401k participants aren’t grading themselves well when it comes to retirement saving.
Fully 80 percent say preparing for retirement is their top priority, but grade themselves a “C” when it comes to their actual retirement readiness.
Additionally, 74 percent of pre-retirees said they should be doing more, while 40 percent simply don’t know what to do to prepare for retirement, according to a new Prudential Investments survey.
“Understanding the hurdles keeping people from a secure financial future is critical to helping them meet their goals,” Stuart Parker, president of Prudential Investments, said in a statement. “This research reinforces the need for people to seek advice and the need for the investment community to give advisors the best tools and solutions available.”
Among the key findings of the survey:
Individuals find investment products complex and are unsure about what they are invested in:
- Sixty-three percent of Americans find investing complex and confusing. Sixty-six percent say it’s harder to invest now than during their parents’ generation and 64 percent say they’re overwhelmed by the number of available choices.
- Forty-two percent of investors are not knowledgeable on how their assets are allocated within a portfolio, and 43 percent are not knowledgeable of which types of products they’ve invested.
Pre-retirees need a plan, but are frozen by inertia:
- Seventy-four percent of pre-retirees said they should be doing more while 40 percent simply don’t know what to do to prepare for retirement.
- While the savings estimate for retirement is more realistic for some pre-retirees, 24 percent estimating retirement needs of one million or greater, there is still a large gap — 54 percent of pre-retirees have less than $150k saved in their employer-sponsored plans.
Each generation finds it harder to save:
- Seventy-five percent of retirees believe the generations following them will have a more difficult time saving for retirement. Younger generations agree: 20 percent of pre-retirees don’t believe they’ll ever be able to retire. Overall, 35 percent of pre-retirees say they’ll never be able to save enough, so it doesn’t matter when they start saving.
- Across generations, 57 percent of Americans say they would use savings to cover a financial emergency. Millennials often buck that trend — with 32 percent opting to borrow money from family and friends or 18 percent reporting that they would take out a bank loan.
Many retirees retired earlier than planned, and fear certain factors could negatively affect their savings:
- Fifty-one percent of retirees retired earlier than planned. Of those who retired earlier, 50 percent retired five or more years earlier than expected.
- Only 2 percent of the population retired earlier than planned because they either wanted to retire or were tired of working. For those who retired earlier than expected
- Fifty-two percent retired early for health problems or to take care of a loved on
- Thirty percent were laid off from their jobs or offered an early retirement incentive package.
- Among the greatest fears that retirees believe could negatively affect savings, the following rise to the top:
- Fifty-seven percent reported healthcare costs.
- Fifty-seven percent stated changes to Social Security.
- Forty-five percent reported illness or disability.
Individuals recognize the value of live advice, but less than half use an advisor:
- The top source cited to learn about investing is a professional financial advisor, with 37 percent of Americans reporting this. However, only 44 percent reported using one.
- The second most cited source for information used is financial institutional websites, with 34 percent of Americans citing this.
- Interestingly, 17 percent rely on their employer and 14 percent of Americans don’t use any resources at all.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
