Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Americans Don’t Contribute Enough to Retirement Funds, MU Researcher Finds

01.10.2013
Americans should contribute at higher levels during economic downturn

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.

Nathan Hurst | EurekAlert!
Further information:
http://www.missouri.edu

More articles from Studies and Analyses:

nachricht Amputees can learn to control a robotic arm with their minds
28.11.2017 | University of Chicago Medical Center

nachricht The importance of biodiversity in forests could increase due to climate change
17.11.2017 | Deutsches Zentrum für integrative Biodiversitätsforschung (iDiv) Halle-Jena-Leipzig

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: First-of-its-kind chemical oscillator offers new level of molecular control

DNA molecules that follow specific instructions could offer more precise molecular control of synthetic chemical systems, a discovery that opens the door for engineers to create molecular machines with new and complex behaviors.

Researchers have created chemical amplifiers and a chemical oscillator using a systematic method that has the potential to embed sophisticated circuit...

Im Focus: Long-lived storage of a photonic qubit for worldwide teleportation

MPQ scientists achieve long storage times for photonic quantum bits which break the lower bound for direct teleportation in a global quantum network.

Concerning the development of quantum memories for the realization of global quantum networks, scientists of the Quantum Dynamics Division led by Professor...

Im Focus: Electromagnetic water cloak eliminates drag and wake

Detailed calculations show water cloaks are feasible with today's technology

Researchers have developed a water cloaking concept based on electromagnetic forces that could eliminate an object's wake, greatly reducing its drag while...

Im Focus: Scientists channel graphene to understand filtration and ion transport into cells

Tiny pores at a cell's entryway act as miniature bouncers, letting in some electrically charged atoms--ions--but blocking others. Operating as exquisitely sensitive filters, these "ion channels" play a critical role in biological functions such as muscle contraction and the firing of brain cells.

To rapidly transport the right ions through the cell membrane, the tiny channels rely on a complex interplay between the ions and surrounding molecules,...

Im Focus: Towards data storage at the single molecule level

The miniaturization of the current technology of storage media is hindered by fundamental limits of quantum mechanics. A new approach consists in using so-called spin-crossover molecules as the smallest possible storage unit. Similar to normal hard drives, these special molecules can save information via their magnetic state. A research team from Kiel University has now managed to successfully place a new class of spin-crossover molecules onto a surface and to improve the molecule’s storage capacity. The storage density of conventional hard drives could therefore theoretically be increased by more than one hundred fold. The study has been published in the scientific journal Nano Letters.

Over the past few years, the building blocks of storage media have gotten ever smaller. But further miniaturization of the current technology is hindered by...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

See, understand and experience the work of the future

11.12.2017 | Event News

Innovative strategies to tackle parasitic worms

08.12.2017 | Event News

AKL’18: The opportunities and challenges of digitalization in the laser industry

07.12.2017 | Event News

 
Latest News

Engineers program tiny robots to move, think like insects

15.12.2017 | Power and Electrical Engineering

One in 5 materials chemistry papers may be wrong, study suggests

15.12.2017 | Materials Sciences

New antbird species discovered in Peru by LSU ornithologists

15.12.2017 | Life Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>