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Saving for Retirement ‘Not Main Priority’ for Working Americans: HSBC

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For the majority (81%) of working-age Americans, saving for retirement is not their main priority, according to HSBC’slatest report, “The Future of Retirement: A Balancing Act.”

“For many working-age people, saving enough for a comfortable retirement is difficult,” said Charlie Nunn, group head of wealth management for HSBC, in a statement. “The global economic downturn has hit retirement saving hard. Many people have had to rethink their retirement plans and there are other priorities too — families to support and mortgages to pay.”

The U.S.-specific findings — out of a global report that represents the views of more than 16,000 people in 15 countries — reflect a nationally representative survey of 1,000 people of working age (25 and older) and in retirement based on an online poll conducted by Ipsos MORI in August and September.

The HSBC report found that debt repayments are the biggest barriers preventing working age people from adequately preparing for a comfortable retirement. According to HSBC, a quarter (25%) of pre-retirees say they are paying off their mortgage, while over half (51%) say they are paying off other debts.

Other priorities included saving for children’s education, a rainy day or a vacation.

It’s these “more immediate financial commitments” and other life events that have had an impact on pre-retirees’ ability to save for retirement, HSBC says.

According to the report, 76% of working-age people has had their ability to continue saving for retirement impacted by a major life event.

“While some of these events can be planned for, such as buying a home or paying a mortgage (27%) or starting a family (13%), unexpected events can also have a significant impact,” the U.S.-specific findings state. “Unforeseen life events like illness, divorce or losing a spouse can have a significant impact on a person’s financial situation, before and after retirement.”

More than 1 in 10 working age people (14%) faced an unexpected illness that stopped them or their spouse from working, with a knock-on effect on their retirement saving. In addition, unemployment affected the abilities of 27% of those surveyed to effectively save for retirement.

HSBC also found that nearly twice as many (33%) widowed or divorced retirees said their financial situation was worse than expected, compared with just one in five (18%) of those who are married.

But, the most significant life event cited as having an impact on people’s ability to save for retirement is the global economic downturn, according to 30% of Americans surveyed.

An economic downturn can also have spiraling effects in other areas of pre-retirees’ economic well-being – with 27% saying that losing their job, getting into debt/having severe financial difficulty (25%) or seeing a significant drop in their earnings (25%) affected their ability to save for retirement.

“Despite recent signs of recovery, people’s retirement saving has been, and continues to be, significantly impacted by the global economic downturn,” the report says of the U.S. findings.

Compared to before the recent global downturn, HSBC found that many working age people have either stopped or reduced their retirement saving, whether through cash deposits (25%), investments (24%), annuities (23%), personal pension schemes (21%) or employer pension schemes (20%).

As the country recovers from the global economic downturn, so does financial confidence among some. According to HSBC, 41% of pre-retirees reported feeling more confident about their future financial prospects than a year ago, and confidence is even higher among preretirees in Los Angeles (65%) and New York City (55%) than the nationwide average (41%).

 

—Related on ThinkAdvisor

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