Are Your Savings Retirement-Ready?

The results of this survey seem to indicate it’s both.

Are your finances ready to support you in retirement?

The reports on American’s retirement readiness are bleak. Many are delaying their exit from the workforce in order to catch up financially. Some have had to retire in debt, or dip into their retirement benefits early to pay off debt, forcing them to continue to work; and those who have left the workforce still regret not saving enough.

Empower Retirement, a retirement services provider, in its fifth edition of the Lifetime Income Score research, polled over 4,000 working Americans  between 18 and 65 years of age to find out what issues, concerns and challenges they face regarding retirement savings, guaranteed income and investing.

It turns out the vast majority of individuals saving for retirement need to figure out healthcare costs in order to lead a quality lifestyle after leaving the workforce.  This isn’t surprising and coincides with previous reports that most retirees encountered higher-than-expected healthcare expenses after they retired.

Other findings include:

  • Currently more workers are confident about their housing values and expect higher home values in the year ahead than those polled in 2012.
  • More Americans are confident about their job security; fewer workers are concerned about losing their job.
  • 30% of workers plan to delay retirement to earn more. That’s down from the 41% who planned to do so last year.
  • Yet, Americans are only on track to replace 58% of their current income in retirement. That’s DOWN from the amount of income they planned on replacing in retirement last year, which was 61% of their income.

The results of the survey may be baffling, but they’re also telling:  The survey says more Americans are confident about job security and housing values and so fewer Americans plan on delaying their retirement.  Yet Americans are on track to replace less of their income with retirement assets and investments, which could leave these consumers in a bind a few years down the road.

“Judging from these findings, it seems that while Americans are more confident in their readiness for retirement, they may also be unaware of exactly how much they’ll need to be retirement ready which is a potential problem,” President of Consolidated Credit, Gary Herman says. “If you don’t know how much you need, how can you save sufficiently? Folks often overlook the costs associated with the considerable healthcare services needed during retirement, costs that can eat up a chunk of retirement savings quickly. It cannot be ignored, however, that one of the best ways to prepare for retirement is to begin the process early.”

Boomers may have a harder time playing catch up and may need to take a more rigorous approach in increasing their savings, but the younger generation can use these cues and start planning early to make sure they don’t make the same mistakes.

“We live in an age where the hurdles for millions of individuals to secure a sustainable, dignified retirement seem daunting, yet are achievable,” Edmund F. Murphy, III, President of Empower Retirement says.

A successful retirement seems out of reach for many but there are ways to alleviate some of the problems before getting there.

Retirement preparedness tips and lessons from the survey

Survey: Respondents with a financial advisor are currently on track to replace 82 percent of their current income in retirement. Those without an advisor are only on track to replace 55 percent.

Tip: Hire a financial advisor.Seek their counsel but do your research first. Some reports show that brokers are selling Americans who want to save for retirement, plans that yield a larger return beneficial to them and not the clients. This practice could be costing Americans currently saving for retirement up to 17 billion dollars each year, so it is important to do your due diligence and find a professional who will put your interest ahead of their own.

Survey: The majority of individuals saving for retirement aren’t prepared enough for the potential healthcare costs they’ll face during retirement.

Tip: Contribute to a healthcare plan. Healthcare is costly and regrettably some Americans are finding this out during retirement. Save yourself the unwelcome surprise by applying for healthcare insurance and allocating savings specifically for healthcare. Take care of yourself; the last thing you want to worry about in retirement is medical debt. 

Survey: Access to workplace savings plans has a significant impact on retirement preparedness.

Tip: Match company 401 (k) Plans. To help workers help themselves in preparing for retirement, Congress enacted a law that allows companies to automatically enroll their employees in their 401(k) plans as soon as they’re eligible. Take advantage of the offer and review your plan carefully. Match whatever it is that your company is offering, if not to the fullest but as closely as possible. If you’re not sure whether your company offers these plans, be proactive to find out and start contributing as soon as you’re eligible.

Survey: Interestingly enough, Lifetime Income Scores (the measure of your ability to replace income in retirement) are driven much more by savings behavior than by actual income earned. 

Tip: Employ good savings habits regardless of income. Apparently your saving habits bear more weight on how much of your income you will be able to replace in retirement than the amount of money you earn. This makes sense and supports the finding that even investors are delaying their retirement because they don’t think they saved enough to retire at the traditional age. Learn from this and start saving early.

Survey: Financial education is essential in helping prepare for retirement.

Tip: Get educated.  Reports have shown that Boomers delay retirement due to lack of financial education, and financial education leads to retirement readiness. For those still in the workforce, be sure to take advantage of financial wellness programs offered at work – especially if they are free to use.

If they’re paid, there are a host of companies like Consolidated Credit that offer free financial education to the public. Check out our free resources on retirement planning and tools to help you build a healthy financial outlook. Whatever your needs or concerns, don’t be shy about calling 1-888-294-3130. Our counselors are certified and will be happy to help. You may also request help online.

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April Lewis-Parks
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