Most employees have not seen a retirement projection; 57% of employees at pre-retirement age, between 55 and 64, said they had not run a calculation to estimate whether or not they were on track to replace 80% of their annual pre-retirement income (or their goal) in retirement. This number grew with younger generations: 68% of employees age 45-54, 67% of employees age 30-44, and 73% of employees under 30 indicated they had not run a calculation and didn’t know if they were on track to retire, Financial Finesse found in its research.
Employees who reported they are on track to retire had an average wellness score of 7.2 out of 10. They also had sound money management skills such as having an emergency fund in place, paying credit card bills in full each month, and having a plan to pay off debt. Both those who know they are not on track and those who don’t know whether they are or not scored far lower, with a 4.2 wellness score for those not on track and 4.7 for those who don’t know.
Financial Finesse found that basic money management skills are essential to employees’ retirement preparedness and appear to be a key reason why some Americans are more prepared for retirement. There were significant correlations between retirement preparedness and having an emergency fund, effectively managing debt, and paying credit card bills in full. While U.S. employees improved their money management skills post-recession, most are still in a position where they need to make further improvements in order to free up more dollars to save for retirement.
Liz Davidson, CEO and Founder of Financial Finesse, says the report’s findings are especially disconcerting because of decreasing government and employer subsidized retirement benefits. Employees will not be able to meet their retirement goals unless they make significant improvements to their saving and planning behavior.
“Employees are not doing enough to ensure their retirement considering the new normal is a retirement supplemented by more of our own savings,” she said. “The environment is changing faster than employees are. They need to further accelerate their savings to compensate for the fact that they can no longer depend as much on their employers and the government for retirement income.”