaction surfaced even though the average respondent
was now living on 66% of his or her pre-retirement income, with 85% of
respondents saying that they didn't require as much money as they once
did to maintain their standard of living.8
There you have it: a roundup of good news about the economy and the outlook for retirement. Stay positive and plan actively for your future.
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Citations.
1 -
istockanalyst.com/business/news/7063858/fidelity-s-quarterly-retirement-snapshot-average-balances-increase-year-over-year-record-contributions
[4/29/14]
2 - blogs.marketwatch.com/encore/2014/04/29/older-savers-pull-ahead-in-the-401k-race/tab/print/ [4/29/14]
3 - blogs.marketwatch.com/encore/2014/06/03/survey-401k-savings-rates-spiked-in-2013/ [6/3/14]
4 - bloomberg.com/news/2014-08-05/how-to-stay-optimistic-about-retirement-read-this-article.html [8/5/14]
5 - thestreet.com/story/12941709/1/adp-report-shows-hiring-picking-up-job-growth-in-right-places.html/ [11/5/14]
6 - newyorkfed.org/microeconomics/hhdc.html#2014/q2 [11/4/14]
7 - bloomberg.com/news/2014-07-28/medicare-s-financial-condition-improves-on-reduced-costs.html [7/28/14]
8 - news.investors.com/investing/073014-711065-people-adjust-to-lower-income-in-retirement.htm [7/30/14]
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Sincerely,
Bill Morrissey, CFP® and Tammy Prouty, CFP®
Sound Financial Planning, Inc.
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