Survey: 55 percent behind on retirement planning

Disappearing pensions, personal contributions to 401(k)s, a tough economy and the lasting impact of the financial meltdown – the varied elements of retirement planning weave a web of challenges for those considering leaving the regular workweek for what was once considered a time to wind down a bit and step up long-delayed, personal pursuits.
About 55 percent of Americans, however, are not financially prepared for retirement, according to the findings of the “2013 Retirement Savings Assessment” by Fidelity Investments released Dec. 4. Baby boomers are somewhat more financially prepared to leave the workforce, compared to the track being followed by Gen Xers born between 1965 and 1977 and Gen Yers born between 1978 and 1988.
“More than half of Americans risk falling behind on the road to retirement,” said Lauren Brouhard, senior vice president for retirement for Fidelity Investments.
Fidelity surveyed 2,200 households across the nation, made up of customers and noncustomers, on financial-planning topics such as savings, income, home equity and pensions in an effort to track and understand retirement-planning trends.
“We estimated what percent of their retirement expenses they’re on track to cover,” said Brouhard. The information led to a score, called a Retirement Preparedness Measure, of up to 100 percent, which estimates what percent of retirement expenses a household would be able to cover, even in a down market.
“It varies a lot by generation. The baby boomers, which is the generation that is entering or on the cusp of entering retirement in the next five to 10 years, they had a score of 81,” said Brouhard. Baby boomers were born between 1946 and 1964.
“We were pleasantly surprised at the number of baby boomers on track,” said Brouhard. “The big differentiator for the baby boomer generation is that many of them still have the benefit of a pension.”
Changing workplace structures, heavily influenced by the stresses of the economy, are impacting the retirement readiness of the Gen X and Gen Y generations.
“The younger generations – people in their 20s, 30s or even 40s – are unlikely to have the safety net of a pension,” said Brouhard. “So it’s going to be even more important that they start saving early.”
A good starting point to approximate what’s comfortable is that people will need 85 percent of their pre-retirement income to live on in retirement, but that varies widely by lifestyle and goals, said Brouhard. Certified Financial Planner Oliver R. Tutt, managing director of Randall Financial Group in Providence, said Rhode Islanders “are reasonably representative of the survey. Generally, people are under-prepared for retirement.”
What about the impact of Rhode Island’s stubbornly sluggish economy on retirement readiness?
“There’s no question some of it is related to the economy. We see savings rates decline when people are out of work or underemployed,” said Tutt. “But I don’t think that has an impact on the overall trend.”
The finding that age has the most significant impact on retirement planning holds true with Tutt’s clients.
“I think a lot of it follows age,” said Tutt. “The average age of our clients is in the mid-50s, when people really start to prepare.”
The dramatic changes in corporate policy are adding to the lack of preparedness for creating a solid financial foundation for retirement, said Tutt.
The shift away from defined benefits, the most substantial of which is a pension, to defined contributions, such as a 401(k), is creating an increasing lack of retirement preparedness, he said.
“It’s not a savings-rate problem. It’s putting people in charge of a lifelong decision they have little interest in or capability of handling,” said Tutt. “It’s become do-it-yourself financial planning for retirement.”
“Most individuals don’t have enough experience in investing and aren’t able to invest money dispassionately, so they generally make blunders,” said Tutt. “That keeps me in business, but it’s really an unfortunate trend.”
Dramatic shifts in the health care industry are likely to have long-term impacts on retirement planning for nurses. Findings from a separate survey by Fidelity Investments, the Nurses Retirement Study, released Dec. 16, found data similar to the population as a whole – baby boomer nurses are better prepared for retirement than their younger colleagues.
The survey of nurses found that 76 percent of Gen X nurses are concerned that they will never be able to retire. That compares to 53 percent of nurses in the baby boomer generation who are worried that they will never be able to leave the workforce. •

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