Americans Reach New Lows in Retirement Readiness
Americans love the idea of retirement, but preparing for it is another matter. According to a new survey from Ameriprise Financial, The New Retirement Mindscape 2012 City Pulse Index overall financial preparation for retirement has reached a three year low. Only 70 percent of those polled say they're preparing financially, down from 75 percent last year. (source)
Worse still, only 63 percent are setting aside money for retirement, compared to 69 percent last year and in 2010. For the first time in three years, fewer than half say they're contributing to an employer sponsored account (47 percent) or into their own accounts or investments (also 47 percent). Nearly 30 percent say they haven't thought about retirement much at all. The bottom line? The steps Americans are taking to save for retirement has declined.
What's ironic though, says Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial, “People are feeling fairly good about retirement and are reporting an increase in planning for specific activities during their non-working years.”
For example, the number of people who say they feel positively about retirement remained the same as last year, with 42 percent saying they feel happy about retirement, 34 percent optimistic and 32 percent hopeful. Regarding plans, 40 percent say they're planning to spend time with family, 21 percent say they're planning to do more meaningful work and 16 percent say they're planning to volunteer. “While it is good news that people are optimistic and starting to make plans, it is critical that they step up their preparation or they won't necessarily be able to meet all of their lifestyle goals,” she warns.
Although nearly half of those surveyed admit that they are concerned about outliving their savings, in some parts of the country there's much less worrying. The survey looked at some of America's 30 largest metropolitan areas. Which places have bragging rates for retirement preparation? The top 10 honors go to Hartford-New Haven; San Diego; Minneapolis-St. Paul; San Francisco-Oakland-San Jose; Philadelphia; Raleigh-Durham; Nashville; Denver; Pittsburgh and Atlanta. The bottom dwellers include Washington, D.C.; Charlotte; Indianapolis; Chicago; New York; Baltimore; Cleveland-Akron; Tampa-St. Petersburg; Orlando-Daytona Beach-Melbourne; Los Angeles and Miami-Fort Lauderdale.
Several things set apart the top ranked metros. The folks in the top three places are significantly more likely to say they're making financial preparations, including setting aside money for retirement, determining how much they need to save and consulting with a financial advisor, says de Baca.
The Sacramento metro had the distinction of showing the most decline, falling to 18th down from second in 2011 and fourth in 2010. People there are less likely to report making both financial and lifestyle preparations than they were in either of the previous two years. Sacramento residents (20 percent) are also significantly more likely than people in other metros (14 percent) to say student loan debt has taken a toll on their finances and consequently on their ability to meet long-term goals. Of those affected, 38 percent admit to reducing the amount they're saving for retirement, while 15 percent say they've withdrawn money from a retirement account to cover loan payments.
There was a bit of good news in the manufacturing belt. Though only one metro area broke into the top half of the index this year, Pittsburgh (9), Detroit (17) and Cleveland (24), each climbed three spots while Indianapolis (28) rebounded slightly from last place in 2011. Perhaps it's the reinvigorated auto industry, who knows? But residents of each of these metro areas were at least slightly more likely than people elsewhere in the the U.S. to say they had contributed to an employer-sponsored plan.
The survey also confirms what the retirement grapevine has been saying recently, people's views on the traditional retirement age appear to be changing. While the vast majority (83 percent) of retirees polled say they were under age 65 the day they said adios to their boss, many Americans expect to work much longer. Only 20 percent of workers say they plan to retire before 65, and more than one-quarter say they plan to remain in the workforce as long as they're able.
What's the takeaway? Says de Baca, “Regardless of how optimistic you feel about retirement and how much you're looking forward to leaving the workforce – you must take concrete steps to make your retirement a reality. It's critical to understand how much you'll need in retirement and continue socking money away so that you can enjoy the activities you'd like to pursue in retirement. Write down your financial and lifestyle goals on paper. Once you have a roadmap, you can check in on your progress and adjust as necessary.”
Edit 10/1/2012: Corrected retirement plan stats.