Survey highlights lack of planning among workers, retirees

Fewer than 1 in 5 workers and only about one-quarter of retirees surveyed have a written financial plan. Fewer than 1 in 5 workers and only about one-quarter of retirees surveyed have a written financial plan.

Most Americans lag in their readiness for retirement. And a chief reason is lack of planning.

This is a key finding of Voya Financial’s “Voya Retire Ready Index,” which measures the retirement readiness levels of Americans who are working or recently retired. The study shows how each group of individuals score on an average basis. The report also examines the attributes of those who score at the highest levels to learn more about what they do to prepare.

Workers surveyed by Voya averaged a score of 4.1 out of 10 in the index. Retirees performed slightly better, averaging a 5.5.

"While it's clear that individuals can improve upon all aspects of their retirement readiness, our study suggests that planning is an important lever — and an area where even more support is needed,” says James Nichols, head of Retirement Income and Advice Strategy for Voya Financial. 

Voya designed its Retire Ready Index on the premise that successful retirement preparation involves three components:

1) Sufficient knowledge and awareness of how to prepare ("knowing").

2) Accurate and comprehensive planning activity ("planning").

3) Adequate savings to generate sufficient income replacement ("having"). 

Voya's study finds that out of the three categories, both workers and retirees score highest on knowledge, but lowest in planning. Workers average a 3.0 in the planning category, while retirees score slightly better at 4.2. 

The findings show that fewer than 1 in 5 workers (17 percent) and only about one-quarter of retirees (26 percent) have a written financial plan. Roughly one-third of workers (31 percent) and retirees (35 percent) have a comprehensive budget. 

The study also reveals gaps in retirement income planning: More than 6 in 10 workers (63 percent) have never attempted to calculate what their savings would be if converted into future monthly income.

"While knowledge of retirement-related concepts is an important foundation which should always be improved, the findings reinforce what we know is required to help advance retirement readiness — more individuals need to put their knowledge to action," says Nichols. 

Despite their low planning scores, a significant majority of those surveyed agree that certain planning-related activities would boost their confidence and control. More than 8 in 10 workers (83 percent) and three-quarters of retirees (76 percent) confirm that calculating the amount of future monthly income their savings produced would provide at least a moderate boost in confidence.

You can see the infographic on the next page.

Two-thirds of workers (66 percent) say using self-directed financial planning and budgeting tools would provide this same benefit.

Voya's study also finds that a sub-set of workers and retirees are more proactive and well-prepared; and they average the highest scores on the index. 

Key findings related to these two highest-scoring groups include the following:

  • Nearly two-thirds of these workers (65 percent) have a written budget, and almost half (45 percent) have a formal written financial plan.

  • More than two-thirds of the retirees (68 percent) have a financial plan and approximately 8 in 10 (81 percent) have a relationship with a financial professional.

  • A significant majority of workers (85 percent) and just over half of retirees (51 percent) report owning more than $100,000 in life insurance coverage.

  • More than 8 in 10 workers (82 percent) and nearly the same number of retirees (78 percent) have a specific strategy for investing their assets.

  • Nearly all of the retirees in this group (97 percent) are happy with their financial security. And more than 8 in 10 (81 percent) retired because they wanted to.

  • Nearly all workers in this group (96 percent) report being somewhat or very confident in about their retirement preparedness.

The study incorporated two surveys that were conducted with Greenwald & Associates, Inc. The surveys asked current workers and recent retirees questions related to the three retirement readiness components. Using the survey results, Voya calculated scores on a scale from zero to 10 in each category, and then again on an overall basis to determine a combined score.

Voya's infographic is below (click or touch to enlarge view).

voya infographic

 

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