The truth is the future for prospective retirees may indeed usher in a level of uncertainty. Social security, health care law changes, and other macro-economic factors work to shape and reshape the outlook on almost a daily basis and can leave those who do not see a financial advisor without any direction. Navigating choppy markets along even the shortest time horizon is a difficult and labor-intensive task even for professionals. This leaves many economists most worried about the investors least likely to consult a financial advisor as they approach retirement. The data seems to support this concern and relying on individuals to steadily create retirement assets on their own may be a mistake.
Today, some reports indicate 60% of near-retirees own some form of defined contribution (DC) assets. These assets are held in some form of retirement plan in which the employer or employee (or both) may make regular contributions. Those reports show that this figure is up from 12% thirty years ago. Yet, even with Boomers possessing these assets, just 31% of US workers were participating in DC plans just before the recession. DC plans also allow those who do participate to choose how much to contribute and where/how to invest those contributions. Unfortunately, some save too little, and many save nothing!
In fact, according to 2010 Fed data, some 45% of Americans who work are NOT saving for retirement. Now, this probably does include all American workers, so that 45% includes young Gen-Y workers, and part–time employees, so it’s not that shocking, right? Wrong – the Employee Benefits Research Institute puts the percentage of workers between ages 55-64 that have saved only 1 year’s income for retirement at 64%!
The data also works to illustrate other disparities. Among today’s Boomers approaching retirement, those lower middle-class workers that are not participating in a pension plan like their public sector counterparts are far less likely to save for retirement. But income is not the only concern, in fact higher-income folks aren’t saving enough either. As a percentage of income, high income earners are saving even less for retirement.
So what are we pulling from this data? Well, the fact is that no one is immune to the effects of approaching retirement. This lack of retirement savings that we see today is not so much based in irresponsibility as it is in lack of knowledge and expertise. From the high-income earners who aren’t saving enough, to those lower middle-class workers who don’t even have an open retirement account, the common thread is lack of professional advice. It is, therefore, imperative that Boomers on the precipice of retirement rappel down its steep face with the aid of a Registered Investment Advisor.