Are Americans ready for retirement or not? Depends on whether you are an optimist or pessimist — new studies point to either yes or no. But according to two advisers, most people still have work to do.
A series of retirement reports released this week offer conflicting opinions on the state of Americans' retirement preparedness. According to two advisers, most people still aren't ready.
One of this week's reports gleans positive news from its survey results, with numbers showing that the public is saving for retirement at a healthy rate, or at least a significant amount more than in decades' past. The study, released by the Investment Company Institute, American Benefits Council and The American Council of Life Insurers, says Americans have stowed away nearly $21 trillion in assets for retirement outside of Social Security. And retirement savings per household stand at an average of $167,800, more than six times the amount saved in 1975 in inflation-adjusted dollars.
But one from Fidelity Investments offers a gloomier view. The company's new Retirement Preparedness Measure shows that only a third of Americans are on target to cover at least 95% of their retirement savings goals. Meanwhile, 40% are saving at a rate to cover 65% or less of their retirement needs. In total, more than half of households need to start putting away more to cover essential expenses once they've exited the workforce, the study shows.
The National Retirement Risk Index, released on Tuesday by a team at Boston College's Center for Retirement Research, also found more than 50% of homes “at risk” of being unable to maintain their living standards in retirement.
Despite the rosy outlook in the first study, two advisers said most Americans still need to hear the “save early, save often” mantra when it comes to retirement.
“I have clients who come in here that are almost on the verge of retirement that have not saved anything,” said Anja Luesink, president of Luesink Financial Planning. “Most of the clients have not saved enough.”
Karen Altfest, executive vice president of Altfest Personal Wealth Management, said many of the clients who walk through the door at her firm have started saving, but they do so unevenly. She and her staff check on existing clients every couple of years to make sure they have opened all the right savings accounts and are putting away enough for the future. Many people are saddled with paying off daily expenses, like home loans, and don't prioritize saving for their senior years, she said.
“If you think of yourself last, you're going to be in a really tough position when it comes to retirement,” said Ms. Altfest, whose firm has more than $1 billion in assets under management. “There aren't really the good promises, the good pensions, that we might have heard about in earlier generations. You have to have a few irons in the fire and you have to take care of yourself.”
The positive gains in the stock markets this year — the S&P 500 is up more than 25% — have made some investors feel better about their preparedness for the post-working years, said Ms. Altfest. Whether that confidence is short-term or long-term is yet to be seen.
“I think people are feeling more comfortable,” she said. “There's always the fear factor that it's not going to continue because fresh in everyone's mind is 2008.”
As the markets gain, Ms. Luesink said she's seen a spike in people calling her and looking for a financial adviser, a good first step in getting ready for retirement. Still, as a whole, she thinks the public needs to improve their readiness for the post-working years — regardless of what the surveys show.
“When [clients] leave my office, they are prepared, but before that, absolutely not,” Ms. Luesink said. “I always emphasize, the earlier you start the better.”
