A new Bank of America Merrill Lynch study released this week found that 81 percent of Americans do not know how much money they will need for retirement and many are not confident they will have enough.
The study, Finances in Retirement: New Challenges, New Solutions, revealed major gaps in retirement readiness among pre-retirees.
Among the key findings in the survey of 4,800 people nearing retirement, respondents said financial decisions are the most second-guessed of any major life decisions. It also revealed that half of the respondents do not have any positive financial role models and people are more concerned about their personal economy than the overall economy.
It also discovered that only 27 percent of workers over 50 feel financially prepared to fund a retirement that lasts 10 years, let alone 20-30 years. Thirty percent of Baby Boomers and 50 percent of Millennials feel a secure retirement is beyond reach.
The three biggest financial worries for most Americans are a costly health issue impacting them, inflation and not having enough money to do what they would like.
“As Americans gear up for longer retirement experiences, the responsibility for funding these later years is landing much more on their shoulders,” Lorna Sabbia, head of Retirement and Personal Wealth Solutions at Merrill Lynch, said. “To navigate this new landscape, today’s retirees and future generations will need to play a more active role, which includes closing the savings ‘intention-action’ gap, planning ahead to meet their retirement goals and regularly course-correcting along the way.”
The study showed that Americans are saving about 5.5 percent of their income, which they feel is less than they should be saving. Thirty-six percent are also most likely to second-guess decisions related to personal finance – far more than those who would second guess decision about work (18 percent), health (15 percent) or their home (8 percent).
Another finding revealed that 65 percent of Americans find financial jargon confusing and not user-friendly and 46 percent said the key trigger point for those saving for retirement is their employer-sponsored savings plan.
“In order to better experience the great ‘upsides of aging’ and the new freedoms retirement can offer, people could take steps to better understand their finances, more openly discuss finance topics and seek out positive role models – and that process can start now, no matter what age you are,” Kevin Crain, head of Workplace Financial Solutions, said. “This also opens doors for employers to play an even larger role in empowering Americans to financially prepare for their futures.”