People who take the time to envision their ideal retirement save a higher rates than those who don’t go through this exercise, according to new research from Lincoln Financial Group.
Retirement plan participants who have envisioned their ideal retirement think they need to save a median of 20% of their income. As a result, those who have a picture of what retirement holds for them are more than twice as likely to save 15% or more to their workplace retirement plan compared to those who have not given it any thought.
“Planning for retirement is more than just a number,” says Jamie Ohl, executive vice president, president of retirement plan services at Lincoln Financial Group. “When savers take the time to really think through what retirement will hold—like volunteering, traveling the world or even working part time—they are better able to take steps today to make the tomorrow they imagine a reality.”
Asked what they thought an ideal retirement would include, the most popular themes were traveling (35%), not worrying about money (30%) and living comfortably (16%). This was followed by being debt-free (12%), relaxing (11%), relocating or downsizing their home (10%), enjoying entertainment or hobbies (9%), spending time with family and friends (9%) and working part time (8%).
Lincoln Financial says besides envisioning an ideal retirement, it is also important for people to estimate the cost of that ideal retirement. However, among those within 10 years of retirement, only half have estimated the basic costs they will face in retirement, and only 38% have calculated what their ideal retirement would cost.
Retirement plan sponsors can help employees plan for their unique vision of retirement. Offering retirement planning calculators allows participants to understand what their finances and savings might look like years down the line. If participants run a variety of potential scenarios, they can start to formulate a picture of their ideal retirement—whether that means retiring outright, embracing part-time work or even launching their own business.
Sponsors can also offer financial wellness programs, automatically enroll participants or escalate their contributions into the plan. And employers may also consider setting up phased retirement programs.
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