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.