The road to a happy retirement will not be paved with good intentions but with critical action you take to assure your safe passage, so says a new study about our attitudes toward fiscal health.
More than 1 in 5 Americans is “not at all confident” about being able to reach their financial goals, yet more than 1 in 3 admit they’ve taken no steps to plan for their financial futures, says the 2015 Northwestern Mutual Planning & Progress Study.
We hear about the lack of retirement planning all the time. Just in the past couple of weeks, for example, studies have said:
- Retirement savings gap: Nearly one in three workers have saved under $1,000.
- Top financial worry that keeps us up at night: Having enough money for retirement.
- Behind on retirement savings? Here is what to do.
Insecurity abounds, but action is lacking
The Planning & Progress Study addresses the discrepancy between people’s intentions and their actions.
“Intending one thing and doing another is human, but it’s an impulse we should all fight hard to resist,” said Rebekah Barsch, vice president of planning and sales at Northwestern Mutual, in a prepared statement. “How many of us know we should eat better and exercise more, but fail to take action? It’s similar with finances. We know it’s important, but we excuse ourselves – consciously or not – because it’s not easy. Of course, intentions only get us so far. And when the stakes are high, it’s taking action that’s critical.”
Among attitudes identified in the online survey of 5,474 adults by the Harris Poll:
- Two out of 3 expect more financial crises, but about only half that amount are confident their financial plans can withstand market cycles; nearly 1 in 4 do not believe their plans can weather economic ups and downs.
- Two out of 3 consider themselves savers, but more than half say they have debt equal to or greater than their savings.
- Two in 5 adults have not spoken to anyone about retirement planning.
The No. 1 financial fear in the survey was “an unplanned financial emergency.” But just because we fear an unplanned financial emergency doesn’t mean we would change anything about our financial planning, even if that fear came true. What would prompt us to take action, we say, is a windfall.
The study uncovered generational differences in attitudes about financial responsibilities.
More than 6 in 10 millennials, ages 18-34, say their generation is less financially responsible than their parents’ or grandparents’ generation. A little more than half of Gen X (ages 35-49) and boomers (50-68), felt the same. Only 36 percent of mature respondents (69 and up) agreed.
“This probably says more about how people view their own behaviors versus evidence that there’s a real deterioration in financial responsibility across generations,” Barsch said. “We’ve actually seen some rather consistent signals that millennials, for example, are setting a pretty high bar for financial responsibility.”
Nearly 2 in 3 millennials in the study said they considered themselves savers instead of spenders, pretty much matching the overall response.
About 7 in 10 millennials said they won’t save enough to retire comfortably; that’s just a bit less than the 8 in 10 overall who said the same.
However, while nearly 6 in 10 millennials said they feel their personal finances will improve in 2015, only 4 in 10 overall were as optimistic.
Another study, however, said 40 percent of millennials can’t cut their parents’ financial cords, including 22 percent of 30-34-year-olds and 20 percent of millennials who are married or living with a partner.
To-do list for retirement savings
Health care costs are rising, and we’re living longer on average, so having your money last through retirement is a key consideration. If you need to get going on your retirement savings, here are a few tips:
- Sign up for an automatic investment account.
- Put away just $25 a week, an amount many say they could handle by cooking more at home, eating out or ordering takeout less, or cutting back on soft drinks, movies, streaming video, specialty coffees and lottery tickets. That’s $1,300 a year, which with a compound interest rate of just 4 percent could grow to more than $55,000 in 25 years, according to online financial calculators.
- If you’re older than 50, consider making tax-deferred catch-up contributions of up to $3,000 this year to your retirement plan.
- Make the most of your 401(k) contributions by seeking out low-cost investments and contributing enough to get your company’s maximum match, if it has one. It’s like free money, says the Financial Industry Regulatory Authority.
- Plan to maximize your Social Security benefits by considering when to retire, when to apply for spousal benefits and when to use the file-and-suspend tool.
- Consider working past your full retirement age, if possible.
Are you getting your ducks in a row for retirement? Tell us about it in comments below or on our Facebook page. And be sure to share this article with your Facebook friends.