Driven by the recession hangover, most Americans have pushed aside retirement savings priorities, which rank a distant second to paying monthly bills, according to new research from JPMorgan released Monday.
And despite the fact that 401(k) plans are the only or the primary source of retirement savings for two-thirds of Americans, 45% of the 1,014 people interviewed for the online study conducted for JPMorgan by Harris Interactive said they never call or visit websites to monitor the progress of their savings.
“Driven by the recession, people are paying more attention to financial issues, but they are doing so on a near-term basis,” according to the results of the J.P. Morgan study, published in a white paper titled “Searching for Certainty.” ”Many participants remain accidental investors, those who are taking advantage of an employee benefit program without actively managing their accounts. Apparently, longer-term issues, such as saving for retirement, have been placed on the proverbial back burner.”
Companies’ declining use of traditional defined benefit (DB) plans has created problems for employees who must now perform those calculations themselves. Early Boomers now represent the first wave of retirees whose savings plans are built predominantly in the defined contribution (DC) space, and they appear ill-equipped to translate their DC balances into an income stream at retirement, the study shows.
“Paying monthly bills, credit cards and mortgages accounts for 71% of individuals’ top priorities,” said Donn Hess, managing director of product development at J.P. Morgan Retirement Plan Services in a statement. “It is extremely difficult to convince participants that retirement should be more important than any of these financial concerns. That’s why we have to make it hard for people to fail as savers and why the right 401(k) plan design is so essential to the mix. Automatic programs can make the difference between someone who can afford to retirement and someone who cannot.”