UpFront | Published in January 2015

Savings Regrets

Half of employees approaching retirement wish they had started saving sooner.

By Jill Cornfield | January 2015

PS115_UF_Story_JiHyunYuArt by Ji Hyun Yu

The top concern for near-retirees? Running out of money to cover monthly expenses, according to a survey from TIAA-CREF. The “Ready to Retire” report says regret tinges many of the survey’s findings, with more than half (52%) of people ages 55 to 64 who are approaching retirement saying they wish they had started to save for the future sooner.

Many survey respondents say they wish they had made smarter financial decisions earlier in their careers, including saving more of their paycheck (47%) and investing their savings more aggressively (34%). These regrets underscore how important it is for employees, with support from their employers, to start thinking about retirement planning early and to remain engaged in the process throughout their working years.
Forty-five percent of respondents ages 55 to 64 say financial readiness is the most important factor in determining when they will retire. Yet only 35% say they saved in an individual retirement account (IRA) or met with a financial adviser; 32% have calculated the income they would need for each year of their retirement; and 12% have saved in a health care savings account (HSA).

The research reinforces the idea that preparing for retirement should not be a sprint to the finish but a long-distance run that requires careful planning throughout an adult’s life, according to Teresa Hassara, executive vice president of TIAA-CREF’s institutional business in Boston.

According to the survey, financial challenges make up three of the top four concerns for individuals closing in on retirement. Many worry about inadequate resources to cover monthly expenses (45%), while others are anxious about how health care costs (35%) or inflation (32%) could deplete their retirement savings. However, despite these concerns, only 10% of this age group has purchased an annuity, the only retirement product that guarantees an income stream for life, TIAA-CREF says.

The firm notes that according to the Social Security Administration (SSA), a 65-year-old male in 2010 could expect to live another 17.57 years, on average, while a woman of the same age could expect to live another 20.20 years.

These challenges are leading some to reconsider what their retirement will look like. Forty-two percent of survey respondents ages 55 to 64 say they plan on working part-time during retirement, 39% say they will be more conservative about how much they spend on entertainment and other luxuries, and 23% say they will downgrade their living quarters to something less costly. These realities may conflict with their desire for flexibility to do “what they want, when they want” during retirement, which 57% of this group says they are looking forward to most on leaving full-time employment.

“If Americans find that their retirement savings aren’t adequate to meet their expectations about retirement life, it’s never too late to make adjustments,” Hassara says. “In fact, if a 55-year-old starts to max out his or her employer-sponsored retirement plan contribution next year and continues to do so for the next 10 years, those savings could grow to about $325,000.”