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Power Hedge
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Power Hedge is an independent international investor with a passion for macro- and microeconomic analysis. Power Hedge focuses his research primarily on dividend-paying, international companies of all sizes with sustainable competitive advantages. Power Hedge is neither a permabear nor a... More
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  • Poor Retirement Readiness Will Act as a Drag on Employment 0 comments
    Dec 8, 2010 9:07 PM

    Wells Fargo released a study earlier today that shows how poorly the average American is prepared for retirement.

    • 72 percent of Americans aged 25 to 69 expect to work through their golden years.
    • Most people surveyed believe that they need $300,000 to retire. They have, on average, 20,000 saved.
    • The median amount of savings for people aged 50-59 is $29,000. This is not nearly enough to support them in retirement, even with a massive economic boom.
    Most of the fifty-somethings also believe that they will have enough saved up to support their lifestyle in retirement. There is no way, barring a large savings boom that these people will be able to save up to even the $300,000 figure (and this number is not nearly enough to retire for an average middle class family). If that savings boom comes, then it will act to curtail the demand for goods and services in the American economy. After all, money that is used to be saved cannot be spent. Given the reliance of the U.S. economy on consumer spending, this could act as a significant economic drag.

    I believe that it is more likely that these poor savers will simply continue to work and never retire. This will create a drag on employment. With less attrition in firms, there will be less need for companies to hire people to replace those workers who retire.

    Themes: Employment, Consumer Demand
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