Survey Reveals Americans' Financial Future: We're Not Ready

Getting a cold dash of water in the face is rarely pleasant. When the sudden shock involves the financial planning of millions in trouble, it passes disheartening and enters the realm of scary.

According to a new survey of 326 middle-income Americans and 314 baby boomers by personal finance site MoneyTips.com, scary is the future of the country. MoneyTips gave us an exclusive early look at the results, and no matter which group you look at, large swaths of the populous are unprepared for the future -- and many are having trouble now as well. Plus, there are signs that many of those who volunteered to take the survey were relatively optimistic, and that the overall picture is probably bleaker.

Plan? What Plan?

You can't control what you don't watch, and that's where things start badly. When asked whether they have clear financial goals and milestones, 68 percent of boomers and 63 percent of middle-income respondents said that they did. That's good, but the flip side isn't.

"If you look at middle class Americans, defined as income in $40,000 to $80,000, the financial plan for one third of them is no plan," said MoneyTips CEO Marc Diana. "I would be expecting that number to be about 20 percent."

%VIRTUAL-pullquote-There is visible strain in the ability of many to keep things together.%As for boomers, he was "very surprised" at even 68 percent. "They're older; they're closer to that milestone of retirement," he said. "I would have expected the baby boomers would have been a higher number." Even if more than two-thirds have solid plans, having close to a third of the largest demographic in the country approaching retirement without a plan is sobering.

Already there is visible strain in the ability of many to keep things together. For middle income Americans surveyed, 57 percent were "comfortable" with their current standard of living. As for boomers, 61 percent were comfortable with their current standard. Roughly 40 percent of each group already forgoes things, though how many are saving for the future vs. not making enough to do better is impossible to say.

And How Are Those Plans Going?

Only 57 percent of the boomers with plans said they were on target to meet them. For the middle-income group, the number drops to 46 percent. Even for the people who have plans, a great many see them slipping away.

Broken out in some detail, 53 percent of boomers and 41 percent of middle-income people said they were "on track for milestones," such as marriage, a new car, home purchase or remodeling. Children's education funds were on target for only 23 percent of middle incomes and 21 percent of boomers (although almost 61 percent didn't answer, which suggests that the bulk may be through that hurdle). Fifty-one percent of middle income claimed the "right financing" for their home or properties, compared to 62 percent of boomers.

In each case, many have clearly fallen behind. When it comes to retirement, hold on. Only 49 percent of middle-income respondents and 56 percent of boomers are on track with a retirement plan. Fifty-seven percent of boomers say that their savings plan will let them live comfortably in retirement; for the middle income set, the number drops to 32 percent. There is a giant brick wall facing the country, and the impact starts in just a few years.

Two-thirds of the middle-income respondents said that they do not have an up-to-date estate plan. For boomers, 51 percent didn't. Why plan for an estate when the money could well run out anyway?

Can You Say Bernie Madoff?

The planning process for many is clearly broken, with 30 percent of middle incomes and 40 percent of boomers using a certified financial planner or counselor. Middle-income people actually outpace boomers 46 percent to 44 percent at using online resources to educate themselves.

"Among those searching for online answers to their financial questions ... I would have expected a larger number at [personal finance and business sites]," Diana said.

The level of trust that people express in their financial advisers seems naive. Of the 44 percent of boomers who said they use a financial planner or counselor, 93.6 percent "completely trust" the person or company. Ninety-two percent said that the counselor or adviser "provides a variety of financial products that meet all of my financial planning needs."

%VIRTUAL-article-sponsoredlinks%Only 30 percent of middle-income responders consult a financial planner or adviser. Of them, 93.8 percent "completely trust" the source of advice and 91.7 percent get financial products that "meet all of my financial planning needs."

In other words, the people who use professional help seem almost entirely dependent on the person. Of course, you would be beyond insane to use a financial adviser you didn't trust. However, the combination of trust and practical dependence can be deadly. The law of averages dictates that as many advisers who are above the median in performance are below. All other things being equal, people have a 50-50 chance at getting a relative loser -- assuming that advisers are, on the whole, good at what they do.

Remember that the vast majority of mutual funds don't beat the market. Assuming that professional advice is always smart and accurate would be a mistaken generalization. In addition, many advisers make their money from selling financial products that they represent, whether those products are the best for your interests or not. Chances are that some hopefully small portion of the advisers are scalawags more interested in separating you from your money than in growing same.

More Involved Than Most

"Overall, the common theme that I've found is that larger numbers of people don't have a financial plan, aren't comfortable with where they are," Diana said. "They're missing their financial milestones and aren't comfortable about where they'll be in retirement. Those are all larger numbers than I would have expected across the board. I understand these are difficult economic times, but five years doesn't make a lifetime of living for everyone out there. I was expecting more people to be buckling down during these tough years and having been more prepared for the future than what I'm seeing here."

But perhaps the scariest revelation from this survey is what it doesn't show, due to its methodology. All of those who participated were either recruited online via an email file MoneyTips has, or found out about the survey through the MoneyTips' Twitter (TWTR) and Facebook (FB) feeds. That sample population, then, is hardly a fair mirror of the country as a whole. Instead, it would be fair to assume that the group is weighed more heavily toward people who take an active interest in their personal finances. In other words, the real situation is probably a whole lot worse.

"I think it's going to be a very, very challenging time five to 10 years from now," Diana said. "Even if the economy picks up, it will take more time to boost up the savings in the retirement programs that all of these folks are in. I think there's a very large problem looming out there."