As we approach National Retirement Security Week, Oct. 20-26, Lincoln Financial Group has released new research that shows consumers who take the time to envision their ideal retirement actually do end up saving at a higher rate than those who don’t.
The research found the median amount people who envision their ideal retirement think they need to save 20% of their income for retirement (which is 7% higher than those who have not given any thought to their ideal retirement).
As a result, those who have a picture of what retirement holds for them are more than twice as likely to contribute 15% or more in their workplace retirement plan compared to those who have not given it any thought.
“Planning for retirement is more than just a number,” said Jamie Ohl, executive vice president, president Retirement Plan Services, Lincoln Financial Group. “When savers take the time to really think through what retirement will hold—like volunteering, traveling the world or even working part time—they are better able to take steps today to make the tomorrow they imagine a reality.”
Common ‘ideal retirement’ themes
Understanding the ins and outs of a retirement plan are important, but it is just as important for savers to think about what they want to be doing in retirement, as it gives them a goal to work towards and save for directly.
In the 2019 Lincoln Retirement Power Participant Study, people were asked to describe their ideal retirement, in their own words.
The most popular themes were traveling (35%) and feeling financially secure or not having to worry about money (30%). Other common themes included:
- Living comfortably/having a simpler life (16%)
- Being debt-free (12%)
- Not having to work and relaxing (11%)
- Relocating or downsizing their home (10%)
- Entertainment/fun activities/hobbies (9%)
- Spending time with family and friends (9%)
- Working part-time (8%)
“We heard directly from participants in our study, who said they wanted to be able ‘to live comfortably, not extravagantly’ and ‘I don’t want to feel like we can’t do fun things because money is tight,’” Ohl said. “This is powerful—and we are doing everything we can to help participants understand not just how much they need to save, but how to save more, so they can achieve those retirement goals.”
Understanding how much to save
Envisioning the ideal retirement is an important step to take while planning for the future, but it’s also important for savers to calculate the costs of their ideal retirement, especially those who are nearing retirement.
Among those who expect to retire within the next 10 years, only about half have calculated the costs of their basic needs in retirement, and even fewer (38%) have calculated what their ideal retirement would cost.
Like envisioning retirement, calculating retirement costs correlates with higher deferral rates among participants, and helps consumers get closer to achieving their goals.
And while the study found that participants who are closer to retirement are more likely to have given a lot of thought to what their ideal retirement might look like, it also reinforces how vital it is for consumers to start saving young.
Once consumers have put thought into what their ideal retirement looks like, understanding that small changes can have a big impact on savings is important, as this calculator shows. And for those struggling with competing financial priorities, including debt, a debt calculator can help.
“National Retirement Security Week is a great time for participants of all ages to think ahead to what their ideal retirement would look like,” said Ohl, “but it’s just as important for the other 51 weeks of the year. The sooner savers take charge of their retirement savings, the closer they will be to achieving the retirement they envision.”
National Retirement Security Week
The week offers plan sponsors the opportunity to create a focused campaign that emphasizes the benefits of saving for retirement by investing in an employer-sponsored defined contribution plan.
Each public sector sponsor faces their own challenges in educating and enrolling their participants, and NRSW provides the platform around which members can employ their most creative ideas.
Whether a plan sponsor is looking to increase participation, attract certain demographic groups to the plan, or educate against common investing pitfalls, NRSW is a dedicated time to focus on improving employee retirement outcomes.
This year NAGDCA teamed up with a production crew to develop a new video that promotes the importance of all Americans saving for retirement—regardless of their career.
The video, which can be viewed here, can be shared as part of a NRSW promotional campaign.
Anyone running a NRSW campaign is encouraged to use the hashtag #NRSW19.