As 401k participants continue to shift assets to fixed income, many Americans fear the “other shoe will drop” after several years of strong economic growth.
Indeed, close to 50 percent of respondents to a new survey express worry the U.S. will enter a recession in the next year.
“Middle-class Americans are less optimistic about their ability to achieve upward mobility than they were six months ago,” according to CUNA Mutual Group.
When the firm polled the middle class in fall 2018, survey respondents gave themselves a “B minus” grade when asked to evaluate their prospects for achieving the “American Dream.”
Amid increasingly uncertain economic conditions, however, that grade has dropped to a “C”.
However, when thinking about their personal economic position, the majority of respondents feel relatively stable, with 61 percent saying they are somewhat to very confident, and 88 percent saying they feel their job is somewhat or very secure over the next year.
That said, the middle class could be doing better—of the respondents who say they are confident in their economic position, two-thirds are only “somewhat” confident, meaning they can comfortably pay their bills, but want to save more in the long run.
“The middle class is mired in uncertainty,” said Steve Rick, chief economist, CUNA Mutual Group. “We’re seeing stagnating job growth, limited wage growth and increasing market volatility attributable to headwinds from tariffs and unfinished trade negotiations. “
Wake-up call
Calling it a “wake-up call” to start shoring up their finances now, he suggests participants cut spending, reassess their savings to avoid having to cut into their retirement to stay afloat, or even refinancing a mortgage if that’ll put them in a better position.
“If there’s one thing 2008 taught us, it’s that you can’t afford to be caught on your heels if a recession hits,” Rick adds
On the positive side, survey respondents are aware of their economic vulnerabilities.
In the event of a recession, they say they would decrease discretionary spending (53 percent) and make lifestyle changes (52 percent).
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
