Featured Research

from universities, journals, and other organizations

Americans don't contribute enough to retirement funds

Date:
September 30, 2013
Source:
University of Missouri-Columbia
Summary:
Researchers have found that more than 90 percent of future retirees are contributing only a minimal amount of their salaries to their retirement funds.

As the oldest of the baby boomers begin to reach retirement age, a large percentage of Americans are thinking more and more about how much money they must save to be able to retire comfortably. Also, more and more employers are changing retirement benefits from defined-benefit plans, which guarantee some level of retirement income, to defined-contribution plans, which require employees to invest on their own for retirement. All of these changes, plus the recent economic recession, have created a difficult financial environment for future retirees. Now, University of Missouri researchers have found that more than 90 percent of future retirees are contributing only a minimal amount of their salaries to their retirement funds. Rui Yao, an associate professor of personal financial planning in the College of Human Environmental Sciences at MU, says this number is quite concerning.

"With the future of social security benefits in America very much up in the air, it is crucial that people save and invest for their inevitable future retirement," Yao said. "We studied how Americans invested for retirement before and after the recent economic recession, and our findings were alarming. Americans, especially those who are middle-aged, should be saving much more than they currently are for retirement, not only for their own financial security, but for the country's sake as well."

Each year, the Internal Revenue Service (IRS) sets the amount of income a person can set aside for retirement with tax benefits, depending on whether they are younger or older than 50. For her study, Yao examined how much income people invested in retirement funds as compared to the IRS limits. She looked at data from 2004, 2007, and 2010 to get a sense of how behaviors changed before and after the economic recession. In 2004, 43 percent of adults ages 21-70 contributed 20 percent or less of the IRS maximum amount to their retirement funds. In 2007, that number grew to nearly 51 percent and by 2010, more than 90 percent of working Americans were contributing less than 20 percent of the IRS maximum to their retirement funds. Yao also found that in 2010, only 3 percent of working Americans reached the IRS maximum contribution level. Yao says this behavior is very counterproductive.

"Common sense economic theory tells us we should buy when the market is low and sell when the market is high," Yao said. "But Americans are doing the opposite of that and actually contributing less when the market is low, such as during the recent recession. If Americans truly want to maximize their retirement funds, it is critical that they contribute more during a weak economy while they can ease up a little when the markets are higher. They should also take advantage of the IRS maximum levels of contribution as much as possible."

Yao says it is important for financial advisors and employers to educate their clients and employees on the importance of contributing higher amounts during poor economic times. Yao's study was published in the Family and Consumer Sciences Research Journal. She also won the AARP Public Policy Institute's Financial Services and the Older Consumer Award for her work on this study.


Story Source:

The above story is based on materials provided by University of Missouri-Columbia. Note: Materials may be edited for content and length.


Journal Reference:

  1. Rui Yao, Jie Ying, Lada Micheas. Determinants of Defined Contribution Plan Deferral. Family and Consumer Sciences Research Journal, 2013; 42 (1): 55 DOI: 10.1111/fcsr.12038

Cite This Page:

University of Missouri-Columbia. "Americans don't contribute enough to retirement funds." ScienceDaily. ScienceDaily, 30 September 2013. <www.sciencedaily.com/releases/2013/09/130930200714.htm>.
University of Missouri-Columbia. (2013, September 30). Americans don't contribute enough to retirement funds. ScienceDaily. Retrieved April 16, 2014 from www.sciencedaily.com/releases/2013/09/130930200714.htm
University of Missouri-Columbia. "Americans don't contribute enough to retirement funds." ScienceDaily. www.sciencedaily.com/releases/2013/09/130930200714.htm (accessed April 16, 2014).

Share This



More Science & Society News

Wednesday, April 16, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Are School Dress Codes Too Strict?

Are School Dress Codes Too Strict?

AP (Apr. 16, 2014) Pushing the limits on style and self-expression is a rite of passage for teens and even younger kids. How far should schools go with their dress codes? The courts have sided with schools in an era when school safety is paramount. (April 16) Video provided by AP
Powered by NewsLook.com
Could Even Casual Marijuana Use Alter Your Brain?

Could Even Casual Marijuana Use Alter Your Brain?

Newsy (Apr. 16, 2014) A new study conducted by researchers at Northwestern and Harvard suggests even casual marijuana use can alter your brain. Video provided by Newsy
Powered by NewsLook.com
NYPD Ends Muslim Surveillance Program

NYPD Ends Muslim Surveillance Program

AP (Apr. 15, 2014) The New York City Police Department has ended a program that once kept tabs on the city's muslim population. (April 15) Video provided by AP
Powered by NewsLook.com
In Washington, a Push to Sterilize Stray Cats

In Washington, a Push to Sterilize Stray Cats

AFP (Apr. 14, 2014) To curb the growing numbers of feral cats in the US capital, the Washington Humane Society is encouraging residents to set traps and bring the animals to a sterilization clinic, after which they are released.. Duration: 02:29 Video provided by AFP
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins