Springfield Business Journal_2019-10-14

SPRINGFIELD BUSINESS JOURNAL · 9 OCT 14-20, 2019 by Christine Temple · ctemple@sbj.net With traditional pensions going by the wayside, un- certainty surrounding future Social Security payouts and people living longer, money managers say secur- ing a solid financial future is in the hands of individu- als now more than ever. According to Vanguard’s annual How America Saves study, the average defined contribution plan, like a 401(k), for people at retirement age of 65 and older had a balance of $192,877 in 2018. And the me- dian, where half had more and half had less, was at $58,035. That only equates to $4,300 a year, if they live until the average life expectancy. But data show millennials are bucking the trends in retirement savings. According to a study this year from the Transam- erica Center for Retirement Studies, adults today who are 40 years old or younger began saving for re- tirement at a median age of 24 – and they’re saving roughly 10% of their income. That me- dian age is six years earlier than Gen- eration X began saving for retirement and more than a decade jump on baby boomers. “Millennials sometimes get a bad rap,” said Justin Setser, vice president and relationship manager with Central Trust Co. “It does appear that many of them have learned a few things from seeing their parents and older genera- tions struggling through the Great Re- cession.” Setser said the payoff is coming. “Time is one of the greatest factors that anyone can have on their side,” he said. And yet, statistics show not enough people are sav- ing for their retirement. The Federal Reserve Bank of St. Louis last year found only 27% of households na- tionwide had a defined benefit plan, often a pension, and only 33% had a defined contribution plan. With some households having both plans, the St. Louis Fed estimates about half of Americans have no retirement plan at all. And those who do have a plan simply don’t have enough saved. “Frequently, people look down the road at retire- ment and think, ‘I have a long way to go. I’ll wait un- til I get my student debt paid for or my house paid down,’” said Jill Reynolds, vice president and private client adviser at Commerce Trust Co. “That is very problematic. The best thing is to start as soon as possible.” Savings woes According to the Vanguard study, Ameri- cans have an average of $92,148 in defined contribution plans, but the median savings is $22,217. Reynolds said while assets under man- agement are robust and growing among higher net worth individuals, she is con- cerned about lower-wage workers and their retirement needs. “In general, we don’t have a lot of LASTING ADVISER Erica Smith says amid a sea of regulatory change and automation, CPAs act as guides for business owners. PAGE 10 TAX & FINANCIAL PLANNING JESSICA ROSA SAVINGS TRENDS Jill Reynolds of Commerce Trust Co. says employee-driven 401(k) plans have steadily replaced traditional pensions, placing the burden of retirement savings on individuals. Golden Years? Financial advisers fear too many workers are delaying saving for retirement See SAVINGS on page 16 Justin Setser: Millennials learned from the Great Recesssion.