Survey Finds Widespread Deficiency in Retirement
Preparation
November 5, 2009 (PLANSPONSOR.com) - Despite the
economic downturn's effect on the retirement plans of
50-something investors, only 23% of respondents to a recent
survey are salting away more for retirement and 57% never
changed their deferral rate.
A Wells Fargo news release said 20% of survey
respondents are saving less and 56% say they expect to
stay in the workforce an average of three years longer
than they planned, according to the news
release.
Wells Fargo said overall, given respondents'
behavior thus far, the financial positions and savings
habits of this pre-retiree group won't be enough to last
for their expected 20-plus years of retirement.
Survey findings include:
-
While pre-retirees surveyed expect to need
$800,000 for retirement, they have saved only $300,000
(median amounts).
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Pre-retirees clearly haven't assessed how long
their savings will last in retirement. They expect to
live nearly 21 years in retirement, but plan on
spending nearly 10% of their savings every year in
retirement. The industry recommendation is to
withdraw no more than 4% annually.
-
People have been overly optimistic about their
investment returns. When they started saving
(typically in their 30s), both pre-retirees and
retirees expected the value of their investments to
grow by an average 8.7% each year. In fact, the
compound annual growth rate of the S&P 500 from
1958 through 2008 was 6.6%.
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Despite their inadequate savings, nearly
two-thirds lack any formal plans for retirement
savings or spending strategies. Only 35% of the
pre-retirees have a written plan for retirement, and
of this group, only 52% say they updated it in the
past year during the market downturn.
-
Less than half (40%) wish they had been more
proactive about educating themselves about retirement
preparation.
"In the wake of the severe economic crisis, we had
expected to find people had become more conservative in
their savings and spending behavior," said Lynne Ford,
head of Wells Fargo Retail Retirement, in the news
release. "We were surprised to see how few people have
increased their rate of savings and how many people in
their 50s have no retirement plan at all. For people in
the last 10 to 15 years of their working career, the
failure to have a thorough retirement plan in place is
like driving while blindfolded."