November 11, 2012

Top Retirement Financial Concerns

Earlier this year on-line stock broker, Scottrade, released the results of their annual Retirement Survey. While the results were not particularly groundbreaking, it is good to be reminded of the mountain many of us have to climb to reach our satisfying retirement goals:

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:


  1. I'm embarrassed to say I always knew I'd get an inheritance, so it took some of the pressure off. Our financial advisor told us to plan with the assumption of no inheritance. So we did. But still, having that extra has made a big difference.

    1. Your situation is quite similar to mine. I planned for no Social Security and no inheritance even though I would very likely receive both. As my recent purchase of an RV shows, having those cushions allows for some flexibility. But, they never replaced the need for consistent savings during my working years.

  2. A lot of these numbers confirm what we've heard and read. But one of the numbers I simply cannot believe: that 69 percent of Americans are spending less. Well ... less than what? Maybe less than they want to? But certainly not less than last year.

    Just one other thought. I work in retirement. I know plenty of others who do too. So "having to work during retirement to pay living expenses" is not such a bad thing, as long as you're reasonably healthy and still relatively young (under 70).

    1. The figure you note does seem high. One of the flaws of any research is that people tend to say what they think the interviewers want to hear and what puts them in a good light. Folks also tend to exaggerate changes in behavior.

      Even so, I do think it is logical to assume people are a bit more cautious than they were in, say, 2006. Too bad it doesn't seem to affect their behavior about savings

  3. I've have always been amazed at the naivete of most Americans when it comes to saving for retirement, or any goal for that matter. Perhaps it was the generation I grew up in (Boomer) and the way they were raised, but regardless, with personal liberty comes personal responsibility. Expecting things to somehow work out without a real conscious effort on ones part, is not my idea of an effective approach to financial planning.

    For many of us that manage our own finances, it is not an easy task. It takes years of effort and hard work to get comfortable with it. But many people nearing retirement that I know, including some otherwise very bright people, want nothing to do with financial planning. It is either due to lack of interest, a fear of what it entails, or perhaps laziness. Regardless, burying ones head in the sand may occasionally work for an ostrich, but I would not want to recommend it for a soon-to-be retiree.

    1. I don't want to make too much of this point, but our culture believes that we should all be winners all the time. Children get awards for everything and nothing. This mindset does not teach the need for sacrifice and hard work. It can create a belief in entitlement.

      Is there a connection between that and the belief that things will just work out? Maybe.

  4. Good post-- but how was the RV trip?????? I think you'll find most of your readers will be happy to read about your adventures.. no need to worry about becoming an RV blog!! And geez, I wish I had a family estate.. both sides of our families have needed help from their kids.. I hope to not do that to ours!!

    1. My parents taught me well by example. Even though my dad lost several jobs and had a business he bought go under, we survived quite nicely as a family of 5. Mom's teaching career provided the support during the lean times and living beneath their means meant being able to retire comfortably and watch a decent nest egg growth nicely.

      Even now, my dad at 88 years old, worries about spending too much, but is quick to offer financial help if one of his three sons requires it.

      Not to worry, I will write about our trips, especially about the people we meet as we trek across the country. There are lots of stories they can tell that will be interesting and informative to us all. I see an RV trip as a never ending source of blog post ideas.

      FYI, the first trip in R.T. the RV went very well. It was hot the first day so we tested the air conditioner. Then it turned cold so we got to use the furnace. Friday night poured rain so we could determine there are no leaks. Bailey adapted very well to living and sleeping inside the unit.

  5. This article is very troubling for me in particular. As a single person, I've been saving quite a bit for retirement while also trying to pay off debt. I've done all of the calculations provided by my employer, and online, and all say I'll be fine. In addition, I've sought advice from a financial planner through my job. Yet I'm still concerned that without Social Security, I'll have to work part time. All of this prompted me to start a separate account to supplement healthcare costs, and travel costs during retirement. I will also be cutting my costs quite a bit in retirement.

    When you start to blog about your RV adventures, perhaps you can provide some personal interviews with retirees on RVing on a shoe string.

    1. If you have been preparing then you are likely to be just fine, Gail. Like many financial surveys, this one provides a broad brush overview, designed in part to get people to consider using Scottrade to help them manage their affairs. I always look at these as a thought starter and something that makes me review my own situation.

      You have taken important steps and are thinking ahead - something too few people do.

      Good idea about RVing on a shoestring.I've read some blogs where people do live full time in their unit and can do so quite a bit cheaper than in a home, apartment, or condo. Of course, there are major trade offs. But, one thing Betty and I have talked about is that if everything falls apart and our investments are wiped out we could make do in the RV for a time on much less than my Social Security payments are each month. That's a nice safety net.

  6. This year has been an expensive one for me. We all make choices. Next year will be more austere to bring back some balance. I always appreciate your emphasis on personal responsibility.

    1. It is about seasons of life, too. You had an expensive year due to a particular set of circumstances that you decided were right for you. Next year you will enter a different season that doesn't require such a large purchase.

      Like our recent RV purchase, we decided now was the right time in our life for this to happen. We are aware there will be some adjustments to accommodate the extra expenses.

      Thanks, Galen. Your "biggie" this year will bring tremendous joy and stability to your family.

  7. First, I absolutely commend and admire everyone like Bob and those that posted on this thread - it sounds like you are all taking responsibility and making great retirement decisions. Hearing your stories renews my hope and belief that the values that made America great - self-reliance, hard work and thrift - live on!

    However, I want to be careful that we do not blame those that have not made as good of retirement decisions. My research and experience suggests that they care just as much about their future but often simply lack the resources (time, experience, trusted experts). At my last employer (Financial Engines) I had the opportunity to conduct a 2.5 year long in-depth study on why it was that people don't make better retirement decisions. While I initially thought that people's poor planning and avoidance were irrational, after interviewing over 400 people in hour long one on one interviews, I began to see that this behavior was often rational and almost always understandable. For example, so many people we interviewed had in the past tried to hire financial advisors or "experts", but were sold inappropriate products or were ignored because they didn't have enough money. If you want to read all the findings of my research, you can find it here -

    Final note: We used to have experts in the pension system manage saving, investing and then drawing down money in retirement. These were PhDs, actuaries and mathematicians who worked full-time. We now have a system that puts this responsibility directly on the shoulder of typical Americans. While one can argue that younger people should be able to fill this role, the argument falls flat when considering the realities of aging -1/8 people over 65 and 1/2 over 85 suffer from Alzheimers. Given human biology, I wonder how a system based on individuals making smart decisions with their money will fare as our society ages.

    1. You make good points, David. Financial education is lacking for many people. Since there is little to prevent someone from claiming to be an adviser, too many people rely on bogus information.

      At the same time, there is those who simply choose to believe everything will work out and choose instant gratification over long term planning. They are the ones who drive folks who take personal responsibility bonkers.