This article is part of the Missouri Saves Program
Financial Strategies for Later Life
Cynthia E. Crawford, Ph.D., Consumer & Family Economics Specialist, University of Missouri Extension
Overall we've become a nation of spenders, not savers. The statistics from the Survey of Consumer Finances through the Federal Reserve Board on Retirement Savings of American Households are startling.
In her report, published in 2000, Catherine P. Montalto found that
median household retirement assets is just $24,000.
Sixty-two percent of households have some retirement
assets. That means that 37% of households have no
retirement assets. Many people that look forward to a
pleasant retirement are just wishing - they're not
actively planning for that goal.
A big mistake that some workers make is not participating in workplace
retirement plans where the employer offers some matching
funds for savings. Some choose not to participate while
others don't save enough to get the full advantage of
employer match. These employees are basically saying no
to free money.
Changing jobs? The most serious mistake participating workers make is
to spend their retirement savings when they change jobs.
Those with less than $5,000 in a plan are particularly
likely to spend the money rather than roll it over into
another retirement savings plan. Not only do they end up
having to pay taxes on the money they withdrew, but they
lost the benefit of interest compounding.
About one-fifth of workers - often those who earn the smallest incomes or work for small employers - do not have access to a pension, 401 (k), or other retirement plan. If your employer doesn't have a plan it may be up to you to set up your own retirement plan. Look for savings instruments with positive tax implications such as a traditional or Roth Individual Retirement Account (IRA) or a U.S. Savings Bond.
Last update: Tuesday, May 05, 2009