A new survey by Putnam Investments conducted earlier this month found that 67% of defined contribution (DC) participants, 54% of Boomers, and 37% of retirees said they have a gap between what they have saved and what they need. The survey results were announced today at a Retirement Income Summit in New York City, hosted by Putnam.
However, Americans have a relatively high level of confidence in their knowledge of saving for retirement: Fewer than one-quarter of respondents (23%) classified themselves as “highly knowledgeable,” while 49% say they are “moderately experienced.” Only 7% of respondents classified themselves as “novice.”
Why do Americans say they have a gap? About half of participants place blame on market collapse of 2008. Other reasons cited were: saving too little (29%), a drop in the value of their home (28%), being too cautious in investment choices (27%), and started saving too late (25%).
However, somewhat contradictorily, many respondents still had
confidence in the markets, the survey noted. Most Americans (60%) said
they are reviewing retirement statements more frequently as a result of
market volatility. And, despite the market conditions of 2008, 75% of
those surveyed said their investment portfolio was not permanently
damaged by the market declines, including 87% of retirees and 80% of
Boomers. The vast majority of Americans (80%), including 72% of
retirees, said they will continue to invest in equities in hopes of
Closing the Gap
Half of those surveyed said they would look to a financial adviser for help in seeking retirement solutions.
Other ways Americans said they planned to close the savings gap include:
- increasing their savings rate (42%)
- spending less in retirement (41%)
- working part-time in retirement (38%)
- working full-time longer (33%)
- investing more in stocks (25%).
Although Americans seem confident about saving for retirement, when it comes to determining how their savings will translate into income in retirement; only 23% of all survey respondents said they are knowledgeable. Approximately half (52%) of Americans, including 61% of DC plan participants and 45% of those with assets of $500,000 or more, said they know they need a clearer picture of how much income they will need to maintain the lifestyle they expect in retirement.
Forty-four percent said they were unsure about what type of investments are best to generate income in retirement, and 47% of those in DC plans said they were unsure.
However, even more (55%) said they do not have a plan that identifies the income they need for retirement, what their savings can be expected to produce, or how to generate the additional income needed to close any gaps. DC plan participants were slightly more likely to have a plan (45% lack a plan).
The most common reasons people said they do not have a plan are that they believe their investments are sufficient, they do not know where to start, or they have too many financial pressures to save.
The Putnam Retirement Income Survey of 1,496 U.S. adults, age 22 and older was conducted by Braun Research in January.