Retirement Readiness Could Be Better, But There Are Answers

Recognizing that one has a problem is the first step in overcoming it, we are told. According to recent reports, a sizable portion of U.S. adults say they are not financially ready to retire — but mitigating that sobering news at least somewhat is that many know it. And those reports offer some suggestions for how to increase that readiness. 

Just under 40% of U.S. adults — 36% — say they are not ready for retirement, according to the financial analysis service Bankrate. Recent research by Aegon, an insurance, pensions and asset management provider, showed some remarkably similar results. Aegon, in the U.S. results of a recent global study, found that almost exactly as many — 34% — expressed pessimism about their readiness to finance their retirement. 

Both cite not being financially able to save for retirement as one reason for the ill-preparedness. Just 28% told Aegon they can do so, and 58% say that a lack of money is why. And certified financial planning professional Brian Plain told Bankrate that living paycheck to paycheck makes it difficult for many to accumulate such savings. 

But lack of preparation on the part of individuals is only part of the explanation. Another, says Bankrate Chief Financial Analyst Greg McBride, is that many employers do not offer a retirement plan. Aegon also embraces the notion that employer-provided retirement plans offer an answer. 

What can be done to turn the situation around? Says McBride, “Availability of a workplace retirement savings plan is helpful in getting people to save something versus nothing at all, but to improve retirement readiness and confidence, Americans still need to save, and save more than people typically save.” He adds, “Auto enrollment into workplace retirement savings plans is a big step in the direction of getting people to save, and auto escalation — where employee contributions are automatically increased each year — helps facilitate people saving more.” 

Aegon, likewise, advocates similar action. Among the steps it suggests government can take are adjusting tax policy to encourage saving and easing regulations to encourage employers to offer and maintain retirement plans. As for employers, Aegon suggests providing more information employees can use to set retirement savings goals and adopting auto-enrollment. But individuals are not excluded, says Aegon: they can consider working longer in order to boost retirement readiness. 

Good News 

Bankrate also notes — as did ASPPA recently — that establishing a retirement account early can reap benefits for an employee — and the earlier, the better. In the same vein, Bankrate reported some good news — 33% of the employees in its study started retirement accounts in their 20s if not earlier. 

And the good news regarding younger workers doesn’t stop there. Despite their lack of retirement savings, a new survey finds that Millennials — those between the ages of 18 and 29 — feel more financially secure than any other age group. Not only that, they are twice as likely to feel more secure than those 65 years old and older, according to Bankrate in a study of financial security. 

The bottom line is that Americans who are saving are starting earlier. Twice as many 30-to-49-year-olds started saving in their 20s as opposed to their 30s. But those between 50 and 64 were only slightly more likely to have started saving in their 20s than their 30s, and Americans 65 and older were almost evenly split between starting in their 20s, 30s and 40s.

Other findings include:
• While job security, net worth and overall financial situation are all areas in which Americans note improvement over one year ago, twice as many are less comfortable with their savings (compared to one year ago) as are more comfortable.  
• By gender, men's feelings of financial security slipped, while women noted improved financial security since last month. However, men still note improved financial security compared to one year ago while women still feel a slight deterioration. 
• Republicans and Independents were more than twice as likely to feel less secure than Democrats, and people in suburban and rural areas are twice as likely to feel less secure than people living in urban areas.