It used to be that many American career paths included pensions. Employees would put in their time in the office or factory, and employers would take care of them when they got too old to work.
Today, jobs with defined-benefit pension plans are few and far between. Left to our own devices, are Americans taking care of their retirement needs? Our new survey says no.
"Companies have realized they can shift much of the risk and responsibility of managing a retirement plan to their employees by ditching the traditional defined-benefit plan for a defined-contribution plan," says Chartered Financial Analyst Phillip Christenson at Phillip James Financial in Plymouth, Minnesota. "While this isn't inherently a bad change, when combined with a general lack of financial education and low interest rates, it has contributed to a challenging retirement picture."
In an exclusive MoneyTips online survey, 452 Americans were asked about preparing for retirement. Some of those were already enjoying retirement, while others were decades away from their golden years.
We asked the 194 subjects yet to retire:
More than half (59.3%) revealed they had invested in a 401(k) or other retirement vehicle, which was the most popular response, followed by "Saved money" (39.7%), "Set up an IRA" (39.2%), "Invested in mutual funds" (32.0%), and "Participated in a Pension Plan" (26.8%). Nevertheless, nearly 1 in 4 (23.3%) admitted doing absolutely nothing to plan for retirement.
We also asked 258 current retirees:
Current retirees seem to have done a better job preparing, with less than 1 in 11 (8.9%) doing nothing to plan for retirement. More than half had invested in a 401(k) (57.4%), saved money (55.8%), participated in a pension plan (55.4%), and/or set up an IRA (50.8%). While those yet to retire were a little better at investing in a 401(k) or other retirement vehicle (59.3% vs. 57.4%), the future retirees had made fewer investments in IRAs, pensions, stocks, mutual funds, and bonds than current retirees had.
Says financial advisor Christenson, "One of my big concerns is not how a client is saving but whether they are saving enough. A retirement can be a 30-plus-year proposition. It's very hard to go back to work in your 80's if you realize you are running out of money."
We also asked those yet to retire:
The sad results are that more than 1 in 5 (21.1%) are not saving anything for retirement, and more than 1 in 3 (36.1%) are saving less than $100/month. Saving at least $100 but less than $1000 monthly was the most-popular answer (45.4%).
Commented Christenson, "We are heading towards a crisis with over a third of those surveyed saving less than $100 each month. This means their only chance at retirement is Social Security, which most likely will change by the time many people start drawing from it."
We broke down those numbers by gender, and found men are saving more than women are.
Nearly 1 in 4 women (23.9%) are not saving anything for retirement, compared to just 1 in 6 men (17.6%). Moreover, more than 4 in 10 women (41.3%) are saving less than $100 per month, compared to less than 3 in 10 men (29.4%). This could be because on average, women earn less than men do. When we looked at income, we saw that nearly half (47.2%) of people in families earning less than $100,000 annually were saving less than $100/month for retirement.
Added Christenson, "We are seeing more women as the primary and even sole bread-winners in a family. It really doesn't matter who is earning the money as long as the family is properly saving for retirement, education, and their other goals. A couple should plan together on what to spend their money on and how much to save. Getting on the same page with your significant other is crucial to implementing a savings plan."
Regardless of where you plan to retire, the number one factor in ensuring that you can retire on your terms is your 401(k). Make sure that your 401(k) is maximizing its potential with this free analysis that checks your fees, fund mix, and other factors to help you hit your retirement goals. For more of our exclusive retirement data and insights, visit MoneyTips Retirement Survey Findings.