Although 59% of Americans set a goal to save for retirement in 2015, only 31% are doing so, according to a new survey of 1,000 people with investable assets between $50,000 and $250,000 conducted by Bank of America and Merrill Edge.
Among Millennials, 48% say the economy is the most significant factor affecting their savings habits, and among all Americans, 42% say the economy is the most significant factor affecting their savings. Thirty-six percent of respondents said they wish they had stuck to a budget in the past five years. While 51% set a goal to pay down debt in 2015, only 38% accomplished this.
The survey also found that despite the economic pressures on their finances, 50% of those Americans who are saving for retirement want to upgrade their lifestyle in retirement, as opposed to just affording the basics. Also, 89% of those saving for retirement say they would not be comfortable postponing retirement savings, and 47% regret not having saved more in the past five years.
Americans apparently are not willing to cut corners to minimize expenses, as only 54% would be willing to move in with loved ones, 26% would be willing to move to a cheaper area, and a mere 20% would set a budget.
“Year over year, we continue to see financial regrets surrounding extraneous spending, particularly with the youngest generations, and it’s visibly impacting their ability to pursue long-term financial goals,” says Aron Levine, head of Merrill Edge at Bank of America. “The good news is we’re seeing increased optimism heading into 2016 with a focus on saving and investing, including a decrease in overall spending and an increasing reluctance to borrow from retirement funds.”
NEXT: Goals for 2016
Asked about their financial goals for 2016, 68% of survey respondents said they will be saving more, 67% said spending less and 53% said investing more. However, 61% of Millennials said they will be spending more, compared to 26% of Gen Xers, Baby Boomers and seniors. Nonetheless, 88% of Millennials said they will save more (compared to 64% of Gen Xers, Baby Boomers and seniors), and 82% of Millennials said they will invest more (versus 48%) in the coming year.
Among retirees, 71% say saving money is less of a priority, compared to 31% of non-retirees, and 49% of retirees plan to save less in 2016, compared to 21% of non-retirees. Similarly, retirees are more apt than their non-retired counterparts (73% versus 52%) to believe that a big purchase is worthwhile as long as it doesn’t put them in debt.
While 84% of Americans said they would not be comfortable making expensive purchases today, 57% said it might be worthwhile if it lasts a long time, has more value in the future (42%) or creates lasting memories (27%). Perhaps due to their penchant for social media, 61% of Millennials justify a large expense if it generates lasting memories, compared to 21% of other generations. Further, 55% of Millennials believe a big expense is worthwhile if it is a once-in-a-lifetime opportunity, compared to 28% of other generations.
NEXT: Financial regrets
Retirees are also less likely than those who are not retired to regret superfluous spending habits over the past five years, such as eating out (17% versus 46%), buying clothing (10% versus 28%), purchasing technological items (8% versus 20%), cars (7% versus 17%) and vacations (5% versus 19%).
Ninety-four percent of respondents overall say they have no regrets about how much they spent on real estate in the past five years. Ninety-two percent went into debt to pay for their homes, or for home improvements or renovations (74%). However, 96% said they would not be comfortable living in a home that costs more than they can afford.
“While some debt may make sense to take on, respondents need to be mindful that debt isn’t always an easy burden to manage,” Levine says. “Some of the top regrets of respondents this year included wishing they had paid off debt faster and avoiding going into debt altogether. So, it’s important to keep your level of debt manageable to help balance spending with saving for retirement.”
Braun Research conducted the survey for Bank of America and Merrill Edge in early September. The full report can be downloaded here.