While more than a quarter (27%) of those under age 25 are clueless about their retirement needs, the survey found that over half (55%) of those 65 and older still don’t know how much they need to preserve their pre-retirement lifestyle.
According to the 2000 Quicken Fiscal Literacy Survey, more than a third (35%) of respondents didn’t know how much they would need, up 1% from last year’s results.
Just as troubling, many of those who managed to hazard a guess grossly underestimated the need. The study found the median estimates for families earning more than $35,000 per year were 44% below their expected needs based upon the current rule of thumb that retirees can expect to spend 60%-80% of their pre-retirement salary per retirement year.
Spend, Spend, Spend
While most financial advisors recommend six months? savings as a cushion against being laid off, the survey found that nearly a third (30%) only have half that amount set aside. Younger workers, ages 18-24, and households earning less than $25,000 annually were most likely to come up short, with a mere three months in the bank, on average.
The study found that despite having longer life expectancies, a lower percentage of women contribute to these plans than do men.
East Coast Savers, West Coast Spenders
The study also found a correlation between where people live and their savings rates. Residents in the Northeast had the highest average savings rate (6.3 months), put more thought into their retirement savings plans, and contributed the highest percentage of their salary to a pre-tax retirement plan (6%).
Residents of the Western part of the country had more trouble predicting how much money they would need for retirement, contributed the least on average to retirement plans (5%), stored only five months of savings, and carried the highest amount of debt ($2,460 per household), according to the study.
The second annual Financial Literacy survey was conducted by Roper Starch Worldwide. A full copy of the study’s results may be found at http://www.quicken.com/fiscalsurvey/ .