The latest report on the Survey of Economic Well-Being of U.S. Households for 2017 was recently released by everyone’s favorite whipping boy, the Federal Reserve, and it contained some alarming revelations, especially regarding peoples’ lack of preparedness for retirement.
The annual survey is designed to better understand how U.S. adults feel about the state of their finances. About 12,000 people received the survey near the end of 2017.
Real Investment Advice put together a quick breakdown of the positive and negative highlights:
Positive Highlights
- When asked about their finances, 74 percent of adults said they were either doing okay or living comfortably in 2017—over 10 percentage points more than in the first survey in 2013.
- Individuals of all education levels have shared in the improvement over the past five years, though the more educated still report greater well-being than those less educated.
- Less than one-fifth of non-retired adults are pessimistic about their future employment opportunities, although pessimism is greater among those looking for work or working part time for economic reasons.
- Slightly over 7 in 10 adults keep track of their spending and over half follow a budget or spending plan.
- The 7 percent of adults in 2017 who find it difficult to get by financially is about half of what was seen in 2013.This decline in financial hardship is consistent with the decline in the national unemployment rate over this period.
- Nearly three-quarters of adults say they are either living comfortably (33 percent) or doing okay (40 percent), when asked to describe how they are managing financially. The share who are at least managing okay has risen consistently over the past five years and is over 10 percentage points higher than in 2013 when this survey began.
Areas of Concern or Importance
- About one-fifth of adults (and one-quarter of white adults) personally know someone who has been addicted to opioids. Exposure to opioid addiction was much more common among whites—at all education levels—than minorities. Those who have been exposed to addiction have somewhat less favorable assessments of economic conditions than those who have not been exposed.
- Three in 10 adults participated in the gig economy in 2017. This is up slightly from 2016 due to an increase in gig activities that are not computer or internet-based, such as child care or house cleaning.
- Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money. This is an improvement from half of adults in 2013 being ill-prepared for such an expense.
- Over one-fourth of adults skipped necessary medical care in 2017 due to being unable to afford the cost.
- Less than two-fifths of non-retired adults think that their retirement savings are on track, and one fourth have no retirement savings or pension whatsoever.
- Older adults are more likely to have retirement savings and to view their savings as on track than younger adults.Nevertheless, even among non-retirees in their 50s and 60s, one in eight lacks any retirement savings and less than half think their retirement savings are on track.
- Three-fifths of non-retirees with self-directed retirement savings accounts, such as a 401(k) or IRA, have little or no comfort in managing their investments.
- Many adults are struggling to save for retirement, and less than two-fifths feel that they are on track with their savings. While preparedness for retirement increases with age, concerns about inadequate savings are still common for those near retirement age.
- On average, people answer fewer than three out of five basic financial literacy questions correctly, with lower scores among those who are less comfortable managing their retirement savings.
- Approximately 1 in 10 adults receive some form of financial support from someone living outside of their home.Nearly one-quarter of young adults received such support during 2017. Among young adults with incomes under $40,000, over one third receive some support from outside their home. Conversely, older adults are more likely to provide financial support to individuals outside their home— peaking at 23 percent of adults in their 50s.
- One-fifth of those with education debt were behind on their payments. Individuals who did not complete their degree or who attended a for-profit institution are more likely to struggle with repayment than those who took on large amounts of debt but completed a degree from a public or not-for-profit institution.
- Women of all education levels and less-educated men are less comfortable managing their retirement investments.
Lessons To Be Learned
- The financial industry has done a horrible job at educating consumers about the true nature of stocks and personal finance in general. I mean, not even the Fed can’t get it right when it comes to understanding the long-term inherent risk of the stock market. Bless their hearts. The entire industry pushes the myth that stocks are safe in the long run and the Federal Reserve supports it.
- Financial vulnerability remains a factor for many U.S. households. Our culture of spending is hazardous especially now as borrowing costs increase.
- Households must establish financial boundaries and learn how to say “no,” more often to family and friends who require financial support.