The Financial States of America

June 29th, 2016, Comments Off on The Financial States of America.

As life expectancies continue to climb, Americans are increasingly less confident that their savings will last through retirement. According to the latest findings from Northwestern Mutual’s 2016 Planning & Progress Study, two thirds of Americans believe there is some chance that they will outlive their savings, with 1 in 3 (34%) saying the likelihood is 51% or better.

Notably, 14% think that outliving their savings is a definite (100% likelihood).
However, Americans are not proactively addressing the financial implications of living longer. Only a fraction (21%) say they have increased their savings, while more than 4 in 10 (44%) report having taken no steps at all.

The lack of preparation is particularly concerning, given decreasing confidence about the future availability of Social Security:

  • Only a quarter of Americans (24%) say it’s “extremely likely” that Social Security will be there when they retire
  • 3 in 10 (28%) listed Social Security uncertainty among the greatest obstacles to achieving financial security in retirement
  • Just one third of non-retired Americans (35%) expect that Social Security will be their sole or primary source of retirement income compared to nearly half of current retirees (49%)

“The prospect of an extended retirement in an environment of diminishing safety nets makes it even more essential that your financial plan is flexible enough to stretch as long as needed,” said Rebekah Barsch, vice president of planning for Northwestern Mutual.

Debt a pressure point

The survey’s findings further reveal that mounting debt is a serious source of financial pressure for Americans. When asked what one change would make the most significant impact on their financial situation, eliminating all debt (27%) narrowly outpaces earning significantly more income (26%), clearly indicating the magnitude of the debt issue. While mortgages emerged as the leading source of debt (29%), the impact of credit cards comes through strongly (23%), exceeding student loan debt, car loans, and home equity loans/lines of credit combined.

For the second year in a row, health-care costs (45%) emerge as a top-cited obstacle to financial security in retirement, along with lack of savings (44%) — substantially ahead of lack of planning (30%), events in Washington, D.C. (23%) and volatile markets (22%).

“Interestingly, though people recognize the impact of healthcare costs and insufficient savings on retirement security, they are not necessarily seeing the role of financial planning as the connection between the two,” continued Barsch. “A solid financial strategy can ease both concerns.”

More bullish about themselves than the US

Despite the financial challenges they’re facing, Americans are generally positive about their broader financial prospects, with nearly half expecting improvement in their finances in 2016. This optimism, however, does not extend to the overall economy. The number of Americans who believe the U.S. economy will be better this year dipped to 31% from 37% last year.

“While it’s encouraging to see that financial worries aren’t putting a damper on the big picture for Americans, optimism without action is like an engine without fuel — it won’t get you far,” concluded Barsch.

This study was conducted by Harris Poll on behalf of Northwestern Mutual, and included 2,646 American adults aged 18 or older.

Ayo Mseka

Small-Business Owners Plan to Exit, but Unprepared to Do So

June 14th, 2016, Comments Off on Small-Business Owners Plan to Exit, but Unprepared to Do So.

Small-business owners planning to exit their businesses for retirement or other reasons may be in for a rude awakening.

New research conducted by Securian Financial Group shows that the vast majority of small-business owners are unprepared for exiting their businesses. The financial ramifications, especially for business owners counting on their companies to fund their retirement, could be significant.

“While 54 percent of business owners plan to leave their business in the next 10 years, 72 percent have taken no exit planning action,” said Andrew O’Brien, who directs Securian’s business owner client solutions group. “For most small business owners, the business is by far their largest asset. Not properly planning for the sale or transfer of their business can leave a lot of people—including the business owner—in a very difficult position.”

The study found that 50 percent of small -business owners want to sell their business to a partner, a key employee or a third party, while 37 percent want to transfer the business to family members.

“A sale or transfer of a business involves multiple financial and legal steps that tend not to work well for the owner when rushed,” said Channing Schmidt, who leads a team of Securian associates who advise financial professionals and their business-owner clients on advanced planning. “A written exit plan developed by a team of experts working in concert with the business owner is the best way to prepare for a successful transition.”

Six hundred small business owners with an average of 27 employees and annual revenue ranging from $250,000 to more than $20 million were surveyed in August and September of 2015 for the Securian Small Business Owner Life Stage Study. More information is available at

Ayo Mseka