Dreams of comfortable retirement are slipping away, and Americans seem to be responding by hanging onto their jobs a bit longer. This sentiment would support a recent Quicken study on savings and debt, which found that Americans fear growing older — that is, reaching retirement age — and are thus extending their work-lives to mitigate increased credit card debt, unexpected emergencies and not saving enough for the future.
According to the study, released yesterday by Intuit, the makers of Quicken financial management software, most financially related stress traces back to people not saving enough or properly managing their debt.
Credit card debt
Americans have tried to reign in their credit card spending with U.S. credit card debt reportedly hitting a decade low of $672 billion in the second quarter of 2012, down 22 percent from a peak of $866 billion in 2008. Nevertheless, of those who are still using debt for whatever reason, 1 in 5 continues to increase their debt levels, and a majority (53 percent) cannot manage to lower the total.
Other findings from this study include that people frequently work against the goal of reigning in debt and overall unreasonable spending:
- Nearly one in three Americans admit to spending when they know they don’t have the money in the bank.
- 31 percent pay bills with a credit card due to lack of necessary funds.
- 16 percent incur late fees; one quarter pay late each month.
Credit cards are useful when managed wisely, but can quickly result in a dangerous, downward spiral crushing people under their burdens.
Preparing for an emergency
With Sandy barely receding from our shores and even our homes, causing overwhelming gas shortages and power outages, many people are facing the reality of what it’s like to fund an emergency recovery. In some areas entire houses were literally washed out to sea and off the map, and insurance and FEMA will likely not cover everything. In that case, an emergency fund has to be in place for the short term. While experts argue on dollar amounts, time frames and how best to fund an emergency account, all agree it is a vital component of your finances.
However, the study shows that while more than half knew about the importance of the stash, more than one-third have no emergency savings at all. This money will likely need to be accessed at a moment’s notice and three to six months of living funds could really save a lot of stress in a disaster.
Saving for retirement, whenever that may be
A recent NY Times article revealed that the number of people working past the age of 65 is the highest it has ever been. Proportionally, especially since so many people lost their jobs since the recession, the percentage of workers over the traditional retirement age of 65 has reached a new peak, while joblessness keeps apace.
This could also be because of a severe lack of adequate savings. Some 40 percent blame their non-retirement working track on a lack of funds and an inability to save. More than 25 percent reported they have no retirement savings at all. As the old financial model is gradually disposed of with CD and savings rates so low it is not really worth the investment, new long-term harbors for our money need to be devised.