A new survey finds that Americans don’t know how much they will need to fund their retirement, and think they should be saving about five times more than they are. Little wonder they are also more likely to second guess their financial decisions than any other major life decision.
The study, “Finances in Retirement: New Challenges, New Solutions,” by Bank of America Merrill Lynch, concludes a four-year, 50,000-respondent investigation focused on understanding the transforming nature of retirement through seven interconnected “life priorities” – family, work, health, home, giving, leisure and finances.
Among the findings from this latest survey of more than 4,800 respondents:
- While most Americans realize retirement will be the biggest purchase of their lifetime, 81% say they do not know how much money they will need to fund their retirement.
- Americans are saving only a fraction of what they think they should: 5.5% vs. 25% of their annual income (after taxes).
- More than half of Millennials feel a secure retirement is beyond reach, though only 30% of Boomers (who, let’s face it, are closer to that goal line) feel this way. Of course, Millennials expect 65% of their retirement income to come from personal sources, including savings and continued employment, far more than earlier generations, which might have something to do with their concerns.
- While most people say they want to live to the age of 90, only 27% of pre-retirees age 50+ feel financially prepared to fund a retirement that lasts 10 years, let alone 20-30 years.
- Nearly two-thirds (65%) of Americans say the language of finance is confusing and not user-friendly (don’t you wonder about the other 35%?).
- Americans are seven times more likely to say that talking about personal finances is taboo than they are to say it can be discussed openly. Only 11% feel comfortable discussing their personal finances.
Ninety-one percent say they would make healthier choices to reduce potential expenses in later life, and the same percentage would use more generic medications and supplies.
Sixty-eight percent say they would consider purchasing long-term care insurance.
Three in four say they would downsize their home to both lower ongoing costs and benefit from the equity, while 67% would be willing to move to a less expensive location and 47% would consider selling their home and renting an apartment.
Ninety percent of people would be willing to cut back on basic expenses and save more, while 77% would increase use of tax-protected retirement accounts. Two-thirds would sell belongings or real estate that they no longer need, and three in five would adjust the timing of their Social Security benefits.
One positive thought: Among those who are saving for retirement, 46% said that what got them started in the first place was an employer offering a retirement savings plan.