Spooky Season: Six Scary Stats About Money

Halloween is a time for getting together, carving pumpkins, dressing up, and telling scary stories. This spooky season, let’s discuss some scary facts about money today and how you can avoid becoming a statistic yourself.

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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, that the person 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 they offer or plan to offer this benefit so that you can take advantage of it.

2. Borrowing Is The Most Expensive It’s 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. Speculators say 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:

1. Reassess your budget and consider adjusting discretionary spending.
2. Make a payment plan.
3. Pay more than the minimums on credit card balances.
4. Prioritize paying high interest rate debt first.
5. Build an emergency fund to avoid putting emergency expenses on your credit card.

4. The Best Days In The Market Tend To Happen When It’s Scariest To Be Investing

I’ve noticed more and more people turning to cash during the volatility we’ve seen 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 retirement plan providers in the United States, Fidelity, states their average 401(k) account balance for individuals ages 50-59 is $175,400 and the median balance is $53,400. If a retiree distributed 4% annually from $175,400, they 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. Our Population Is Aging And It’s Going To Strain Resources Without Changes

While more and more people face infertility and opt not to start families, the overall United States population is flatlining and the portion of aging population is increasing. This creates a strain on retirement and pension systems, as well as government aid and healthcare. To reduce impact of potential benefit adjustments, you can supplement these plans 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 armed with these stats, you can make small steps toward a positive financial future.

By Cicely Jones, Contributor