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).
• 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%.
• 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."