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Americans Hitting Roadblocks to Retirement; The Costs of Living Today Continue to Get in the Way of Saving for Tomorrow

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05-24-2005

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The desire by many Americans to save for retirement is being overshadowed by the financial demands of everyday living, according to "Roadblocks to Retirement," a new study released today by Prudential Financial, Inc..

The study found seven in 10 Americans are most concerned with short and mid-term financial spending, while placing retirement savings a distant third priority. In fact, 60 percent of Americans indicated they are behind schedule in saving for retirement and the vast majority now expects to work longer and/or to continue working in some way in retirement. Women face an even greater challenge, as they have to catch up more than men and, given longer life spans, likely will need their financial resources for a much longer period in retirement.

"Planning for a secure retirement becomes a serious challenge for many Americans who are focused more on current needs," said John Strangfeld, vice chairman, Prudential Financial. "Our new research shows that most Americans don't get serious about planning for retirement until they reach their 50s. And even then, more than half focus primarily on short-term financial goals," Strangfeld said.

When Retirement Arrives Uninvited

Issues such as downsizing, injury, health limitations or family emergencies can lead to a sudden and unexpected retirement. Four in 10 respondents indicated they were forced to retire, and nearly half of involuntary retirees were under the age of 60. Almost two-thirds of the people who unexpectedly retired indicated they were not financially prepared.

And the survey found that this sense of financial unpreparedness can diminish a retiree's perceived quality of life, including their emotional well-being, overall health, activity level, and family responsibilities.

The "Dream" Retirement Could Be Just That For Many

Among those who were forced into retirement, six in 10 said they are simply trying to make ends meet. Even among those who retired on their own terms, two-thirds indicated they are just living "comfortably." Fewer than half of all retirees said they were able to travel or vacation as they may have hoped. And only about five percent would say they live an "upscale" lifestyle of freedom and flexibility.

Many Expect To Just Work It Out

During the first ten years of retirement, seven in 10 Americans currently expect to continue working to supplement income and continue to build their nest egg. At the same time, 64 percent recognize they may be simultaneously coping with deteriorating health. In the second 10 years of retirement, 80 percent of respondents indicated health care was a top concern, with many retirees expecting to require nursing home care and/or run out of money.

Other Notable Findings Include:

Retirement Savings Took A Five-Year "Hiatus"

During the last five years, an alarming 59 percent of those surveyed (ages 30 to 69) feel both the general economic environment and their personal situations have harmed their retirement prospects.

All survey respondents, regardless of age, income and ethnic or racial backgrounds, consistently expressed a lack of progress in retirement security since the turn of the century.

Only 16 percent of respondents feel they made some progress during this same period related to planning and saving for retirement.

Many Americans Are Literally Betting The House

More than half of all respondents expect to unlock the value of their home by moving to areas with a lower cost of living or a smaller home within 10 years of retirement.

Eighty-five percent of involuntary retirees think the equity in their home is a dependable source of retirement income. Yet, more than half still have an outstanding mortgage on their primary home.

Although 401(k) plans were cited by respondents as one of the top three positive factors impacting retirement prospects, more than 30 percent of those recently retired were not enrolled in employment-based plans. When looking at involuntary retirees, that number swells to more than 50 percent.

The financial responsibilities Americans face will continue in retirement as many expect to provide financial support for their parents and few expect the same support from their own children.

Retirement Planning Remains A Mystery

Almost half of Americans surveyed indicated they are perplexed about how to choose financial products to help meet their retirement goals.

A significant percentage of each ethnic segment surveyed is unfamiliar or uncomfortable with the process of choosing retirement products and services. In 2004, fewer than two in 10 met with a financial professional for retirement advice.

A holistic training program aimed at helping Americans transition into retirement is an appealing idea. In fact, more than half of those surveyed expressed interest in a retirement program similar to what the military offers to help members adjust to civilian life.

Despite a reluctance to save for retirement, for those who do, most don't consider it a burden at all. In fact, about 80 percent across age, income and different ethnic/racial backgrounds, hardly notice the "lost" spending opportunity and ultimately feel happy about their savings toward tomorrow's security.

"Americans have clear retirement goals. However, many are not sufficiently informed to effectively plan for the transition to retirement. The most effective approach is perhaps the simplest, too - a return to the basics of sound management of household finances. That is, spend less, save more, start early, and seek professional financial advice," said Vivian Banta, vice chairman, Prudential Financial.