And 3 things you should do about it
9 Findings from the Retirement Planning Survey
by Gary Foreman
Will Boomers Have Enough to Retire?
Fine with a Small Salary?
A Tool to Determine the Best Time to Take Social Security Benefits
The Employee Benefit Research Institute recently came out with their 2016 Retirement Confidence Survey. There are a number of interesting findings, especially for baby boomers and those thinking of retirement.
For instance, current workers' confidence in their ability to pay for basic expenses in retirement has increased since 2013. At that time, only 16 percent were very confident. Today 43 percent are that sure.
Or consider workers confidence that they're doing a good job of preparing for retirement. In 2013, only 28 percent said "not at all." By 2016, that number is 38 percent for those without a retirement plan but only 11 percent for those with a plan.
Workers also are expecting to work longer. Twenty-five years ago, fully 50 percent planned to retire before age 65. Today 37 percent expect to retire later than 65 and 6 percent say they do not plan to retire at all.
At the same time, almost half of those who are retiring report that it's happening sooner than they had planned. Fifty-five percent say it's due to health issues. But 33 retired earlier than planned because they could afford to.
There's also a big difference between workers and current retirees in their dependence on Social Security. Fully 62 percent of existing retirees say SS is a major source of their income. However, 84 percent of today's workers expect SS to play the same role for them, which is a considerable increase.
It is assumed the recession affected the number of workers who had money saved for retirement. Back in 2009, 75 percent said they had savings. Today that number has dropped to 65 percent. The assumption would be that they consumed money saved for retirement for current expenses.
Age makes a difference in retirement savings, too. Workers between the ages of 35 and 54 are just as likely to be saving money as their counterparts 10 years ago. But among younger workers aged 25 to 34 the number saving for retirement has dropped from 70 percent to 55 percent. It was not cited in the study, but rising student loans could be a reason.
The amount saved could fall far short of what they'll need in retirement. Fully 75 percent report that they and their spouses have saved less than $25,000 for retirement (excluding their home and defined benefit pension plans). About 28 perdcent of them have saved less than $1,000!
Finally, less than half of the workers surveyed have done a calculation on how much money they'll need at retirement. Not surprisingly those who have done a calculation are more likely to have a higher target for savings.
So what can you do with this information? If you're among the 50+ percent that haven't calculated what you'll need for retirement, do it. The National Association of Personal Financial Advisors can point you to a fee only planner who can help with the calculation. Or you can use one of the many online calculators. A popular one is on the AARP site.
Next, create a savings plan that will get you to your retirement savings goal. Again, you'll want to use a fee only planner or online calculator to know how much you'll need to save each year.
Then make retirement savings part of your regular budget. It's not an afterthought. Something that you'll do only if you have money left over. Cut other expenses or seek another source of income if necessary.
Saving for retirement is not an option. According to the Social Security trustees, there are currently 2.8 people working for each person collecting benefits. And that ratio is gradually going down. So unless you're already up in years or plan on living in poverty, it's important to have and execute a retirement savings plan that's not totally dependent on Social Security.
Updated December 2016
Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com. Gary shares his philosophy of money here. You can follow Gary on Twitter. Gary is also available for audio, video or print interviews. For more info see his media page.
Take the Next Step:
- Subscribe to After 50 Finances. You've learned how to work smarter, not harder. This weekly newsletter is dedicated to people just like you. Subscribers get a FREE copy of our After 50 Finances Pre-Retirement Checklist, a list of everything you need to do to be ready for retirement.
- Determine if debt could derail your retirement and what you can do about it now. Our checklist can help you. Afterall, one of the most important ingredients for a comfortable retirement is to be debt free when you retire.
- Find tools and resources geared specifically for the 50+ crowd in The Dollar Stretcher section dedicated to your financial issues. If you're over 50, your financial needs are different. And so are your questions.
Share your thoughts about this article with the editor.