Middle Class Americans Face a Retirement Shutdown; 37% Say ‘I’ll Never Retire, But Work Until I’m Too Sick or Die,’ a Wells Fargo Study Finds

42% Say Paying the Bills AND Saving for Retirement ‘Not Possible’

Nearly Half of Women Say Greatest Retirement 'Financial Fear' Is a Loss of Social Security, Surpassing a Large Health Expense

CHARLOTTE, NC - October 23, 2013

As U.S. lawmakers engage in an ongoing fight over how and when to pay the country’s debts, more than half the middle class (59%) are very clear that their top day-to-day financial concern is “paying the monthly bills,” an increase from 52% in 2012. Saving for retirement ranks a distant second place, with 13% calling it a “priority,” as four in ten middle class Americans (42%) say saving and paying the bills is “not possible.” As a result, 48% are not confident they will be able to save enough for a comfortable retirement, and 34% of the middle class say they will work until they are “at least 80” because they will not have saved enough for retirement, up from 25% in 2011 and 30% in 2012. These results come from the latest annual Wells Fargo (NYSE: WFC) Middle Class Retirement study(PDF*), a telephone survey conducted by Harris Interactive of 1,000 middle class Americans between the ages of 25 and 75 and interviewed July 24 to August 27, 2013.

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“We do this survey every year and for the past three years, the struggle to pay bills is a growing concern and the prospect of saving for retirement looks dim, particularly for those in their prime saving years,” said Laurie Nordquist, head of Wells Fargo Institutional Retirement and Trust. “We’d like to try to help people find the silver lining and create a path to retirement savings. Having a plan and saving not only creates more hopefulness, but it produces results that can grow and lead to a solid retirement.”

The plan effect
According to the 2013 study, about half (52%) of the middle class between the ages of 25 and 75 say they are “confident” they will have enough saved for their retirement. However, less than a third (29%) say they have a written plan for their retirement. For those who have a written plan, 70% describe themselves as “confident” in their future retirement versus 44% who do not have a plan.

Ninety-one percent of the middle class who have a plan for their finances in retirement agree that they have the “will-power” to save for retirement versus 75% of those who do not have a plan.

Thirty-one percent of Americans in prime retirement saving years – 40 to 59 – say they have a plan, versus 69% who do not. Both groups in this age range say they will need a median nest egg of $200,000 for their retirement. However, people who attest to having a written plan say they have saved a median of $63,000, or 32% of their goal. Those without a written plan have only saved a median of $20,000, or 10% of their goal.

“This data so clearly shows what a difference a retirement plan makes, in that people who have a plan have saved three times what those without a plan have saved,” said Nordquist. “A plan instills confidence and gives people the discipline to stick with their objectives and reach their financial goals.”

Why no retirement plan?
A plurality of middle class Americans without a written plan for retirement (45%) attribute having “so few financial assets” as the reason they don’t have a plan for retirement. According to a June 2013 U.S. Census report, the median household income is $52,100.

A quarter of middle class Americans who earn between $25,000 and $50,000 have a written plan for retirement. The proportion that has a plan rises slightly to 29% for those with household income between $50,000 and $100,000.

However, having more income does not necessarily translate to having saved more as a percentage of their overall retirement goal. The middle class has saved between 5% and 8% of their overall savings goal, regardless of their income.

A third of all middle class Americans say Social Security will be their “primary” source of income in retirement. Nearly half (48%) of those making less than $50,000 say Social Security is going to be their “primary source” of income in retirement, versus 25% who make more than $50,000.

Forty percent of the middle class say “a large unexpected healthcare expense” is their greatest fear in retirement; however, a similar level, 37% of the middle class, say the “loss or diminishment of Social Security” is their greatest financial fear. This fear is heightened for women, almost half of whom (46%) say their number one financial fear in retirement is a loss or diminishment of Social Security.

“People say they don’t have a plan because they don’t have enough money,” added Nordquist. “The most important message I can impart about retirement is that planning is for everyone. It is the foundation for consistent savings, which can allow people to have the nest egg they will need in retirement and can also help people determine the role Social Security will play in their retirement.”

Stock market is “not for me”
The study shows that across middle class members of all generations, from the silent generation to the millennials, only 24% are confident in the stock market as a place to invest for retirement, while 45% of the middle class say “the stock market doesn’t benefit people like me.”

