It is said that numbers don’t lie, and when it comes to retirement planning, the recent numbers are downright distressing with only 13% of people saying they feel confident they can afford a comfortable retirement. This is according to a recent Retirement Confidence Survey by the Employee Benefits Research Institute.
When you consider the findings of another recent survey, those results aren’t surprising. According to a nationwide survey conducted by TheStreet’s MainStreet.com, nearly 70% of Millennials (the so-called Generation Y) have taken no steps yet to save for retirement.
Clearly a lot of Americans will have a lot of catching up to do as they get closer to retirement age, and that is making the role of the retirement planner more challenging than ever. And as both of these surveys reveal, the recent economic downturn played a significant role in setting people back.
For many people there is not a lot of disposable income right now, according to Ross Kenneth Urken, personal finance editor at TheStreet.
“Many people feel they can’t afford to plan ahead 30 years; it is a matter of survival of the immediate,” Urken said. But the unfortunate irony is that no one can afford not to plan for retirement. Social Security benefits alone just don’t cut it.
The even greater irony is that TheStreet survey reveals that the same Millenials that are taking no steps to prepare for retirement also have little confidence that Social Security will even be there for them. Clearly, the future is just not on their minds.
Urken said he wasn’t really surprised at TheStreet’s survey results. After all, thoughts about retirement are “basically a generational view,” he said. Driving interest in retirement planning for the typical individual is employment picture, marriage, and then children.
Also generational are views on what government assistance the typical American can count on in retirement, according to Urken. “When we asked if they thought they would be able to collect Social Security, 83% of Boomers said yes, while 54% of Millenials said yes,” he said.
But the survey numbers that most impress Urken are the contrasting fact that “two in three Millenials expect to retire at age 65, but 70% have taken no steps to do so.”
In addition to the sin of starting too late, the other retirement planning issue that plagues many Americans is a lack of awareness on what they need to act on, or where they need to invest.
“When you ask a question as simple as, ‘Have you done some sort of calculation of how much money you’re be needing in retirement,’ half the people say they have never done that, so it really looks like people aren’t thinking much about retirement,” said Craig Copeland, a research analyst with the Employee Benefits Research Institute. “When they’re thinking about finances, they’re thinking about how to get through this year, not—especially if they’re in their 30s—how do you get through 30 years later.”
A non-profit research organization based in Washington DC, the Employee Benefits Research Institute has been studying consumer confidence in retirement planning for a few years, and the results are never encouraging. Consider another statistic from the recent Confidence study: only 23% of survey respondents said they felt they were doing a good job of financially planning for retirement.
“In some cases, maybe their parents have done pretty well on Social Security, or their grandparents have,” Copeland said. “But things have changed. And unfortunately, people don’t really understand the Social Security system and how it works.”
Individuals counting on Social Security alone today may be in for the shock of their lives.
But there is some good news in all of this. For one, the problem is getting noticed. As noted in the recent report “HR’s Role in Preparing Workers for Retirement,” published by the Society for Human Resource Managers (SHRM), “Evidence is mounting that many Americans are unprepared financially for their retirement. New data shows that HHR professionals and employers are becoming increasingly aware of the problem, and they are giving workers more guidance and options for their eventual departure from the labor force.”
That fact is confirmed by recent data from the U.S. Census Bureau that revealed that the number of employers that are offering a sponsored pension or retirement plan is up slightly in 2013 from a year ago, from 59% to 61%.
But again, not enough workers are taking advantage of those offerings. According to the Census Bureau data, among workers that have retirement plans available, 46% partake in them. That number rose only 1% in the past year, from 45% to 46%. Even more discourage, it is down from 10 years ago, when those participating was 48%.
Source: The Street