Data and Research November 19, 2014

Millennials Are More Engaged, But Not Saving Enough

While 64% of Millennials say they have a financial plan, most believe they are only saving half of what they should be, according to a Nationwide Retirement Institute survey.
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While the high percentage of Millennials who report having a financial plan is encouraging, the 68% who say they are not investing enough for retirement is highly problematic, Nationwide says. The survey reports 36% of Millennial investors only guess at how much they need to fund their retirement, and nearly one in four do not know if they even have a 401(k) plan.

“While it’s great that Millennial investors now have a financial plan, they’re still coming up short when it comes to savings,” says Mike Spangler, president of Nationwide’s mutual funds business. “To help close the gap, we recommend that Millennials work closely with a professional financial adviser.”

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The survey finds 56% of Millennial investors think they would be more financially successful with professional financial advice; however, only 39% use a financial adviser. A majority (58%) conduct their own financial research and make their own investment decisions, but only half are confident they know how much to save. Of those without a financial plan, 28% feel that creating a financial plan is overwhelming and 40% say they haven’t gotten around to it yet.

Millennials are more likely to consult family (50%) and websites (49%) than a financial adviser for meeting their financial planning needs. In contrast, retirees are more likely to turn to a financial adviser (62%), traditional media (37%), and to follow their gut feeling (36%).

“The good news is that Millennials acknowledge the value of a professional and want to save and invest more,” Spangler adds. “The financial industry has a real opportunity to help Millennials understand how to balance the demands of paying for today with investing for the future.”

Additional data from the survey is presented here.

Participants November 19, 2014

Nearing Retirement, and Worried the Money Will Run Out

Half of employees approaching retirement wish they had started saving sooner, a TIAA-CREF  survey finds.
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The top concern for near-retirees?  Running out of money to cover monthly expenses, according to “Ready to Retire.” Regrets wash over many of the figures in TIAA-CREF’s report, with more than half (52%) of people ages 55 to 64, who are approaching retirement, saying they wish they had started saving for the future sooner.

Many survey respondents say they wish they had made smarter financial decisions earlier in their career, including saving more of their paycheck (47%) and investing their savings more aggressively (34%). These regrets underscore how important it is for employees, with support from their employers, to start thinking about retirement planning early and remain engaged in the process throughout their careers.

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Forty-five percent of respondents ages 55 to 64 say financial readiness is the most important factor in determining when they will retire. Yet these individuals haven’t always taken advantage of many common retirement planning and saving strategies that could help them feel financially prepared. Only 35% say they saved in an individual retirement account (IRA) or met with a financial adviser; 32% have calculated the income they would need for each year of their retirement; and 12% have saved in a health care savings account.

Not making the most of these options leaves many Americans feeling uncertain about their financial futures, with 68% of those approaching retirement saying they are unprepared for what lies ahead.

The research reinforces the idea that preparing for retirement should not be a sprint to the finish line, but a long-distance run that requires careful planning throughout an adult’s life, according to Teresa Hassara, executive vice president of TIAA-CREF’s institutional business.

“This will help prevent those nearing retirement from feeling like they have to play catch-up near the end of their careers,” Hassara says. “Developing and acting on a carefully constructed plan can help individuals at any age build a financially secure future.”

According to the survey, financial challenges make up three of the top four concerns for individuals closing in on retirement. Many worry about inadequate resources to cover monthly expenses (45%), while others are anxious about how health care costs (35%) or inflation (32%) could deplete their retirement savings. However, despite these concerns, only 10% of this age group has purchased an annuity, the only retirement product that guarantees an income stream for life, TIAA-CREF says.

The firm notes that according to the Social Security Administration, a 65-year-old male in 2010 could expect to live an average of another 17.57 years, while a woman of the same age could expect to live an average of another 20.20 years.

These challenges are leading some to reconsider what their retirement will look like. Forty-two percent of survey respondents ages 55 to 64 say they plan on working a part-time job during retirement, 39% say they'll be more conservative about how much they spend on entertainment and other luxuries, and 23% say they will downgrade their living quarters to something less costly. These realities may conflict with their desire for flexibility to do “what they want, when they want” during retirement, which 57% of this group says they are most looking forward to in their retirement years.

“If Americans find that their retirement savings aren’t adequate to meet their expectations about retirement life, it’s never too late to make adjustments,” Hassara says. “In fact, if a 55-year-old starts to max out his or her employer-sponsored retirement plan contribution next year and continues to do so for the next 10 years, those savings could grow to about $325,000. Employers and financial advisers can work with individuals to develop a robust retirement plan at any life stage so they can pursue the kind of retirement they envision.”

The Ready to Retire Survey was conducted by KRC Research online between May 19 and May 28 among a sample of 1,000 employed adults, ages 18 years and older, currently contributing to an employer-sponsored retirement plan. Data was weighted by key demographic variables to ensure the sample is representative of the employed population contributing to defined-contribution plans. Respondents for this survey were selected from among those who have volunteered to participate in online surveys and polls.

More information about the 2014 TIAA-CREF Ready to Retire Survey is available in the executive summary on TIAA-CREF’s website.

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