Credit: Shutterstock photoMany eventual retirees actually save enough, many only feel they save enough. Some lag and fall even further behind on the long trek of retirement planning. Here's who they are and how they can catch up.
Mark Twain claimed British statesman Benjamin Disraeli said there are three kinds of untruths: "Lies, damn lies and statistics." As a lifelong personal finance junkie, I qualify that yes, some statistics are distractions.
Other stats put our financial progress in stark perspective. According to the latest " State of U.S. Employee Retirement Preparedness " study from financial education provider Financial Finesse , for example, 61% of respondents never ran a retirement calculation.
Heard about folks who hike the Appalachian Trail for 2,200 miles, end to end? Imagine if 61% of them ventured forth with no compass, no idea how long the trip would take or how much food they needed and wearing only a single pair of sneakers. A little crazy, right?
The road to retirement, a similar long-haul hike, requires planning. This study suggests most Americans are starting out blind and, beyond unprepared, with no knowledge of how or why to prepare.
While American retirement savers are making progress, many remain far behind. Financial Finesse founder and chief executive Liz Davidson notes that this year a fifth of employees expressed confidence they are on track to meet their retirement income needs, up from 18% in 2012 and 14% in 2011. "We believe the improvement is due to market appreciation and improvements in employees' investing behaviors, not increased savings," she adds.
"We're … very concerned about Millennials (born between the early 1980s and early in this century), women, and lower-income employees who are the demographics we see at highest risk for not achieving retirement security," Davidson stresses.
Three very big groups: If you aren't in one - or all - of them, I bet you know and care about someone who is. Consider these findings from the study:
- True, 20% of participants feel on the right track for retirement preparation - and 80% don't. The bulk of unprepared folks are young, female or both.
- Millennials lost ground, dropping to 17% prepared from 19%, despite almost nine out of 10 of them being enrolled in employer-sponsored retirement programs (automatic enrollees of all types generally contribute less to their plans, 3.5% to 4.4% compared with 7% for active enrollees). Experts recommend contributions between 10% and 15% to adequately fund a retirement account. "We view them as a lost generation disconnected from the retirement-planning process," Davidson writes, "of all the generations they are the least likely to be on track to reach their income-replacement target in retirement despite [having] a lot more time for their money to grow."
- Retirement preparedness among women rose to 17% from 13% - still lagging nine percentage points behind men. Women face much stronger financial headwinds than men, making it even harder and more important for them to adopt a retirement strategy. Davidson also notes that on average, women contribute about 6.9% of their pay into retirement savings and maintain an average retirement plan balance of less than $60,000.
If numbers fail to paint the picture for you, let's go back to walking the Appalachians. You need a guidebook or map. If you are young, female, below your income potential or any combination of the three, read the second edition of my On My Own Two Feet: A Modern Girl's Guide to Personal Finance , subscribe to a personal finance magazine such as Money or signing up for Go Girl Finance to read online.
Take a map, take a book and take a hard look at how retirement planning means a long hike.
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Manisha Thakor is the CEO and founder of MoneyZen Wealth Management in Santa Fe, N.M. - an independent boutique advisory firm focusing on the needs of high net worth women and families. Manisha regularly shares her financial insights on her blog, and her work has been featured in a wide range of media outlets includingThe Wall Street Journal, Forbes, The Boston Globe, The Chicago Tribune, MORE and Glamour. She is the author of two personal finance books aimed at women, and often appears as a guest on national television. Manisha earned her MBA from Harvard Business School, her BA from Wellesley College and is a Chartered Financial Analyst
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
