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What some call retirement planning is a joke

Written by Jeffrey Steele - 13 Comments

What some call retirement planning is a joke

This post is from staff writer Jeffrey Steele.

The Employee Benefit Research Institute’s 2013 Retirement Confidence Survey was released in mid-March, and reinforced the notion that within many sober reports on serious personal finance subjects, we can find a few good laughs.

In short, one will come away from perusing this survey with more than just a bonanza of solid information. Also lying in wait for the reader is the periodic giggle, the oft-heard chortle, and the occasional good raucous guffaw.

All of these result from reading about the retirement philosophies and actions of Americans, a group that includes many people who, hamstrung by lack of formal education in personal finance, sustain their bewilderment by sidestepping every chance to learn more about and master sound money management disciplines.

Having earlier been tipped to one finding of the report, that something like 57 percent of people in the country had saved less than $25,000 for retirement, I wasn’t surprised by some of the details revealed in the EBRI survey.

Those tidbits included the fact that Americans’ confidence in their ability to comfortably retire is at an all-time low; that many cite specific percentages of income they must save to retire comfortably, but haven’t bothered to investigate how much they actually will need; and that some Americans spend good money on financial advisors, and then ignore those advisors’ suggestions.

Is it any wonder that many Baby Boomers expect to be shuffling off to work well into their 80s (but as the report reveals, probably won’t be able to)?

With no further ado, let’s enjoy some yucks.

Waking up to reality

The survey acknowledges that despite the steadily brightening economic climate, many workers’ own states of retirement confidence have darkened. That’s likely because they’re finally dialing in to just how much they will need to save. Thirty-three percent of workers polled said they figured they would need to save 20 percent or less of household income, 20 percent said they’d need to save 20 to 29 percent and 23 percent figure they’ll need to save 30 percent or more.

Here’s the part of the report that caught my eye:

“Those who say they are not confident about their financial prospects in retirement are more likely to say they do not know how much they need to save.”

So in addition to being down about fact their retirements may be impoverished, these folks have made themselves more morose by not clicking on any one of the 10.2 million results that appear on Google when the words “retirement-planning calculators” are entered.

Delaying retirement planning

One of the more amusing findings of the report had to do with when respondents started planning for retirement. If up to me, I’d mandate starting in their junior year of high school, while taking an obligatory personal finance class. But since that’s not very common, the report asked retirees when during their adulthood they began to plan. An admirable 34 percent said 20 years or more, and another 32 percent said they initiated planning 10 to 19 years before they retired.

“However,” the report remarks, “19 percent said they did not start planning until five to nine years before retirement, and 12 percent started less than five years before that point.” The factoid I loved was that two percent of retirees polled starting planning for their retirements – are you ready? – the very year they retired!

I think these were some of the same people who do their taxes on April 15th, start their holiday shopping at all-night pharmacies on Christmas Eve, and cracked open their first course book in a class the evening before final exams.

Following investment advice

Approximately a quarter of both the workers and the retirees responding to the survey reported they had paid for investment advice from a financial advisor.

Last time, I checked, such advice wasn’t offered for low rates; in fact, the folks dispensing it often make a very good living. So those accessing the advice likely had to pony up some significant dollars. Despite this, 23 percent of workers and 28 percent of retirees in the survey reported obtaining financial advice. Yet only 27 percent of workers said they followed all the advice, and almost a third of workers said they followed only some of the advice, or none of it.

This would be akin to hiring a lawn service, and then when the crew shows up with state-of-the-art lawn tractors, shoving them out of the way and using a non-motorized push lawn mower to mow the lawn yourself.

And we’re supposed to be shocked they are downbeat about retirement prospects?

A final note

Want to quickly understand why retirement may be difficult for many Americans?

The survey divulged that only two percent of workers and four percent of retirees view retirement planning as the most pressing financial issue facing Americans today. Compare that to the 60 percent of workers and nearly 40 percent of retirees identifying their current debt load as a problem, and we get a sense of priorities out of whack.

We as Americans have to do a better job of planning ahead for our post-work years. If we don’t, the result isn’t going to be funny.

Published on April 10th, 2013
Modified on April 15th, 2013 - 13 Comments
Filed under: Planning, Retirement

About the author: is an independent writer in Chicago who has written over 2,000 articles appearing in publications such as Barron's, Boston Globe, Chicago Sun-Times, LA Times, and more.

