If you follow the retirement news industry, it won’t come as a shock that millions of Americans are grossly unprepared to fund their retirement years, and subsequently experience quite a bit of anxiety about their financial future. A recent study conducted by Age Wave and Merrill Lynch has further confirmed this. Additionally, their survey also explored just how far Americans approaching retirement are willing to go to ensure retirement success. The following is a synopsis of the findings as reported in a recent CBS News report.
A significant 88% of participants claimed that their primary objective in retirement savings is achieving peace of mind, while just 12% said their focus is on accumulating as much wealth as possible. However, “peace of mind” means something different to everyone. Here’s a breakdown of what the phrase means to those polled:
- Living comfortably within their means: 57%
- Having the financial resources to live the life they choose: 39%
- Being able to handle a major unexpected expense: 34%
- Not being overwhelmed with debt: 28%
- Feeling confident about not outliving their money: 25%
- The ability to provide for family if something happens to them: 17%
While this list presents a number of different priorities for future retirees, it also provides a good planning list, as many would benefit from addressing all of these goals.
One of the major hurdles facing most Americans in their financial planning is the idea that money is an off-limit topic of discussion. Only 8% of respondents felt that their personal finances could be discussed openly. Shockingly enough, most prefer talking about their end of life preferences than their financial status. It’s hard to plan appropriately when you don’t feel you can even talk about your money freely.
When asked about the steps that they would be willing to take in order to reach financial security in retirement, the participants responded as follows:
- 90% said they would be willing to cut back on expenses, spending just enough to meet their basic living needs.
- 79% claimed they would seek financial advice.
- 77% believe that they should increase the use of tax-protected retirement accounts.
- 75% would speak to an expert in order to pay lower taxes.
- 66% are willing to sell real estate or other assets.
- 64% believe that it would be a smart move to postpone taking Social Security benefits.
- 60% claimed they would take Social Security as early as possible. This strategy is only successful if you’re disciplined enough to save your benefits and are lucky enough to out-earn the stock market.
- 43% said they would withdraw the cash value from a life insurance policy. Many policies allow the holder to convert cash value into a lifetime annuity.
- 39% would request assistance from social services or charities.
- 25% stated they would declare bankruptcy.
While some of these steps are recommended by financial experts, others aren’t typically as successful in providing financial security. It would be wise for workers nearing retirement to develop a strategy for generating lifetime income, through an annuity for example, or to continue working for as long as possible. It is also a good idea to talk about options for adequate medical insurance that supplements Medicare. Planning for retirement can be a complex and time-consuming process; one that could benefit from discussion with a professional financial advisor. But when you consider the fact that your future health and happiness may depend on it, you’ll hopefully realize that the time and effort is well worth the peace of mind.
Written by Rachel Summit