Halloween is a time for getting together, carving pumpkins, dressing up, and telling scary stories. Your finances can be part of the conversation. This spooky season, let’s discuss some scary facts about money today and how you can avoid becoming part of these statistics.
1. People Can’t Afford Emergencies
According to a 2022 Consumer Bureau of Financial Protection study, only 37% of Americans have at least one month of income saved in an emergency fund. This increases the likelihood that if an emergency crops up, people will need to go into debt or take a loan/hardship withdrawal from their retirement accounts if allowed. When people withdraw from their retirement accounts, it severely impacts their ability to supplement retirement expenses down the road. The SECURE 2.0 Act aims to support people starting in 2024 by allowing emergency fund contributions through employers. Check with your employer to see if it offers or plans to offer this benefit so that you can take advantage of it.
2. Borrowing Rates Are The Most Expensive They’ve Been In 23 Years
According to Freddie Mac, average rates for a 30-year fixed rate mortgage are now around 7.5%. The last time rates were that high was before to dot-com bubble burst in 2000.
3. Bankruptcies Are Up
Both corporate and individual bankruptcy filings are up significantly in 2023, per data from the business services company Epiq. There is speculation that this is from an increase in overall debt in the last three years coupled with a turbulent economy. Some strategies that individuals can use to avoid being in this position are:
- Reassess your budget and consider adjusting discretionary spending.
- Make a payment plan.
- Pay more than the minimum on credit card balances.
- Prioritize paying debt with a high interest rate first.
- Build an emergency fund to avoid putting those expenses on your credit card.
4. The Market’s Best Days Tend To Be When It’s The Scariest Time To Be Investing
I’ve noticed more and more people turning to cash during the economic volatility over the last couple years. If you were able to invest $10,000 in January 2003 and left it in the S&P 500 until the end of 2022, you would have $64,844*. However, if you missed the 10 best days in 20 years, your returns would be cut by more than 50% to $29,708. Seven of those 10 best days happened during bear markets in 2008 and 2020. Protect yourself from being a victim of market timing by staying the course during times of volatility.
5. Average Retirement Savings Are Not Enough To Live On
One of the largest 401(k) providers in the United States, Fidelity, states its average account balance for individuals ages 50 to 59 is $175,400 and the median balance is $53,400. If a retiree distributed 4% annually from $175,400, that person would have a retirement income of $584.67 per month from the plan (not including taxes). You can help combat this by understanding your retirement income needs and opting into automatic savings early.
6. The U.S. Population Is Aging And It’s Going To Strain Resources Without Changes
While more and more young couples face infertility and opt not to start families, the overall U.S. population is flatlining and the portion of aging people is increasing. This creates a strain on Social Security, other pension systems, Medicare, and Medicaid. To reduce the impact of potential benefit adjustments, you can supplement government social safety net programs with private health and long-term care insurance, additional retirement account savings, and Health Savings Account contributions.
Conclusion
This spooky season, I hope that being aware of these stats, you can make small steps toward a positive financial future.
*It is not possible to invest directly in an index. Investing involves risk, including loss of principal.
This informational and educational article does not offer or constitute, and should not be relied upon, as tax or financial advice. Your unique needs, goals and circumstances require the individualized attention of your own tax and financial professionals whose advice and services will prevail over any information provided in this article. Equitable Advisors, LLC and its associates and affiliates do not provide tax, legal, real estate, or mortgage lending advice or services. Equitable Advisors, LLC (Equitable Financial Advisors in MI and TN) and its affiliates do not endorse, approve or make any representations as to the accuracy, completeness or appropriateness of any part of any content linked to from this article.
Cicely Jones (CA Insurance Lic. #: 0K81625) offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN) and offers annuity and insurance products through Equitable Network, LLC, which conducts business in California as Equitable Network Insurance Agency of California, LLC). Financial Professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. Any compensation that Ms. Jones may receive for the publication of this article is earned separate from, and entirely outside of her capacities with, Equitable Advisors, LLC and Equitable Network, LLC (Equitable Network Insurance Agency of California, LLC). AGE-5982469.1(10/23)(exp.10/25)
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