About half (52%) say they don’t invest in the stock market because “I am afraid to lose my nest egg in the ups and downs of the market.”

The apprehension about the market is stronger for those age 25 to 29, with 56% expressing fear of losing their nest egg. When asked if given $5,000 for retirement where they would invest, 58% of those age 25 to 29 say they would invest in a savings account/CD. Confidence in the stock market differs by gender. In contrast to past research, women seem to be less fearful than men: 46% of middle class women express fear of losing their nest egg in the stock market versus 58% of middle class men.

Perhaps enhancing investor fear is the fact that middle class investors have no desire to learn more: 51% say they have “little interest in learning about investing” and this percentage is up to 60% for middle class Americans in their 50s and 60s.

“There is a striking amount of fear about the stock market among all investors. The middle class just isn’t making the link between being invested and the potential growth of their savings, but on top of this fear is apathy – there is no interest in learning more about investing. Fear and apathy are a bad combination, whereas knowledge about saving and investing is empowering. We’ve got to move people to this mindset,” said Nordquist.

Who gets it? The 30-somethings
Middle class Americans in their 30s seem to have the most realistic overall outlook for retirement.

People in their 30s who have access to a 401(k) or equivalent plan are currently saving a median of 6% of their income, 1 percentage point more than those in their 20s and 40s, and they estimate needing a median of $500,000 for retirement, the highest estimate of all the age groups surveyed.

In addition, more than a third (34%) of those in their 30s have a written retirement plan, the highest response rate among all the age groups surveyed. Also, these plans are detailed in that they are most likely to include a budget and healthcare cost estimates.

Thirty percent of middle class Americans in their 30s have confidence in the stock market as a place to invest for retirement, the highest confidence level among all the age groups surveyed, while only a third of women in their 30s (the smallest percentage of all surveyed) say they won’t invest due to fear of losing their nest egg in the “ups and downs” of the market.

“On a comparative basis, people in their 30s appear to be more aware of what the variables are for a successful retirement. They seem to know that having a plan, saving more and trying to overcome fear of the market are the keys to success. The bottom line is if people can plan and control their household spending and savings and become more self-reliant in their pursuit of retirement, they will put themselves in the best spot,” added Nordquist.

About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.5 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, and the Internet (wellsfargo.com), and has offices in more than 35 countries to support the bank’s customers who conduct business in the global economy. With more than 270,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune’s 2013 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially. Wells Fargo perspectives are also available at blogs.wellsfargo.com.

About the Survey
On behalf of Wells Fargo, Harris Interactive Inc. conducted 1,000 telephone interviews of middle class Americans in their 20s (ages 25-29 only), 30s, 40s, 50s, 60s and 70-75, surveying attitudes and behaviors around planning, saving and investing for retirement. The survey was conducted July 24 – August 27, 2013. To target the middle class, the survey included only respondents who fell within specified income and wealth brackets. Those age 25 to 29 had 2012 household income of $25,000 to $99,999 and household investable assets of $99,999 or less. Those age 30 to 75 had 2012 household income of $50,000 to $99,999 or household investable assets of $25,000 to $99,999. The lower limits for 20-somethings were used to reflect the early stage of their careers. For the 20s age group, only respondents age 25 to 29 were included in order to focus on workers. Data were weighted as needed to represent the population of those meeting the qualification criteria. Figures for education, age, gender, race/ethnicity, region, household income, investable assets, number of adults in the household, and number of phone lines (to adjust for probability of selection) were weighted where necessary to bring them in line with their actual proportions in the population.

About Harris Interactive
Harris Interactive is one of the world's leading custom market research firms, leveraging research, technology, and business acumen to transform relevant insight into actionable foresight. Known widely for the Harris Poll and for pioneering innovative research methodologies, Harris offers expertise in a wide range of industries including healthcare, technology, public affairs, energy, telecommunications, financial services, insurance, media, retail, restaurant, and consumer package goods. Serving clients in over 215 countries and territories through our North American and European offices and a network of independent market research firms, Harris specializes in delivering research solutions that help us - and our clients - stay ahead of what's next. For more information, please visit www.harrisinteractive.com.

Leslie Ingberg
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Allison Leong
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