Survey Says | Published in June 2012

Have You Measured Your Retirement Readiness?

A large part of the job of a plan sponsor is to educate participants about retirement readiness.

By PLANSPONSOR staff | June 2012
Illustration by David Flaherty

But do we practice what we preach? This question led us to ask NewsDash readers whether they have used a retirement planning tool to measure their own retirement readiness and, if so, what they found out.

The vast majority of responding readers (92.2%) said they have used this type of tool, while the other 7.8% have not.  

The good news is, two-thirds of respondents said they are either ahead of the game (22%) or right on track to reach their retirement savings goals (44%). Twenty-two percent indicated they are behind but catching up is realistic, and 12% are so far behind they may never be able to retire.  

Among “other” responses, one reader said he did not need a tool to know his retirement readiness. Others responded that they used multiple tools and saw varying results. And some said they will be ready, based on whether certain circumstances do or do not play out.  

In the verbatim responses, several respondents indicated they have been hypocritical in touting the tools while neglecting to use one themselves, one reader responding, “I am a classic example of ‘do what I say, not what I do.”   

Others discussed the flaws inherent in many retirement calculators. Our favorite response was: “The tool lies.” 

Additional comments from readers on how these tools of the trade have worked—or not worked—for them:

“There are many tools to choose from, and each tool has assumptions that it makes. So each individual needs to look at [his] own situation and the assumptions, and use several tools to really get a good ‘feeling’ for where they stand.”  

“We only preach that participants should use these tools. We don’t actually use these tools ourselves!”  

“I didn’t think the retirement planning tool was entirely useful, because even though it said I was on track, I don’t agree.”  

“I’m in the business and, therefore, have studied readiness and used different calculators and understand the nuances of the various assumptions and models. But to predict my future health, life expectancy, future medical costs, living cost, etc., is hard. So, like everyone else, I don’t know how to answer the question: ‘How much do I need?’ Therefore, too much ain’t enough!”  

“The calculator indicated I could retire now (in my early 50s), but that seemed terribly optimistic to me!”  

“I’m 30, but I’m trying to prepare. These tools are often geared toward near-retirees. They need to be geared to[ward] individuals my age, so that we don’t face a retirement crisis.”  

“I’ve used different retirement calculators and seem to be on track. How much is enough? A trusted financial adviser should be part of everyone’s retirement planning.”  

“The tool indicated I’m ‘right on track,’ but I still feel insecure, even deferring the federal maximum plus the catchup into my 401(k) for the past several years.”  

“I think these tools need to consider current spendable income and not just base everything on salary. If I am putting away 15% and having Social Security come out, then my spendable income is much less than my current salary. If I need 80% of my spendable income, the goal is much easier to attain. Someone making $100,000 and saving 15% with 5% in Social Security (just using simple numbers for the example) would have spendable income of $80,000. Eighty percent of your spendable income would be $64,000 per year, but that is only 64% of your salary. I may be completely wrong, but this makes more sense to me, since I won’t be saving or paying Social Security when I retire.”  

“Three out of five tools suggest I’m on course. My horoscope reads as clearly.”  

“I’ve used these tools over several years. Initially I was surprised to find I was behind. I have steadily increased my retirement savings and am on track.”  

“My husband and I both used a retirement tool offered by our respective 401(k) providers. Mine indicated I was somewhat behind and his indicated he was ahead of the game. So, taking his results into consideration, I consider myself to be right on target!”