Despite the economic downturn’s effect on the retirement plans of 50-something investors, only 23% are putting away more for retirement and 57% never changed their deferral rate, according to a Wells Fargo survey. One-fifth (20%) of survey respondents are saving less and 56% said they expect to stay in the workforce an average of three years longer than they planned.

Wells Fargo said overall, given respondents’ behavior thus far, the financial positions and savings habits of this pre-retiree group won’t be enough to last for their expected 20-plus years of retirement.

While pre-retirees surveyed expect to need $800,000 for retirement, they have saved only $300,000 (median amounts).

Furthermore, Wells Fargo said pre-retirees clearly haven’t assessed how long their savings will last in retirement. They expect to live nearly 21 years in retirement, but plan on spending nearly 10% of their savings every year in retirement. The industry recommendation is to withdraw no more than 4% annually.

People have also been overly optimistic about their investment returns, according to Wells Fargo. When they started saving (typically in their 30s), both pre-retirees and retirees expected the value of their investments to grow by an average 8.7% each year. In fact, the compound annual growth rate of the S&P 500 from 1958 through 2008 was 6.6%.

According to the survey, most retirees have left their assets in the market, either maintaining their previous asset allocation (44%) or moving to more conservative equities/funds (30%). Only 15% took assets out of the market and placed them into more conservative investments (such as CDs, savings, fixed income/bonds).

What’s the Plan?

Despite their inadequate savings, nearly two-thirds lack any formal plans for retirement savings or spending strategies. Only 35% of the pre-retirees have a written plan for retirement, and of this group, barely more than half (52%) said they updated it in the past year during the market downturn, according to Wells Fargo.
   
Less than half (40%) wish they had been more proactive about educating themselves about retirement preparation.

“In the wake of the severe economic crisis, we had expected to find people had become more conservative in their savings and spending behavior,” said Lynne Ford, head of Wells Fargo Retail Retirement. “We were surprised to see how few people have increased their rate of savings and how many people in their 50s have no retirement plan at all. For people in the last 10 to 15 years of their working career, the failure to have a thorough retirement plan in place is like driving while blindfolded.”

More Women Seek Advice

Most surveyed pre-retirees are not reaching out to their adviser more often than before the downturn, with women more likely to do so than men. Pre-retired women tend to be reaching out to their financial advisers more often than before the downturn (27%, compared to 14% of men), the Wells Fargo survey found.

The survey also found that women are more likely than men to feel affected by the economic downturn, are less certain about their retirement and investing, and regret that they aren't better prepared. Pre-retired women now expect to retire later than they did a year ago (62%, versus 50% of men), and 41% now think they'll need to work in retirement "just to make ends meet" (compared to 32% of men).

Meanwhile, men are much more confident than women about their ability to maintain their lifestyle in retirement. Among male retirees, 47% said they were "very confident they will have enough money to sustain them throughout retirement at an acceptable level," versus only 30% of female retirees.

Pre-retired women have saved less toward retirement and are less likely than men to know how much they will need to save before retiring. On average, the pre-retired women surveyed have saved $250,000 toward retirement (versus $300,000 for men), and are likelier to be saving less toward retirement compared to one year ago (24% of women, versus 16% of men).

Pre-retired women are more likely than men to expect having to cut back on their retirement lifestyle (60% versus 52%). And yet, women are less likely (27%) to be contributing the maximum to their 401(k) plans than men (41%).

On behalf of Wells Fargo, Richard Day Research conducted 2,108 online surveys with pre-retirees (ages 50 to 59) and young retirees (ages 55 to 70). Those interviewed had at least $100,000 in household investable assets, excluding real estate.

See also: "Selling Recovery"