By Jonathan Soyka
Money and Investing Writer
One of the staples of the American dream is a happy and comfortable retirement; unfortunately, most Americans are falling short when it comes to retirement savings.
The baby boomer generation is made up of Americans who are currently age 53 to age 71. This generation of Americans has already started to enter retirement age, and although the United States economy has shown promising signs of recovery, the Great Recession is still weighing heavily on many of these people.
According to a study done by the Economic Policy Institute, “The State of American Retirement,” nearly half of families have no retirement account savings at all. This is a staggering revelation that brings raise to another harsh reality about American retirement savings, inequality.
The EPI portrays retirement savings inequality by the gap between the mean American retirement savings and the median American retirement savings. Researchers report that in 2013, the mean American retirement savings was $95,776.
This amount seems like a strong value, however, the median American retirement savings was found to be a mere $5,000.
This means that although the average value of retirement savings accounts was found to be $95,776, families that actually fall in the 50th percentile had accrued $90,776 less or $5,000.The reality about retirement savings is a story that is all too familiar. The elite and wealthy members of society who sit at the top have continued to gain a larger share of total wealth compared to the average citizen.
This effect will continue to grow as the American stock indexes continue to flourish. If the average American does not have investments in the stock market then the recent rallies serve them no purpose.
Whereas the people who already hold a large amount of savings and investment are seeing their assets continue to rise with a booming economy.Although it is true that a flourishing economy will eventually yield all savings and retirement accounts to increase in the years to come, there is still a gap between retirement savings before the Great Recession and after it. The EPI reports a mean American retirement savings balance of $101,548 in 2007, compared to $95,776 in 2013.
Fortunately, retirement savings inequality and the diminished value lost to the Great Recession are not the whole picture. The Great Recession was the worst financial crisis since the Great Depression and now that the dust is settling, something incredible is starting to emerge, the financial mindset of generation Y.
The generation of Americans that grew up during the financial crisis has been heavily criticized and scrutinized. They are called millennials and they are Americans who were born between 1982 and 2002.
Lazy, entitled, impatient and lacking respect for authority are some of the defining criticisms of generation Y. Yet, this generation has also been dubbed, “The next great generation,” their financial minds and tendencies developed during the Great Recession so they have a deeper respect for savings. Compared to other generations of Americans, Millennials have the highest savings rate.
According to a survey posted by Bankrate.com, that surveyed 1,000 people about their savings habits, millennials were reported to have a higher savings rate than any of their counterparts. 191 people surveyed ages 18-29 reported saving 6-10 percent of their income, compared to 169 people aged 30-39 and only 144 people aged 40-49.
These savings habits portray the focus generation Y has on retirement comfort. As newer generations are born it is imperative that they learn proper savings habits from a young age. Even though the inequality gap for retirement savings is an issue that must be addressed, the future of America continues to shine brighter and brighter as the millennial generation continues to learn and grow.
In order to be able to retire comfortably, Americans must begin to save more money now and instill proper savings habits upon the youth.
A version of this article appeared in the Tuesday, February 21st, 2017 print edition.
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