The Pulse

Most Americans Ill-Equipped In Financial Retirement Planning

Nearly a quarter of survey respondents says retirement savings wouldn’t stretch five years

In its 2020 study, Investor Aptitude: Are You Ready to Manage Your Retirement Finances?, MoneyRates, a QuinStreet industry resource, consumers are likened to ’steering the Titanic without a map. Access the full report here.

FOSTER CITY, Calif., April 30, 2021 /PRNewswire/ — Many Americans may be steering the Titanic without a map when it comes to retirement finances. A new MoneyRates.com survey finds a significant portion of the population understands very little about retirement planning and lacks essential information to make the right moves.

The personal finance website polled 1,000 Americans who are either within 20 years of retirement age or have already reached that age. The results reveal roughly two-thirds of respondents haven’t made any kind of projection of how their savings will hold up in retirement.

“A person’s savings is a basic building block of retirement planning,” remarks Richard Barrington, MoneyRates’ senior financial analyst and author of the survey. “One needn’t be a financial expert to take control of retirement planning. People should take the initiative to get the help they need to feel comfortable with their retirement plan.”

Key Survey Findings:

  • Most respondents (54.90%) haven’t formulated a monthly budget for what they could afford to spend in retirement.
  • About one in four (25.80%) expect their retirement savings would last less than five years.
  • Nearly a quarter (23.10%) say if their retirement savings fall short, they’d simply go back to work again.
  • While just 20.95% of people who haven’t started collecting Social Security intend to begin taking those benefits at age 62, well over twice as many – 49.28% – of those who had begun collecting Social Security did so at age 62.
  • A third of survey respondents (33.30%) admit they do not know much about retirement planning concepts.
  • Of the respondents who own stocks, more than a quarter (26.86%) don’t know what percentage of their retirement savings those stocks represent.

“Stocks are the riskiest of all investments people own,” adds Barrington, “so it’s rather shocking that roughly a quarter of those responding to our survey don’t know how much they own in stocks.”

Since these survey results make it clear that many Americans need help with retirement planning decisions, MoneyRates suggests consumers use its resources, such as a retirement savings calculator and a guide on understanding robo advisors for assistance.

Excerpts From the Study Investor Aptitude: Are You Ready to Manage Your Retirement Finances?

1. Planning to Meet Retirement Income Needs

Do you have a budget for how much you’ll be able to spend per month in retirement?

No 54.90%
Yes 45.10%

A planned spending budget should be the cornerstone of all retirement planning. Without knowing how much money you’ll be living on, you won’t know how much to save for retirement. Once you reach retirement, without a budget you’ll have no idea how long your retirement savings will last.

Sadly, most respondents indicated that they do not have a retirement budget. Even when responses were broken down to just people who are already retired, nearly half – 46.87% – indicated that they do not have a spending budget. That’s a lot of people who are not in control of how long their retirement savings will last.

One needn't be a financial expert to take control of retirement planning. People should take the initiative to get the help they need to feel comfortable with their retirement plan...

2. How Long Will Retirement Savings Last?

For how many years do you expect your savings would last at your current spending rate?

10 to 20 years 28.60%
5 to 10 years 19.30%
Less than 5 years 25.80%
More than 20 years 26.30%

To put these responses in perspective, consider that, according to the Centers for Disease Control, the average life expectancy once a person reaches age 65 is 19.4 years. At age 75, the average life expectancy is 12.2 years.

For retirement-planning purposes, since roughly half the people will live beyond the average life expectancy, it’s important to save enough to last beyond that average.

Looking at these responses, not quite a third have saved enough to last more than 20 years. For the remainder, this means there’s a good chance of outliving their savings.

This is especially true of the one in four respondents whose savings would last less than five years. That group is in near-term danger of running out of money unless they radically change their spending habits.

3. Accommodating a Retirement-Savings Shortfall

People are living longer. If your retirement savings wasn’t adequate for the long haul, what would you do?

Live at a lower standard of living 43.10%
Live with a roommate 5.80%
Move to a different city or country 8.80%
Rent your home and move in with family 5.20%
Sell your home and rent 14.00%
Start working again 23.10%

One motivation to save for retirement is to consider the consequences if you don’t save enough. Most of the responses given above involve a meaningful change in lifestyle if retirement savings don’t last.

As for the 23.10% who say they’d go back to work, that’s easier said than done. Going back to work after retirement depends on your health, maintaining up-to-date job skills, finding an employer willing to take on older workers and the strength of the job market.

Certainly, saving for retirement involves some sacrifices now. Just keep in mind you may be forced to make even bigger sacrifices in the future if you don’t.

 

 

 

Methodology
MoneyRates commissioned a survey of 1,000 people, half aged 65 or above and half between the ages of 45 and 64. Thus, half of respondents had reached the traditional retirement age and half were within 20 years of reaching that age. Questions were designed to explore key retirement-planning decisions people face before and after they retire.
Barrington is available for interviews and can discuss this survey and many other issues related to personal finance.
About MoneyRates
MoneyRates is owned and operated by QuinStreet, Inc. (Nasdaq: QNST), a leader in providing performance marketplace technologies and services to the financial services and home services industries. QuinStreet is a pioneer in delivering online marketplace solutions to match searchers with brands in digital media. The company is committed to providing consumers with the information and tools they need to research, find and select the products and brands that meet their needs. MoneyRates is a member of QuinStreet’s expert Research and Publishing Division.
Since 1998, MoneyRates has served as a personal finance resource designed to help readers make the most of their money. In addition to a variety of financial calculators, MoneyRates.com researches and tracks CD, savings, and money market rates offered from over 400 financial institutions across the country to offer expert advice on banking, investing and retirement planning.

 

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