Notwithstanding a strong U.S. economy, only one in four Americans say they feel financially prepared for retirement, according to a report just issued by the Certified Financial Planner Board of Standards: Close to 80% of participants surveyed say they are not reassured that they have the best retirement savings strategies available to them; the CFP Board states that this may have to do with individuals not knowing what options exist.
Three in 10 respondents do not know whether their current employer offered a retirement savings plan. A quarter of respondents complain that saving for retirement is too complicated. (The poll took place in early April among a national sample of 2,200 adults.)
“With so many Americans getting a late start on retirement savings, the odds are high that they will be unprepared to maintain the lifestyle they’re accustomed to living,” according to Kevin Keller, the CFP Board’s chief executive.
“Americans know how important it is to save for retirement, but the truth is more than a third of those surveyed are overwhelmed by the process and, critically, many do not understand what products and resources are available to them,” he added.
Even so, 60% of survey respondents who receive retirement advice from a financial professional say they have “definitely” benefited from this service. In addition, 54% believe they would benefit from receiving professional retirement savings advice if they were to use it in the future.
According to the survey findings, nearly 50% of respondents think adults should start saving for retirement in their 20s. Few follow their own advice, the CFP Board noted. It said 26% of Americans delay saving for retirement until their 30s, while another 15% wait until their 40s. Worse, 8% wait to start saving for retirement until after they turn 50.
“The nuances to retirement savings vary based on circumstantial factors, such as what you can afford to save and what savings programs are available to you,” Keller explained. “This survey shows there is still a lack of clarity about what options are available to retirement savers, including ethical and competent financial advice.”
The executive says it is time for Congress, the administration and other stakeholders, including the CFP Board, to jointly develop new solutions to meet the retirement crisis. A report commissioned by the group and drafted by Fred Reish, an expert in retirement issues and partner at Drinker Biddle, will be released by year-end. The Retirement Issues Working Group, a blue-ribbon panel of CFP professionals that provides on-the-ground, practical experiences with retirement security issues, will contribute to the document.
Impact of Wellness Programs Separately, Financial Finesse’s latest review of financial wellness reveals that employees who used their financial wellness program regularly improve in all areas of financial planning. The greatest improvement shows up in retirement preparedness. In 2013, 21% of study participants said they were prepared for retirement. By last year, that number rose to 57%.
The study also finds that average retirement plan contribution rates have risen to 9.4% from 6.3%, and average contributions to a health savings account have increased by 41%, to $1,319 from $934.
Close to 70% of employees who use financial wellness programs say they are feeling confident in their investment strategy, up from 43% in 2013. The study includes results of a multi-year study focusing on close to 2,500 employees who regularly engaged with their employer’s personal financial wellness program from 2013 to 2018 to determine financial progress.
“The study’s findings have significant implications for what some industry experts have called a retirement crisis,” Financial Finesse’s chief executive Liz Davidson said in a statement.
“Employers have spent millions of dollars trying to address this problem,” she added, “through incentivizing employees to save by matching their retirement plan contributions, automatically enrolling employees into their retirement plans, and providing employees target date fund and professionally managed accounts designed to invest their assets in line with their retirement goals.”