Start Saving by 30 for Retirement Preparedness: TD Ameritrade

Study finds self-reported prepared boomers started saving earlier than unprepared boomers

A report released Thursday by TD Ameritrade looked at the difference between boomers who are prepared for retirement and those who are not. What it comes down to, according to the report, is to start saving before age 30 and talk to your children about finances and money management to keep them on track as well.

Prepared boomers were more likely to save for retirement by 20 percentage points, the report found, and they started saving at a younger age than unprepared boomers. The median age at which prepared boomers began saving was 30, compared with 35 for unprepared boomers.

Prepared boomers may also have had advantages unprepared boomers didn’t. The survey found prepared boomers were more likely to have family members that could help with financial obligations like paying for college or a new home, and had lower health care costs on average.

Those influences had a greater impact on boomers’ retirement preparedness than more obvious factors like education and income. However, their parents’ influence had a dramatic effect on boomers’ preparedness. Less than 30% of unprepared boomers said their parents talked to them about money management and saving for retirement, compared with 42% of prepared boomers.

Over half of prepared boomers are generally conservative with their money, even in good financial times, compared with just 35% of unprepared boomers. Prepared boomers, unsurprisingly, tend to be more patient as well, and plan carefully (53%), compared with 38% of unprepared boomers.

Respondents were asked to identify themselves as prepared or unprepared based on how they felt about their retirement prospects.

Prepared boomers recognize the impact that budgeting and regular saving have on their retirement prospects. When asked what has helped them the most, 37% said that was the reason for their success. Twenty percent pointed to their company retirement plan, the same percentage who said controlling their spending and keeping debt low was how they managed to stay on track for retirement.

Unprepared boomers were asked what caused them to be off track, and, naturally, the economy played a large part. Over a third said unemployment or underemployment was the reason they were behind in saving for retirement and 33% said the economy and high costs of living were the culprit. Twelve percent said the high cost of health care hindered their planning and saving.

While the recession certainly played a role in unprepared boomers’ relative failures, they aren’t placing the blame entirely on larger economic problems. Nearly said they were already off track before the recession started.

“Clearly, behavior trumps externality,” Lule Demmissie, managing director of investment products and retirement for TD Ameritrade, told AdvisorOne on Monday. She added that it’s never too late for boomers to start saving and planning, but cautioned that it may mean they have to redefine what retirement is for them.

Head Research surveyed 2,000 pre-retirees and retirees in October on behalf of TD Ameritrade. Respondents were evenly split between men and women, and most respondents fell in the “prepared” category (1,430 compared with 570).

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