The survey found that only a quarter of all Americans and less than a third of Americans over age 50 worked with a financial professional to plan for retirement. However—even controlling for income—those who did were more likely to be contributing to a defined contribution plan or IRA. Seventy percent reported that their financial professionals recommended how much they should save for retirement. These findings suggest that financial professionals can have a positive influence on their clients’ saving behavior.
“The findings from this survey were disturbing, given that people will increasingly need to rely on their personal savings to make ends meet in retirement,” Matthew Drinkwater, associate managing director of LIMRA Retirement Research, said in a statement. “It was especially troubling to see that a larger portion of younger Americans—who are less likely to have a defined benefit plan—are not saving for retirement in IRAs or defined contribution plans. In order to have the adequate savings necessary to meet their financial needs in retirement—which could last 20 or more years—it is critical that these individuals begin saving systematically early in their working years.”
Younger and higher-income consumers are more likely to be considering contributing to an IRA in the next year. But nearly half of all consumers said they are not planning to contribute to an IRA because they could not afford to do so.
“In the long run, these individuals would benefit if they made even modest contributions to a pre-tax savings plan that could accumulate until retirement,” Drinkwater said.
The survey also revealed consumers’ lack of knowledge about IRAs. On average, consumers answered almost half the questions posed about IRAs incorrectly; those consumers who currently contribute to IRAs answered only slightly better than non-IRA owners.
“Despite the extensive news coverage on the need to save for retirement, a large number of Americans are not heeding the warnings and preparing financially,” Drinkwater concluded. “Our survey shows that consumers often lack understanding of the savings vehicles that could help them attain their financial goals for retirement.”