E&Y Study Shows Pre-Retirement Shortfalls

November 8, 2002 (PLANSPONSOR.com) - Pre-retirees may have neglected future concerns and are not doing enough now to prepare for retirement, according to Ernst & Young LLP Actuarial Services Group's Next Generation Retirement Planning Survey.

Only 17% of pre-retirees – age 55 or older and still working full time – are “very confident” their monthly income will sustain their desired retirement lifestyle.   Only 16% report they are “very confident” they have enough assets to meet retirement objectives.  

Those that could not say they were very confident have the following concerns:

  • 54% said unexpected lifestyle changes
  • 45% said negative stock market fluctuations
  • 28% said confusion over retirement products
  • 28% said a lack of information needed to assess their current situation

Some of the possible expenditures that pre-retirees did not account for in their retirement savings:

  • 66% did not figure market fluctuations or personal debt repayment needs
  • 53% did not calculate the tax impact on retirement savings
  • 47% did not account for inflation

Illness was another factor that many did not consider, as only 33% of those surveyed expect to spend more than 20 years in retirement:

  • 81% did not factor for parental illness
  • 54% did not factor for personal illness
  • 53% did not factor for spousal illness

Recent market fluctuations have given some reason to worry as only 25% describe themselves as “very knowledgeable about their retirement cash flow management needs” and 36% have not changed their expectations or cash flow requirements.  

Additionally, 23% are managing their investments differently, but recognize they will have less money for retirement and only 8% are actively managing their investments to attempt to reach their original goals.  

When asked what they would have done differently:

  • 49% become better educated on retirement products and services
  • 46% developed a better budget for retirement spending
  • 46% started planning sooner
  • 40% taken advantage of employer-sponsored programs
  • 34% purchased more guaranteed return products
  • 31% sought counsel from a financial advisor

The results are based on 275 phone interviews with adults age 55 and over conducted by RoperASW in the fall of this year.   Pre-retirees accounted for 43%.