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Intersection of Life and Faith

The Great Retirement Disconnect

  • Matt Bell SoundMindInvesting.com
  • 2013 3 Mar
  • COMMENTS
The Great Retirement Disconnect

We Americans tend to be an optimistic lot, a trait that serves us well in many ways, but not when it comes to planning for our retirement.

The disconnect between people’s optimism about the life they will enjoy in their later years and their actual retirement preparedness is on full display in a new Ameriprise Financial Retirement Check-In survey. According to the study, conducted among people ages 50 to 70 who are still in the workforce and have investable assets of at least $100,000:

  • 78% expect to be extremely happy after they leave the workforce.
  • 72% said their dream retirement includes really nice vacations

And yet,

  • Nearly 40% have not estimated their annual retirement expenses
  • More than 50% have not researched what medical expenses Medicare will cover

On average, respondents said they are about $250,000 behind in their retirement savings. So, how will they pay for their extremely happy retired life of really nice vacations?  Nearly half expect to tap home equity, despite the fact that home values are still well below pre-recession levels in many parts of the country.

These findings are consistent with the Employee Benefit Research Institute’s long-running Retirement Confidence Survey. In the 2012 edition, 52% of people in the workforce said they were very or somewhat confident about having enough money to live comfortably in retirement—well down from the pre-recession number of 70%, but still higher than people’s actual preparedness would seem to warrant. Only 22% of workers ages 55 or older have $250,000 or more saved for retirement.

A key step we can all take to prepare for our later years is to estimate how much money we may need to have saved by that time and how much that means we need to be saving now. One of the simplest free online calculators that can perform these estimates is the Fidelity myPlan Snapshot. After running its simple five-question analysis, you’ll have an opportunity to do a more detailed analysis as well.

How well prepared are you for your later years and what more do you plan to do this year to make sure you’re as prepared as possible?

Matt Bell is Associate Editor at Sound Mind Investing. Since its founding by Austin Pryor over 22 years ago, SMI has been providing clear, trustworthy, effective investment guidance to the Christian community. Some 10,000 subscribers look to its flagship publication, the Sound Mind Investing monthly newsletter, for biblical guidance on a range of financial issues and specific investment advice.

Publication date: March 11, 2013