Benefits January 3, 2014

Employees Need More Retirement Readiness Action

January 3, 2014 (PLANSPONSOR.com) – While many employees say they are ready for retirement, more need to take active steps towards this preparation, according to a report from Ameriprise Financial.
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The report, “2013 New Retirement Mindscape City Pulse Index,” says the percentage of Americans who report taking at least some action to prepare for retirement rose slightly to 72% in 2013. However, say the authors, that number is still lower than in previous years.

More than half (51%) report contributing to a 401(k) or other retirement plan—a jump from last year (47%), but still fewer than those who said they were saving into this kind of plan two or three years ago. Fewer than half (49%) say their retirement account balances have recovered from the market downturn in 2008-2009.

Yet, more than ever, respondents say they feel on track, with one in five (19%) saying they feel very prepared financially for retirement or the remainder of retirement and 28% indicating they feel very confident they’ll reach their retirement goals or that the remainder of their retirement will work out as planned.

What employees need to do, the authors say, is to go from mere concern about retirement to taking active steps to establishing and achieving retirement savings goals. The report findings show those who take the initiative to save more, create a plan and work with a financial professional are more likely to feel as if they are on track to meeting their retirement goals.

The report reveals one of the biggest challenges for individuals preparing for retirement is to determine how much they need to save. Findings indicate only about one-fourth (23%) of respondents in 2013 report they have calculated this number.

The report authors recognize that while this is still a low number, it is progress, since the figure is the highest it has been in four years.The report also says employees are concerned about the following financial challenges for retirement:

  • Providing for health care expenses (45%);
  • Knowing how much they can withdraw from retirement savings without outliving their money (38%);
  • Managing investments to safely generate income and growth (34%);
  • Providing for long-term care experience via insurance (24%); and
  • Managing investments and withdrawals to minimize taxes (24%).

 

The Index annually queries employees in the 30 largest U.S. metropolitan areas to determine their retirement readiness by measuring preparation for and confidence about retirement. Those surveyed for the report were asked about their savings habits and expectations for their financial futures.

San Francisco-Oakland-San Jose (No. 1) and Detroit (No. 2), along with Hartford-New Haven (No. 3), claimed the top three spots as the most ready for retirement on the fourth-annual index, while Orlando (No. 30), Los Angeles (No. 29) and Nashville (No. 28) ranked as the least retirement-ready.

More than 10,000 U.S. adults, between the ages of 40 and 75, were surveyed for the report. The online survey of these individuals was carried out by Harris Interactive, on behalf of Ameriprise Financial, in June 2013. The full report can be downloaded here.

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