Americans Ready—but Not Prepared—to Retire

The retirement confidence gap is widening, as 60% of survey participants were “very confident” they would retire as planned, but only 27% felt financially confident in doing so, according to a recent survey from Asset Preservation Wealth & Tax.

In addition, CNO Financial Group’s consumer sentiment survey and J.P. Morgan Asset Management’s annual guide to retirement revealed similar sentiments from potential and current retirees. For advisers, the reports highlight the need for greater participant education on challenges to retirement readiness.

“This year’s findings show that the top concerns for retirees and those preparing for retirement are generating sufficient income, managing spending volatility and maintaining emergency savings,” said Michael Conrath, J.P. Morgan Asset Management’s chief retirement strategist, in a statement. “As people live longer and the retirement landscape becomes more unpredictable, advisers need practical tools to help clients and participants understand and navigate retirement challenges.”

For example, J.P. Morgan’s guide recommended that participants define a savings target and an income replacement goal. According to the report, small, consistent increases in savings rates—as little as 1 percentage point—would significantly enhance workers’ retirement readiness.

Additionally, the guide recommended features for small businesses such as automatic enrollment and automatic escalation.

In Asset Preservation’s survey of 1,000 U.S. adults older than 55, 74% said their top concern for retirement readiness was inflation. When asked if they thought their projected savings would support their desired lifestyle, only 21% of respondents answered yes, while 52% of respondents feared outliving their funds altogether.

Similarly, in CNO’s survey of 500 middle-income U.S. residents aged 50 to 85, 27% said their top concern for retirement was inflation, 32% said their confidence in their retirement plan had decreased in the last year, and 41% were unsure of having enough money to live comfortably throughout retirement.

“As financial confidence declines, middle-income Americans need to evaluate their retirement timelines, savings strategies and long-term care plans,” said Scott Goldberg,  CNO Financial’s president of the consumer division, in a statement. “Important steps to mitigate risk and improve financial security include seeking professional guidance, diversifying retirement income sources and making use of valuable products such as annuities and long-term care insurance.”

Stewart Willis, president of Asset Preservation, said tax considerations are an integral part of retirement planning.

“Tax deferral can be a time bomb in retirement,” Willis said in a statement. “What surprises [retirees] is not the tax they pay on that money when they withdraw [from IRAs or 401(k) plans], but how that taxable income creates taxes and other penalties on things like Social Security and Medicare in the future. You may want to consider putting money away in post-tax assets like a Roth IRA.”