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13 Responses to “What some call retirement planning is a joke”

  1. 1
    Jenny @ Frugal Guru Guide Says:

    It’s sad more than funny. So many people can’t even make good choices at a department or grocery store. They can’t manage to make themselves balance a checkbook.

    And it’s not really about income. I have a friend whose family pulls down $200k a year, and they literally live paycheck to paycheck. They refinanced their house at one point to get more money out of it. It’s crazy.

  2. 2
    Toots Says:

    I started retirement planning in my college years, as I had a friend that just started her own financial advising business. My friends thought I was crazy. Even today, as I near the age of 40, I find most friends and aquaintences don’t seriously plan for retirement! It blows my mind.

    I also find it odd that it’s not a mandatory (or even offered) course in high school. If this isn’t a life skill that you need, what is? Calculus? I went out on my own to find information about retirement planning, it was not offered to me. Even today as a federal employee, when i was hired 6 years ago, retirement planning wasn’t discussed, other than the quick “our 401K is called a TSP, here is the website”. We had discussions at employee orientations of health insurance, but not retirement?

    The bottom line is that it’s just not taught in mainstream USA. Those that have planned have taken it upon themselves to be educated. It’s no wonder we as Americans are in the shape we are in.

  3. 3
    Pretired Nick Says:

    I’d like to see a study of how many people only began looking seriously at retirement at the time they had a layoff forced upon them. I’ve known several people who took their first look at their retirement savings and did the math of how much they could live on once they were drop-kicked by their employer. There needs to be a public education plan of some sort, similar to checking the batteries in your smoke detector twice per year. Everyone just needs to make it a habit.

  4. 4
    Alan@escapingmydebt Says:

    I bet a lot of people who did the survey also are counting on social security. To be honest, I do not know how much I need to save for retirement but I have a target I am shooting for which I hope will be more than enough.

  5. 5
    Penny Says:

    Yes–some people (I think the article said 2%) start planning for retirement at retirement, but some of us have the responsibility of children, aging/dependant parents or other family, a spouse, home maintenance and etc. It’s unreasonable to think that after taxes take 30% of your income (including for social security which you’ll never see), and health insurance takes 15%, and taxes on services and basic necessities takes 10%, and on and on, that you can just place 15% PRE-tax into an account for “eighty years from today”. How incredibly crazy a notion!

  6. 6
    Tahoe Joe Says:

    It’s a lack of personal responsibility. I’ve watched too many people live beyond their means buying new and expensive cars every few years, spending money on frivolous things like there was no tomorrow while I lived below my means to save for my retirement and invested conservatively and wisely. I was able to semi-retire at 45 from a middle management job, continue to work part-time in my own business until I fully retired in my mid 50s. This includes going through divorce, never missing a child support payment and putting my child through college. So please don’t tell me it can’t be done. Yes, there are some exceptions for those in extremely low paying jobs, but it is a lack of financial responsibility for many others.

  7. 7
    William @ Bite the Bullet Says:

    In all fairness, getting rid of debt is the first step toward retirement planning. Of course, not having debt in the first place would have been a better first step! And, when the debt is paid off, staying out of debt is the next thing.

    Unfortunately, many people, when they think of investing, get a feeling of panic, of being overwhelmed, and then they just get back into debt. Just starting early to learn about investing would make such a difference in people’s mindsets.

  8. 8
    Betsy22 Says:

    I think that some of this article was unnecessarily hostile. Some good points, but waaaay too much silliness.

    For example:

    Only 27% of the workers followed ALL of the advice from paid investment advisors- why is that a bad thing? Why are we assuming that the professionals were giving advice that was 100% in the best interest of the investors? I don’t think that’s a wise assumption – at all. Not all paid advisors are held to a fiduciary standard, and investors shouldn’t assume that all recommendations are truly the best for the investor. Take the good advice, leave the bad. (Taking your analogy literally – I wouldn’t hire a lawn service to begin with, but if I did, I certainly wouldn’t hesitate to dispense with their services if I thought that they were doing a bad job…and for small areas, push mowers are completely adequate, so I’d be absolutely disgusted if they showed up at my house with a high tech ride-on mower – I would know for certain that they were overcharging me)

    “Those who say they are not confident about their financial prospects in retirement are more likely to say they do not know how much they need to save.” And your answer is to click on a website. Mmmmhmmmm.

    Really – some online investment calculator is going to tell me what my health will be 20-40 years from now?; what my husband’s health will be?; what our parent’s health will be in the next couple decades (i.e. how much we’ll have to help out with them during our prime working years)?; how many children we’ll have?; what the rate of inflation will be?; what our return on investment will be?; how long we’ll stay at our current jobs?; what our housing costs in retirement will be?……????!!!! yeah, right.

