As numbers go, 1% and 99% have gotten more than their fair share of media attention, but if you’re one of the millions who hope to retire someday, you may want to pay attention to another figure: 21%. According to the 2013 Franklin Templeton Retirement Income Strategies and Expectations (RISE) survey1, that’s the percentage of retirees who have no savings to speak of. So how do you avoid falling into this statistical group? That’s the $64,000 question that’s worth much more than that—it’s the price of your future.
Worrying Their Way into Retirement
The sad truth is that three in 10 adults in the U.S. have not started saving for retirement, according to the RISE survey findings. And it’s not just young adults who are without savings; 68% of respondents aged 45 to 54 and half of those aged 55 to 64 reported having less than $100,000 in retirement savings. Those are some sobering figures.
Interestingly, the survey revealed that preparing financially for retirement creates far more stress than managing the financial aspects of living in retirement. Nearly three-quarters (73%) of Americans said they find thinking about retirement saving and investing to be a source of stress and anxiety. During the transitional years leading up to retirement, the survey revealed a great percentage of people look to make changes to their retirement income strategy, a process that may involve working with a financial advisor. More than three-fifths (61%) of survey respondents looking to retire in 11 -15 years reported they would consider switching advisors (or use one for the first time) if they developed a written retirement income strategy.
Source of Retirement Stress
Michael Doshier, Vice President of Retirement Marketing for Franklin Templeton Investments, observes that, “The findings reveal that the pressures of saving for retirement are felt much earlier than you might expect. Some people begin feeling the weight of affording retirement as early as 30 years before they reach that phase of their life.”
“Very telling, those who have never worked with a financial advisor are more than three times as likely to indicate a significant degree of stress and anxiety about their retirement savings as those who currently work with an advisor,” he added.
It’s probably not a surprise that survey respondents cited healthcare and medical issues as top retirement concerns, followed closely by the specter of running out of money. While ample attention seems to be paid to expenses, there appears to be less consideration given to the other side of the budgeting equation: income. Digging into this piece of the planning puzzle, the survey uncovered that nearly half (47%) of respondents do not have a high degree of confidence regarding how much of their current income will be replaced by Social Security; a comparable number (44%) are similarly unsure concerning their employer-sponsored (defined contribution) retirement plan (i.e., 401(k), 403(b)). Again, those working with a financial advisor were more likely to have a high degree of confidence about where their retirement income sources stood.
“Financial advisors need to be sure that they are involved in the client’s decisions about when to stop working and when to begin Social Security. Both have serious and permanent consequences for the level of retirement income they can hope to receive, which of course has implications for the way their retirement portfolio is invested and drawn down,” said Gail Buckner, CFP®, Franklin Templeton’s Financial Planning Spokesperson. “However, these two decisions do not have to be made at the same time. The events involved—retiring and starting Social Security benefits—do not have to coincide, either.”
The Unexpected Retirement
Many people who aren’t adequately prepared for retirement might think they can simply keep working, whether full or part time. However, that might not be possible. For one-third of current retirees surveyed, their retirement wasn’t a choice. Situations including corporate downsizing and health issues forced many into earlier-than-expected retirement.
“Assuming you can just stay on the job longer could cost you,” adds Doshier. “But taking just a little time to write down a plan – with an advisor – can not only help you understand your true options better, it might also reduce your feelings of stress.”
Ready to reduce your feeling of stress and anxiety about funding retirement? Learn more about the RISE survey and find the tools, tips and resources you need to start planning for your future in our retirement center.
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1. Source: 2013 Franklin Templeton Retirement Income Strategies and Expectations Survey (RISE). The survey was conducted online among a sample of 2,002 adults comprising 1,001 men and 1,001 women 18 years of age or older. The survey was administered from January 10 – 22, 2013, by ORC International’s Online CARAVAN®.