Fewer than half of Americans have achieved their retirement planning goals, according to a new retirement readiness survey from Thrivent.
The survey found only 40% of Americans have “very much” or “somewhat” been able to achieve the retirement planning goals they have set for themselves.
Not surprisingly, most Americans express mixed feelings about their retirement. While 57% of retirees and 43% of non-retirees feel confident about retirement, many from each group also report feeling anxious (19% and 41% respectively) and overwhelmed (14% and 34% respectively) about what is to come.
Influencing this sentiment could be the current financial environment, which is challenging people’s ability to either build or preserve their current level of savings. Survey respondents also cited financial unknowns in the future, such as looming healthcare expenses and possible cutbacks to federal benefit programs, like Social Security, that may add further complexity to retirement planning.
Only 5% of those nearing retirement said they have everything fully planned out and are 100% ready for retirement
Thrivent Retirement Readiness Survey
Only 5% of those nearing retirement said they have everything fully planned out and are 100% ready for retirement, while 19% in this group said they’ve done a great amount of planning and 32% a good amount of planning. This leaves 44% of near retirees who fall into the category of executing minimal to no retirement planning, leaving them at risk of not meeting their financial goals. In fact, some who already have entered retirement regret not saving enough (39%), starting to save too late (25%), or not saving consistently (22%).
“Planning for retirement is a complex process to begin with, but when we add in factors like inflation, market volatility and other unknowns, it becomes even more challenging to figure out how we’ll be able to achieve our goals,” said Doug Grove, VP of Wholesaling & Sales Support at Thrivent. “Our survey data reinforces the importance of having a comprehensive retirement plan that accounts for the different scenarios that may emerge in the future. This will help people enter the next phase of their lives feeling more financially confident and secure.”
Inflation hindering retirement savings
With inflation impacting many aspects of our financial picture, it’s not surprising that survey respondents reported this as a top concern across the board, whether they are still in the savings stage, approaching retirement, or already in retirement. Sixty-six percent of adults said they expect to be impacted by inflation upon reaching retirement, and 67% who are currently retired are concerned about the impact it is having.
A general rule of thumb is to factor in inflation between 2-4% when planning for retirement. The high levels of inflation we’ve seen over the last several months, however, can have a deeper impact on savings, especially for retirees living on a fixed income. Inflation could drastically affect their budgets and day-to-day expenses, and may draw down their nest egg more quickly than they were anticipating. Inflation also can prevent younger savers from building savings because they feel constrained by higher prices. Indeed, Thrivent’s survey found younger generations are less focused on saving for retirement than older generations, as they concentrate on immediate savings (56%) and in-the-moment spending (51%). Nearly two-thirds of survey respondents in this group said they recognize they should be saving more (64%).
“Inflation makes it even more important for people to be proactive about regularly reviewing their finances,” said Grove. “For younger savers, that means accounting for the ebb and flow of inflation and economic shifts as they build their financial strategies. For those nearing or approaching retirement, now is a good time to review investment portfolios to help hedge against the long-term impacts of inflation. This involves reviewing your overall investment objectives, risk tolerance, and determining if any adjustments are necessary.”
Healthcare exposes gaps in retirement planning
According to the Centers for Medicare & Medicaid Services, national health spending grew to $4.1 trillion or $12,350 per person in 2020. This is a huge sum for those who haven’t planned for it. With healthcare policies constantly in flux and fluctuating prices for prescription drugs and insurance premiums, it’s important to plan for future care scenarios, yet Thrivent’s survey found few have taken this critical step.
“Many people falsely believe a combination of government benefit programs, along with their existing savings, will be enough to cover all of their healthcare expenses in retirement.”
Thrivent’s Doug Grove
While this is on the radar for some—two in three adults nearing retirement say they have spent serious time thinking about their future healthcare needs in their retirement planning—only 15% of them said they have spent a great deal of time focusing on this and feel confident in their level of understanding.
Meanwhile, 11% haven’t spent any time at all thinking about healthcare expenses or potential implications for retirement. This presents an important opportunity for financial advisors to coach their clients on this key aspect of planning.
“Many people falsely believe a combination of government benefit programs, along with their existing savings, will be enough to cover all of their healthcare expenses in retirement,” said Grove. “While it may cover a portion of expenses, people may find their existing coverage is simply not enough to provide them with adequate protection, especially if they face a sudden and unexpected health event that requires ongoing, specialized care. At this stage, it may be too late to find and purchase the level of insurance protection that’s needed to support care.”
Young people thinking about retirement
Despite contending with inflation and other financial pressures, Thrivent’s survey found retirement planning is top of mind for many young adults, with 73% saying they’ve started to seriously think about it.
“It’s encouraging to see a large percentage of young savers are thinking about this topic early in their careers,” noted Grove. “As a next step, financial advisors can help them identify their desired retirement outcomes and develop concrete goals they can start working toward.”
As part of ongoing planning conversations, there is room to help younger savers become more educated about the savings vehicles and approaches that could help them achieve key retirement goals. Relative to the overall population, the survey found younger savers are less educated about retirement savings plans like 401ks (48%), IRAs (37%), home equity or other real estate assets (40%). What is particularly striking is less than half of adults surveyed are taking advantage of an employer plan or personal IRA. This is an especially valuable step for young savers, who should ideally start accumulating savings on a tax-advantaged basis as soon as possible.
There is a strong appetite for this and other kinds of advice among all pre-retirees, with nearly 60% expressing interest in increasing their knowledge across retirement topics such as Social Security, compound interest, inflation, and healthcare. This reinforces the key role financial advisors can play in educating clients and helping them plan appropriately for future scenarios.
SEE ALSO:
• Americans Are Increasingly Directing Attention to Retirement Plans
• How Engaged 401k Participants are Saving Significantly More
• Recession Fears Not Stopping Women from Maintaining (or Increasing) 401k Contributions
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
