Americans Are Teetering on Their Own Fiscal Cliff

As our Federal government totters uncertainly toward what has been called a “fiscal cliff,” many Americans find themselves in the same precarious situation with little hope in sight. Americans are teetering on their own fiscal cliff and many could find themselves retiring in poverty.

Americans are teetering on their own fiscal cliff

Laurie Nordquist, co-head of Wells’ Institutional Retirement and Trust unit reported:

…the number of middle class investors who said their biggest financial worry was paying the bills jumped to 52% this year, up from 37% last year. The phone survey canvassed 1,000 middle class Americans, aged 25 to 75, from July to September. Fifty-three percent of middle class investors surveyed said they are not confident they will have saved enough to fund the life they want in retirement, up from 42% in 2011.

More and more of us are having to deal with hard economic realities that leave little or no money to save for retirement. To make matters worse, we are underestimating how well we’re doing in saving for retirement.

They still underestimate how far behind they are on the path toward meeting their retirement goals. One-third of those surveyed believe they’ll need less than half of their pre-retirement income to live on after leaving the workforce. With the median household income just over $50,000 last year, that works out to $25,000 – close to the poverty line for a family of four.

Conventional wisdom suggests cutting back wherever possible and saving more. There’s nothing wrong with that, but conventional wisdom also suggests:

Advisors who work with 401(k) plan sponsors can help design plans to boost worker participation, using methods like automatic enrollment, and choose good investments. Nordquist and Ready said they see 401(k) plans as a real growth area for advisors.

And that’s not a good idea.

Even if many of us work until we’re 80, that only postpones the potential collapse of stock prices as millions of boomers are forced to start taking 401(k) disbursements at age 70 1/2. Remember, all those retirement funds are invested in stocks and mutual funds which have to be sold to fund payouts to retirees and buyers are essential to that transaction.

More sellers than buyers will drive the price of the stocks — and the value of the retirement accounts — down, perhaps dramatically. Americans are teetering on their own fiscal cliff, some of it of our own making, but much of it foisted upon us by employers and the government.

Click here to read more about how Americans are teetering on their own fiscal cliff.

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