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In Retirement Planning, Knowledge Doesn’t Always Lead to Action

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In a retirement readiness index from Voya, retirees scored a little higher than workers, but both groups show room for improvement. Voya named respondents who scored a seven or higher “role models,” but as a group, retirees scored 5.5 and workers scored 4.1.

The overall scores were based on three categories. Both groups fared best in the “knowing” category, which measured respondents’ understanding of retirement and general financial concepts like how workplace plans are taxed, how target-date funds work and which types of investments represent lower risks. Here retirees scored a seven, while workers scored a 5.8.

The “having” and “planning” categories asked retirees slightly different questions from workers, but in general, the having category rated how well respondents have prepared for retirement. Retirees scored 5.3, and workers naturally scored lower at 3.5.

Both groups struggled in the planning category. Respondents were asked about the actual steps they’ve taken to prepare for retirement, like meeting with a financial planner, calculating how much they need to save or thinking about health care. Retirees scored a 4.2 and workers scored only three.

“While higher knowledge scores revealed that both groups have a relatively good understanding of certain financial concepts and rules, lower ‘planning’ and ‘having’ scores suggest that they did not or could not put that knowledge into action to achieve higher levels of readiness,” according to the report.

The report is based on two online surveys conducted last summer by Greenwald & Associates. The firm surveyed about 2,000 workers and retirees.


Two-thirds of workers said they felt at least confident about their chances for a financially secure retirement, but it may be entirely misplaced looking at other data that came up in the survey. Workers themselves had some misgivings, as 31% said they were very concerned about outliving their savings and 28% said they were extremely concerned.

That concern isn’t translating into action, either. Although 87% of workers said creating a holistic financial plan is an important step in planning for retirement, only 17% said they have a formal written plan and 31% said they have a written budget.

Almost half of workers have less than $49,000 saved, and 9% don’t even know how much they had saved.


Retirees showed the same kind of overconfidence that plagued the worker group. The report found 82% are at least somewhat confident about their level of comfort in retirement, but of the two-thirds who expect to live longer than 20 years in retirement, only 40% think their savings will last that long.  

And while they recognize the importance of creating a holistic plan (73%), just over a quarter have a formal written plan and 35% have a written budget.

As you would expect, retirees had more saved than workers. Forty-six percent had between $150,000 and $1.5 million, but 21% didn’t even have $49,000 saved. Thirteen percent weren’t sure how much they had saved.

Role Models

Individuals who scored a seven or higher on Voya’s index were considered “role models.” Role models in the worker group were more likely than their peers to own several different kinds of products and considered their workplace plan a “major source of income in retirement.”

They were four times as likely than their lowest scoring peers to have given a “great deal” of thought to retirement issues like savings goals (70% versus 16%), whether those goals will meet their needs (68% versus 13%), the cost of health care in retirement (66% versus 14%) and the age at which they wanted to retire (59% versus 14%).

Over half of these worker role models (56%) had a relationship with a financial professional, the study found, and they were very active in managing their investments, with most rebalancing assets at least once a year.

Retiree role models scored a little higher than worker role models — 7.4 to workers’ seven. While they were still working, these high-scoring respondents almost universally started saving early, maintained a holistic financial plan and kept an eye on their future monthly income based on what they were making at the time. Eighty-seven percent said they worked with an advisor they chose, and 77% said they used an advisor through their workplace.

Startlingly, 60% of the lowest scoring retirees said they never purchased any insurance or investment products. Almost half said they never planned for health or long-term care issues, and 40% said they didn’t plan for income in retirement.

The report noted that employers are essential to retirement readiness. Many of the respondents in both groups were better prepared because of the support they received from their employers through calculators, and planning and budgeting tools.

“Individuals must understand the importance of saving as soon as they enter the work force and they should treat it as a financial priority throughout their working lives so they have enough at retirement,” the report says.

— Check out 10 Best States for Retirement: 2015 on ThinkAdvisor.


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