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Are Americans more focused on short- or long-term finances?

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When it comes to finances, are Americans short-sighted, or future focused?

According to a brief from The Center for Retirement Research at Boston College based on data from a FINRA Investor Education Foundation online survey of 25,509 American adults ages 25-60 that looked at a state-by-state financial capability, workers are primarily concerned about their ability to satisfy their day-to-day needs and aren’t focused on their future finances—even if their day-to-day finances are under control.  

The study explores whether households of all ages and income levels are shortsighted when it comes to their finances. Individuals of all ages are clearly short-sighted, while the specific problems that trouble individuals vary by age and life stage, according to the CFRR brief. Distant needs such as retirement saving consistently take a back seat to more pressing, immediate concerns.

“Among day-to-day problems, the inability to access $2,000 is associated with much larger reductions in satisfaction at younger ages, and heavy debt burdens are related to a greater reduction at older ages,” the brief states. “Among distant problems, only not saving for college and not having medical insurance are associated with statistically significant reductions in all three age groups.” Younger workers

And younger workers see less satisfaction because they’re concerned with repaying student loans. Middle-age workers are more concerned with lacking life insurance and with having a mortgage greater than the value of their home. Workers approaching retirement age are focused on repaying student loads and also having a mortgage greater than the value of their house.

As with age, financial short-sightedness isn’t determined by income level, according to the CFRR report. Individuals from top, medium and lower financial levels are more concerned with short-term financial problems such as difficulty covering expenses, heavy current debt burdens unemployment and an inability to access $2,000,  than they are with distant problems including having  no medical insurance or life insurance, not saving for college, being underwater with their mortgage or repaying student loans.

The one exception is not having a retirement plan. The study found no relationship between this deficiency and workers’ financial satisfaction across any age group. However, when it comes to income level, there is a difference in financial satisfaction between wealthier individuals and their lower-income counterparts:  higher income households felt they are on shakier financial ground if they don’t have a retirement plan in place.

Americans today are increasingly responsible for saving a substantial portion of their income for retirement and setting up their own retirement plans. “With the shift in financial responsibility to households, it is important to make saving easy and automatic for households at all ages and income levels, so that they can set aside enough to secure a basic level of financial well-being in retirement,” according to the CFRR report.

A retirement plan that includes annuities might be a good option for individuals of all ages and income levels. Annuities can help wealthier household, in particular, feel more financially stable as they head into their retirement years.


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