Americans are more conscious today of where every dollar is spent. And they are responding by cutting simple costs to save for retirement. A survey from investing company Scottrade, Inc. found that Americans are taking action by comparison shopping, using coupons and generally cutting back on unessential expenses like clothing and entertainment.
“Americans are simply looking for ways to save more and spend less,” said Kim Wells, Scottrade’s executive director of product development and chief marketing officer. “They are feeling a financial pinch in more areas of their daily routine – from filling their gas tanks to heating their homes.
In order to reduce their financial concerns this year:
■69 percent are spending less, compared to 63 percent in 2011;
■67 percent are using coupons, compared to 59 percent in 2011; and
■65 percent compare prices to find the best deal, compared to 58 percent in 2011.
The survey data indicates Americans’ uncertainty stems from debt. Weighed down by non-mortgage debt, this year more Americans – 40 percent compared to 33 percent in 2011 – reported it caused them to save less for retirement. And the trend is expected to continue with 34 percent stating that non-mortgage debt will cause them to save less for retirement in 2012.
This explains the ‘Do as I say, not as I do’ theme Scottrade’s research uncovered. Only 5 percent of Americans recommend saving 2 percent or less annually for retirement, yet 55 percent of Americans reported saving 2 percent or less in 2011. And the trend of under-saving should continue as 33 percent plan to save 2 percent or less in 2012.
Despite these concerns, the majority of Americans, 72 percent, said they are confident in their own abilities to plan for retirement. Overall 61 percent of respondents expect to be able to completely retire – and not work again – between the ages of 45 and 74. Fifteen percent of the survey’s respondents have already retired, with the majority doing so between the ages of 45 and 74.
Americans are very concerned with two issues affecting their goals for retirement: the solvency and ability of Social Security to provide enough money and incurring medical expenses they can’t afford.
While Americans’ waning confidence with the future of Social Security is nothing new, it is compounded this year with an emerging concern of covering living expenses during retirement. This general worry had dipped from 2010 to 2011, but in this year’s sixth annual study significantly more Americans responded that they are either ”extremely concerned” or ”very concerned” with three factors:
• Having to work during retirement to pay living expenses (40 percent are concerned, up from 34 percent in 2011);
• That their investments won’t generate enough money to cover living expenses (41 percent are concerned, up from 32 percent in 2011); and
• They will outlive their retirement savings (38 percent are concerned, up from 31 percent in 2011).
Americans’ general concern with having enough money for retirement hit a six-year high. More than half, at 57 percent, reported they are either "extremely concerned" or "very concerned" with this issue, up from 47 percent in 2011 and 56 percent in 2007.
As a result, the majority of Americans, at 56 percent, think generating income during retirement is more important today than it was a year ago. The reason, according to 67 percent of those respondents, is simply an expectation that the cost of living during retirement will be more expensive. This is leading 38 percent of all survey respondents to structure their portfolio to include income-generating investments.
While the majority of survey respondents over the age of 55 strongly agreed that given the opportunity to do it over, they would have started saving for retirement at a younger age, roughly a quarter said they would have become more educated about planning for retirement. Learning from their regret, more Americans, at 35 percent, expect to seek out information to learn more about retirement planning in 2012, compared to 28 percent in 2011.
While I can't say I am surprised by these findings, I continue to be amazed at some of the "head in the sand" denial folks take toward the necessity of saving enough to have a satisfying retirement. Even though the respondents admit that saving less than 2% of income is not a good thing, more than half continue to do so. At the same time 72% are confident in their retirement planning and over 61% expect to retire permanently, some as early as 45 years old.
Then, in the next breath, the respondents express serious concern about the long term health of Social Security and medical expenses that are unaffordable. Yet, those rather important cautions aren't enough to increase savings, delay retirement plans, or dramatically alter current lifestyle patterns.
As I have noted in many earlier posts it all comes down to personal responsibility. Ultimately you will determine the quality of your retirement journey. Obviously, the state of the economy and any major health issues can have a substantial effect. But, to save too little when you can and then wonder why retirement isn't what you hoped for is not going to work.
Here is a sampling of some earlier posts on this subject:
- Protect Your Partner's Finances
- Retirees and Financial Planning
- Predictions of Our Retirement Future
- Can You Retire By Staying Away From "Normal" Investments?