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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.

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Paoli2   |     |   Comment #1
Interesting and apropo article Sheryl.  However what is even worse is if you check out Twitter and read all the tweets from people posting they need to save Social Security because that is the "only" retirement income they have or will have.  I cannot understand how anyone would think they could survive on just social security and not try to save something more for those years.  So many unexpected problems can arise in one's senior years that personal retirement savings are a "must", imo.  In this day and age, one would think having personal savings would be top priority for everyone who has any income coming in even with the low interest rates. 
rosie43   |     |   Comment #2
My husband was put on disability in 1995 and we lived on $150 a week and my part- time job for 6 months and then just my part-time job  until his SS disabilty and Medicare started.  We had our home paid for and it was no problem. We had savings but did not have to touch it. I retired in 2008 and we lived on both of our SS. We have IRA's and pensions and still lived on our SS benefit. I have always shopped sales.  It is not hard to live on SS but many people do not know how to budget and shop sales. Because of my husband's disabilities we were not able to travel but we did not want for anything. We ate well had meals for the relatives durig the holidays and did just fine. We did other things that did not cost a lot of money.
51hh   |     |   Comment #3
Good4you, Rosie.  A great example of frugality and enjoyment of life.

We need to balance earning/accumulating wealth with happiness and contentment.  To carry retirement savings to the extreme (e.g., $4-5M goal) will simply ruin one's life, health, family, and friendship along the way.
Inforay   |     |   Comment #4
What is the incentive for laypeople to save, when they are making 1% or less on savings and there will have galloping inflation based upon the policies of the Federal Reserve re: QE1, QE2 and AE3?  Printing dollars is not the answer to unemployment.  I would like to point out that Mitt Romney did criticize Ben Bernanke and indicate that he will not reappoint him.  (See  Savers on this blog must unite to see that Bernanke is out of office as soon as possible.
Paoli2   |     |   Comment #5
Saving is NOT just about how much interest we are making it is also about getting into the habit of setting aside a certain amount of money each paycheck for your future and emergencies.  If one is fortunate enough to make decent interest on these savings that is an added bonus.  The main thing is to train oneself to live frugally and put what one can aside as a "savings " account.  When and if interest rates go up to a decent rate we can also have a nice sum to earn interest on.  If we don't save at all, we don't get to take advantage of rates if they go up.

As for Bernanke, Obama will probably be reelected and we will be stuck with both of them at least for four more years.  People didn't care enough to get involved with the Savers Petition so I really don't think they will care enough to do anything about Bernanke.  People seem to be too involved in just trying to keep a job, if they are fortunate enough to still have one.

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