Economic Perspective: Coming Up Short on Savings

MARY WALDEN:

“Today’s program looks at coming up short on retirement savings. Mike, a recent survey showed many households fall far short of adequately saving for their retirement. Give us the numbers, and possible solutions.”

MIKE WALDEN:

“Well we have some new numbers from the survey of consumer finances. This is a survey done every few years by the Federal Reserve, and it finds right now that the average person, and by average we’re looking in the age of somewhere in their 40s, has saved only $25,000 for retirement. That’s very, very low.”

“Now of course the majority of people are going to be covered by Social Security, but you have to remember that Social Security, even when it was set up in the 1930s, was never intended to cover someone’s total retirement. It’s a supplement.”

“Also there are issues with Social Security in terms of whether it will be able to cover its obligations in 20 or 30 years. So I think the bottom line here is we do have a shortfall in what people are saving for retirement, and people ought to look at the various options they have. There are tax-benefitted retirement savings plans, things like: IRAs, 401(k) plans.”

“There is some legislation now being considered in Congress that would actually mandate employers to help their workers save for retirement. So I do think this does have to become more of a priority for more people, and one personal finance recommendation has always been when you’re looking at how to use your paycheck always pay yourself first in terms of savings.”

Mike Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in
the Department of Agricultural and Resource Economics at North Carolina State University who
teaches and writes on personal finance, economic outlook and public policy.