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19 June 2010
Results from a survey regarding retirement readiness has popped up in a few places on the internet. Here is a brief synopsis:
Outliving Your Money Is Feared More Than Death, Yet Consumers Remain Ignorant about Saving
June 18, 2010 — The past few days have brought a flurry of press releases and survey results on how fearful and unprepared for the future Americans are with regard to saving money:
Boomers Guessing at Retirement NeedsMore than 90% of baby boomers believe the United States is facing a retirement crisis, but most have a limited understanding of how much money they'll need, and they're afraid they'll outlive their income, according to a survey from Allianz Life Insurance Company of North America.
The study, "Reclaiming the Future: Challenging Retirement Income Perceptions,"which was conducted in May with more than 3,200 baby boomers ranging in age from 44 to 75, found that, while 61% of boomers fear outliving their money in retirement, 31% say they are not too clear about what their expenses will be, and 36% have no idea if their income will last.
A majority of respondents think their retirement lifestyle must surpass their parents (79%), indicating a need to focus on income in retirement versus accumulation of assets. When asked how much yearly income is needed in retirement, respondents indicated a median income of $59,000 per year. However, according to the report, respondents were off by a factor of nearly three times too small when estimating how much they'd need to save to create that household income.
What is important here to note is that the right questions were asked. To be reasonably sure you won't run out of money in retirement, you need to know about how much you will be spending in retirement and what your other sources of income will be. The issue is with fewer and fewer people retiring with defined benefit pensions, and social security looking like it won't be able to make payments at a rate of 100%, the only thing left is earned income (income from working) and portfolio earnings/income. This puts a lot of pressure on the "nest egg" during the retirement years. It is difficult as a financial planner to determine any of these numbers with 100% certainty (nothing in life is that certain except for 2 things--you know what they are!) but at least we can get an idea, by doing a financial plan, if you headed in the direction of financial security or headed towards a cliff. I personally would like to know if I'm headed towards a cliff because then I can do something to get going in the right direction.
