Americans are getting worse at saving for retirement


Main Street Americans have been bailing out of the stock market for a year, and bonds for even longer, and a new report from Fidelity Investments warns that it’s hurting their long-term retirement prospects.

Investors have sold $200 billion worth of stock mutual funds and exchange-traded funds since April of 2022, according to the latest data from the fund industry’s trade association, the Investment Company Institute.

That contrasts with a huge $400 billion surge into those stock funds during the boom of 2021 and early into 2022.

(The numbers show the public also pulled $200 billion from bond funds during 2022, though they have been buying them again this year, and have pulled $21 billion from “commodity” funds, such as exchange-traded funds that own gold.)

As so often, the public is buying stocks high and selling them low—the exact opposite of how you’re supposed to do it. No wonder studies show that over the long-term ordinary investors in the stock market have ended up earning way less than they would if they had just left their money alone.

And this is one of the reasons Fidelity gives for the news that average retirement readiness is getting worse, not better. The average household is on track only to have 78% of its needed income in retirement, a five-point slump since 2020, the investment giant warns.

Just over a third, 34%, are at serious risk of not being able to cover essential retirement expenses, based on their savings rates and investment strategies, the company warns. That’s up from 28% two years ago. The biggest decline is among millennials, age 27 to 42.

The reasons?

“People are saving less and investing more conservatively,” it says. They are putting less money into investments, and investing less of it in the stock market. The percentage of investments being held in stocks, as opposed to bonds and cash, fell slightly during the year. But the real change was in the amount being invested at all.

Boomers on average are saving 9.7% of their incomes, down from 11.7% during the pandemic-fueled boom year of 2020. Millennials are saving 9.5%, down from 9.7%.

Meanwhile Generation X, meaning those born between 1965 and 1980, have hiked their savings rates from 9.7% to 11.1%.  

The survey was conducted in August and September of last year.

Fidelity’s helpful advice for those behind the 8 ball is that those who are younger should be investing more in stocks, which are more volatile but offer superior long-term returns, those who are in later middle age should be saving more, and those in their 50s and 60s may need to think about working longer, and taking Social Security later.

Meanwhile a new report from the Employee Benefit Research Institute, based on Investment Company Institute data, highlights anew the benefits of just sticking with your savings plan. 

Consistent participants in 401(k), meaning those who held a 401(k) plan at the end of each year from 2016 to 2020, saw big gains, it calculates: An average jump in value of 57% a year for those in their 20s, 22% for those in their 40s and 15% a year for those in their 60s. There again, those were boom years.




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