Bully (but not) for you!
At a time when the U.S. stock market is flirting with record highs, more than half of Americans are standing on the sidelines during the running of this latest bull market.
A survey released earlier this month by the Bankrate.com website found 52 percent of those polled said they weren't currently investing in the stock market.
“It was a little surprising, especially since we specified that also includes IRAs and 401(k)s,'' said Claes Bell, banking analyst for Bankrate.com. “So you'd expect to see more people with some money in the stock market.”
But Dan Sherman, certified financial planner and vice president of Morgan Stanley Wealth Management, 101 Decatur Drive, didn't find the poll results unexpected.
Sherman said, “No, I'm not surprised. Look at the cost of living and the average wage. I look at my personal bills and I think 'I make a good income, but how do you have any extra at the end of the day?'”
“I think the cost of living is higher than it was 20 years ago, and wages have not come up that much in the last 10 years,” said Sherman.
“We've known for awhile now that 50 percent of the country is in no company-sponsored retirement plans,” said Tim Cashdollar, co-owner of Cashdollar & Associates, 115 Erie St., Grove City.
“I'm not surprised by it,” said Tim Ekas, investment adviser for Eagle Strategies/New York Life, 101 Alwine Road, Saxonburg.
“There have been varying statistics in the past, similar to this poll, that show an eye-popping number of people don't participate in any retirement plan,” said Ekas.
“When you dig down a little deeper, you find a disproportionately large number of those are low-income people,” said Ekas, who posits the shrinking middle class is to blame for the widening gap.“People with money tend to invest and make money,” Ekas said.The 2008-09 bursting of the stock and real estate bubbles drove a lot of people out of the stock market, Ekas said, but the following recovery has proven beneficial to those who remained in stocks.“People who were invested tended to make a lot of money in the intervening years,” said Ekas.The stock market bust of 2008 tends to cast a long shadow on people's future plans.“ ... But we had two big market shocks in recent memory. The bubble burst in tech stocks around 2000, and of course the financial crisis. So part of that probably comes from mistrust of the markets and ... people not having the funds to invest right now,'' said Bell.“People think the market is too high, so why start now?” said Sherman. “2008 is still pretty vivid in many people's minds.”“For the long-term investor, anytime is a good time to invest. History has shown time in the market, not timing the market, makes a difference in the long term,” said Sherman.Ekas said, “I think everyone who invests should be long term. Advisers should be long-term advisers.”“I'm confident in saying that 10 years from now, the market will be higher than it is today,” said Ekas. “There may be some short-term declines, but in 10 to 20 years the market will be higher.”It's never too late to start investing in the market for your retirement, according to Cashdollar.“If they are adding in on a regular basis, when the market goes down, they are getting more shares. That's the magic of dollar cost averaging,” said Cashdollar.He blames lack of education, not a lack of spine, for investors missing out on the surging market.“What we find is it's probably a lack of education and a lack of focus on planning,” he said. “A lot of people don't have time to research investments and don't know where to start if they did.”“They say the average American spends four days a year planning his vacation and two days a year planning for retirement, when really retirement will be the longest vacation in their lives,” said Cashdollar.“I think a lot of people don't count on anything,” said Ekas.And those who do contribute to an IRA or 401(k) don't have concrete plan for what they want to accomplish with their savings, said Ekas.
“A lot of people contribute 5 percent to a 401(k) because that's what the company will match. Nobody game plans about what it would take to retire at 60,” said Ekas.“And those who are (saving) have an average balance of $90,000, and that's not nearly enough to retire on,” said Cashdollar.“Probably, medical would be the main expense for seniors,” said Sherman.“That's what's scary. I'm scared for my generation,” he said.“Even if you have a million saved, when you are drawing $50,000 or $60,000 a year, mostly for medical expenses, it runs out,” said Sherman.Seniors were more likely than their younger peers to say they didn't have the money to invest, while millennials between the ages of 18 and 29 were more than twice as likely as other age groups to say they weren't in stocks because they didn't know enough about the market, according to the Bankrate.com survey.Sherman said, “My parents at least, a good percentage, still had a pension. My generation is going to have to work until they are dead. The priorities are off.”“I was born in 1973. From the '60s on up, the priorities are to have a bigger house, a fancier car versus savings. It should be the other way around,” said Sherman.“There's some of the baby boomers whose parents grew up in the Depression. They're the savers,” said Ekas. “The generation Y or the millennials, they want the new cell phone or iPad or whatever it is.”“Unfortunately, they are still counting on Social Security in its current state as a viable option or working forever,” said Ekas.Sherman said, “A great big percentage don't have anything saved. I see people in their 50s that don't have anything saved and they want to retire I don't know what to tell them.”“I would encourage people to make a conscious decision on what they want to save and why. It's a simple matter of doing the math,” said Ekas.