    I’ve clicked on several of those retirement planning websites and even the best of the calculators require me to make assumptions that require answers to those questions (and more)….and they don’t account for years of partial employment or other variable inputs. The calculators are helpful, but they don’t provide a very high degree of certainty, in my opinion. Changing just a couple of assumptions makes a HUGE difference in the results. Like many others, I’m doing the best that I can, but I’m not arrogant enough to think that I have all the necessary data at this point in time…

    I guess that it’s a good thing that writer enjoys such a degree of certainty…though since he thinks that we all should be blindly following paid advisors like a bunch of sheep off to slaughter, I’m not feeling any more encouraged about the state of American retirement planning wisdom than I was before I started reading.

  9. 9
    Betsy22 Says:

    I think that some of this article was unnecessarily hostile. Some good points, but waaaay too much silliness.

    For example:

    Only 27% of the workers followed ALL of the advice from paid investment advisors- why is that a bad thing? Why are we assuming that the professionals were giving advice that was 100% in the best interest of the investors? I don’t think that’s a wise assumption – at all. Not all paid advisors are held to a fiduciary standard, and investors shouldn’t assume that all recommendations are truly the best for the investor. Take the good advice, leave the bad. (Taking your analogy literally – I wouldn’t hire a lawn service to begin with, but if I did, I certainly wouldn’t hesitate to dispense with their services if I thought that they were doing a bad job…and for small areas, push mowers are completely adequate, so I’d be absolutely disgusted if they showed up at my house with a high tech ride-on mower – I would know for certain that they were overcharging me)

    “Those who say they are not confident about their financial prospects in retirement are more likely to say they do not know how much they need to save.” And your answer is to click on a website. Mmmmhmmmm.

    Really – some online investment calculator is going to tell me what my health will be 20-40 years from now?; what my husband’s health will be?; what our parent’s health will be in the next couple decades (i.e. how much we’ll have to help out with them during our prime working years)?; how many children we’ll have?; what the rate of inflation will be?; what our return on investment will be?; how long we’ll stay at our current jobs?; what our housing costs in retirement will be?……????!!!! yeah, right.

    I’ve clicked on several of those retirement planning websites and even the best of the calculators require me to make assumptions that require answers to those questions (and more)….and they don’t account for years of partial employment or other variable inputs. The calculators are helpful, but they don’t provide a very high degree of certainty, in my opinion. Changing just a couple of assumptions makes a HUGE difference in the results. Like many others, I’m doing the best that I can, but I’m not arrogant enough to think that I have all the necessary data at this point in time…

    I guess that it’s a good thing that writer enjoys such a degree of certainty…though since he thinks that we all should be blindly following paid advisors like a bunch of sheep off to slaughter, I’m not feeling any more encouraged about the state of American retirement planning wisdom than I was before I started reading

  10. 10
    DC guy Says:

    I honestly think that one of the keys is just to build in the routine habit of spending less than you earn. Automating the savings piece. And then vowing to never have a car loan or carry credit card debt, which is feasible because…you are spending less than you earn so you have savings.

    The nice part of that is it relieves you from having to replace 100% of your salary to maintain your lifestyle in retirement. And the neat thing is, you are really just as happy spending 75% of your income as you are spending 105% of your income.

  11. 11
    BG Says:

    Betsy22) Come now, you don’t listen when your advisor tries to steer you into the latest fund with heavy loads, and you don’t buy into his annuity sales pitches?

    BTW: my companies 401k planning calculator is a joke, and so are the vast majority of those found by google searches.

  12. 12
    Michael Harr @ Living TodayForward Says:

    You can take Jeff’s humor as you wish, but the statistics are very troublesome. Planning is the result of intention turned into action, and it’s no secret that most folks fail in planning for retirement. The same could be said of Christmas.

    The fact is that human beings aren’t built for long-term planning; it’s unnatural. To get good at something like this, you have to engage with it through intention and then follow through with appropriate actions over time. It doesn’t matter if your plan is perfect, it only needs to be a work in progress – something you refine over time.

    The key is engagement. Once you’ve done that, your future prospects will improve because we are all adept at finding a way to make things happen once we’ve set our minds to it.

  13. 13
    Tortoise Banker Says:

    Its a scary thought. I work at a bank and a lot of my clients have next to zero retirement savings. I’d be interested to see how much, on average, of the average American’s net worth is in their home.

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