30% Of Americans Still Living Week-to-Week; 47 Million 'Worse Off' Now Than Before Recession

MBA NewsLink Staff

June 14, 2019


Despite a broad economic expansion following the Great Recession, lack of savings paints a disconcerting picture about financial preparedness in America, said Northwestern Mutual, Milwaukee, with nearly a third of U.S. adults within three paychecks of needing to either borrow money or skip paying one or more bills.

And a separate study from Bankrate.com, New York, said 47 million Americans who were adults when the recession started in December 2007 say their overall financial situation is worse now than it was before it hit. Another one in four say they are doing about the same now as they were prior to the start of the recession.

Northwestern's 2019 Planning & Progress Study reported more than a fifth (22%) of Americans have less than $5,000 saved for retirement, while nearly half of working adults (46%) expect to work past the traditional retirement age of 65.

"People are skating on some very thin ice financially," said Emily Holbrook, senior director of planning with Northwestern Mutual. "While there are some signs of improvement since last year we still have a long way to go, and for most Americans there's no way to get there without a plan."

Other study findings:

--While more than one in five (22%) Americans have less than $5,000 saved for retirement, and 15% have no retirement savings at all, that's actually an improvement from 2018 when 31% had less than $5,000 saved and 21% had no retirement savings at all.

--While 10,000 Baby Boomers turn 65 every day, nearly one in five (17%) have less than $5,000 saved for retirement and 20% have less than $5,000 in personal savings. For Gen X, the numbers are greater--21% have less than $5,000 saved for retirement and 22% have less than $5,000 in personal savings.

--More than half (56%) of Americans don't know how much they'll need to retire comfortably.

--More than a fifth (22%) of non-retired U.S. adults believe it is not at all likely that Social Security will be available when they retire.

--On average, people think there is a 45% chance they will outlive their savings, and 41% have taken no steps to address it.

The study also said 46% of Americans expect to work past the traditional retirement age of 65. Nearly one out of five Baby Boomers (18%) and an equal percentage of Generation X (18%) expect to work even longer--past the age of 74. However, more than half (53%) of Americans who expect to work past age 65 say it will be by choice, compared to 47% who say it will be out of necessity.

Additionally, the study did report some improvements. It said 71% feel financially secure today vs. only 47% who felt financially secure in 2009. Compared to 10 years ago, 73% say their financial situation is better now; 88% say their financial habits are better; 74% are carrying less debt; 74% are more frugal; and 66% have set specific goals for the next 5-10 years, while only 57% said the same in 2009

Holbrook said despite the stronger financial footing, Americans have gotten substantially more cautious over the past 10 years. Much of that can be pegged back to the financial crisis of 2008, which she said left a deep behavioral mark on people's lives which extends well beyond finances.

"In many ways, 2009 feels like ancient history, but the imprint that period left is still visible in the data we collected in 2019," Holbrook said.

As a result, overall optimism has flattened. Among adults age 35 and older, the study found just over half (54%) agree the American Dream is attainable for most Americans, down slightly from the 58% who said the same in 2009. Nearly three-quarters (73%) believe a person can accomplish anything if they put their mind to it, but confidence was higher in 2009 when 82% said the same. Two-thirds (65%) believe they will get to where they want to be in life, which is flat to the 65% who said the same in 2009. A little more than one-third (36%) believe the U.S. is generally headed in the right direction, which is an uptick from the 27% who said the same in 2009. But 44% feel the U.S. is not headed in the right direction, which is slightly more than the 40% who said the same 10 years ago.

"There's a real mix of optimism and pessimism in these numbers," Holbrook said. "At the individual level, people continue to believe in themselves, but they're more cynical about the broader questions such as the direction of the country and the attainability of the American Dream. That's very similar to what we heard 10 years ago, which is interesting given the uptick in financial stability we've seen at both the national and individual levels. It's very likely connected to the same rise in risk-aversion and caution we've seen in other parts of the study."

Meanwhile, the Bankrate survey said nearly have of Americans born before 1990 said they have seen no financial improvement since the Recession.

The Bankrate survey reported 66% of those who still live in the same home that they did before the recession started in December 2007 say their home is worth more now than it was pre-recession. Another 23% say the value is about the same as it was back then and 11% say their home is worth less.

Additionally, the survey said 46% of homeowners at the time of the recession say their home lost value from December 2007 to June 2009. More than one in five (21%) who said their home lost value during the recession say that same house has never regained its pre-recession worth. One in 10 whose home value depreciated during the recession say they no longer want to own a home as a result and 23% say they now have a more affordable home/mortgage.

The survey also reported 47 million (23%) Americans who were adults when the recession started in December 2007 say their overall financial situation is worse now than it was before it hit. Another one in four say they are doing about the same now as they were prior to the start of the recession. Just 51% say their overall financial situation is better compared to before the 2007 recession, and several groups are more prone to say that things are worse now than they were back then.

Other findings:

--Twenty-six percent of those who were negatively impacted by the recession say they're doing worse now, compared to 14% who were not negatively impacted.

--Twenty-seven percent of women say their overall financial situation is worse now, compared to 19% of men.

--Those with lower income and education levels are more likely to say they are doing worse now than before the recession.

--Despite the largely positive gains associated with the job market and economic growth, most Americans report failing to experience higher pay compared to over a decade ago. Fewer than half (46%) of those Americans who were adults at the time of the recession say their wages/salary are better than before the recession began.

--More than one-third (36%) of those who say they or their partner lost a job during the recession claim their pay is worse now than it was before the recession.

--Twenty-six percent of Baby Boomers (ages 55-73) say their pay is worse now, compared to 16% of Millennials who were adults in 2007 (those aged 29-38).

--Women, lower earners and those with a High School diploma or less are all more likely than their counterparts to indicate a decline from their pre-recession income.

"The echoes of the Great Recession remain very present in the financial lives of many Americans, despite the improvement in the broader economy," said Mark Hamrick, senior economic analyst with Bankrate.com. "While some have managed to prosper in the decade since, there are still tens of millions who are struggling to even get back to where they were before the economy took a turn for the worse."

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