Are Americans Financially Prepared for the Future?

Wall St. Cheat Sheet

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Northwestern Mutual surveyed 2,092 American adults age eighteen and older to determine how Americans plan and whether or not they are moving in the right financial direction. They also looked at Americans’ attitudes towards money and financial decisions and how prepared people are for the long-term future. The results of the study suggest that many Americans are not ready and are not carefully preparing for the future, although many people feel that they are moving in the right direction. Those who haven’t saved enough are facing financial problems primarily because of debt, unexpected expenses, and lack of effective planning. Interestingly, Americans as a whole seem to believe that they are personally moving in the right financial direction, but don’t feel the same way about the country as a whole.

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According to the study, many people aged twenty-five and older feel that they are moving in the right financial direction. 47 percent of the people surveyed feel financially secure (versus 43 percent last year.) Last year, nearly one in three people (32 percent) expressed financial insecurity, but only 26 percent expressed that same sentiment this time.

Clearly, Americans believe that they are doing a better job becoming financially secure than they believed a year ago, but they don’t feel the same way about the entire country. Of adults, 49 percent feel that the economy is stuck or going backward (29 percent), while only 22 percent feel it is moving forward.

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What is surprising is that while many Americans believe that they are doing a good job preparing now, many don’t believe they will have enough saved later on in life. Twenty-six percent of people feel that they will not be financially prepared to live to 75; this is based on their current financial conditions, future prospects, and long-term plan. Of those, 32 percent believe that they won’t be financially prepared to live until eighty-five, and 39 percent worry about making it financially to ninety-five. Twenty-one percent believe they can can “catch up” later through savings and investments. So while Americans feel that they are moving slowly in the right direction individually, they are still worrying about their long-term future.

Americans seem to believe that saving slowly but continually and steadily is the best plan. One in three Americans surveyed described their investing and savings mentality as “slow and steady”. Most of those surveyed were careful about their investments, and 21 percent said that they wanted to be more cautious but really had to catch up. Of those trying to catch up, 51 percent had issues with debt; 48 percent with unexpected expenses, 38 percent hadn’t planned well, and 31 percent had been unemployed or had an unemployed spouse, all of which affected their savings.

The study showed that an impressive two-thirds of American adults have a savings account, which sounds very positive. Unfortunately, while Americans are saving, they aren’t planning far beyond the initial savings account. Only 27 percent of those surveyed own stocks, 14 percent own bonds, 23 percent own mutual funds, 14 percent own real estate, 24 percent own term life insurance, 9 percent have long-term care insurance, 8 percent have disability insurance, 23 percent have permanent life insurance, 14 percent have an annuity, and 6 percent have a college savings account. Thirty-nine percent have an IRA, which shows more planning, but over all, these numbers suggest a lack of financial planning for the future. The lack of stocks, bonds, and insurance necessary for future protection are particularly telling.

Although Americans believe that they are moving in the right direction financially, we seem to have a long way to go as a country. Many people’s belief in their own stability doesn’t seem to match the fact that so many Americans are not prepared for the long-term future. So while some people are saving well now, many others have no strong future financial goals or plans. Others are just trying to catch up because of poor decisions or difficult circumstances.

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